MR CHANDRASHEKAR BHAT vs. DIRECTOR GENERAL OF INCOME TAX (INV)

WP/14073/2023HC KarnatakaKAHC01032922202330 August 2023Author: KRISHNA S DIXIT10 pages

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What did the High Court hold?

The High Court observed that the original documents seized on 04.05.2013 have been returned to the petitioner on 11.08.2023, making the primary prayer for their handover infructuous. The court deprecated the Income Tax department's action of retaining original documents for over a decade without justification, noting that copies could have been retained or provided. While Section 17(1)(d) of the Limitation Act, 1963, concerning fraudulent concealment, might not be strictly applicable as the IT officials were not parties to the underlying transactions and there was no finding of fraud, the court held that the period during which the documents were in the custody of the Income Tax department should be discounted while computing the period of limitation for any suits or legal proceedings founded on these documents. This was to prevent prejudice to the petitioner. The court also noted that the petitioner is free to initiate proceedings against erring officials for redressal of grievances.

What were the facts?

The petitioner, Mr. Chandrashekar Bhat, filed a writ petition seeking a mandamus directing the respondents (Director General of Income Tax and others) to return original documents seized during a raid on May 4, 2013. The documents, including sale deeds, sale agreements, and cheques, were retained by the Income Tax department for over a decade, despite requests for their return or copies. The petitioner argued that the prolonged retention caused prejudice, rendering some documents invalid due to time lapse and potentially making legal recourse for property transactions time-barred. The respondents eventually returned the documents after the court issued emergent notice. The assessment year(s) are not explicitly stated, but the seizure occurred in 2013.

What were the issues?

1. Whether the respondents should be directed to hand over the original documents seized during the raid conducted on 04/05/2013 (Question of fact and law, concerning the right to possession of seized property). Assessee's Contention: The petitioner argued that the documents were seized on 04.05.2013 and retained until 11.08.2023, disregarding requests for return or copies. This prolonged retention caused prejudice, as bank cheques became invalid and property transaction documents risked non-justiciability due to delay or limitation. The petitioner sought an observation for saving the limitation period for legal proceedings founded on these documents. Revenue's Contention: The revenue contended that the seizure and retention were done in due discharge of official duties and that officials have the protection of the good faith doctrine. They also submitted that the documents have now been returned, rendering the original prayer infructuous.

Which sections of the Income-tax Act were involved?

Section 132(8), Section 17(1)(d)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF AUGUST, 2023

BEFORE

THE HON'BLE MR JUSTICE KRISHNA S DIXIT WRIT PETITION NO. 14073 OF 2023 (T-IT) BETWEEN:

MR CHANDRASHEKAR BHAT, AGED ABOUT 56 YEARS, S/O LATE. S GOVIND BHAT, RESIDING AT NO.70, 5TH B CROSS, NARAYANAPPA LAYOUT, R.T. NAGAR, BANGALORE - 560 032. …PETITIONER (BY SRI. AJAY KUMAR N.,ADVOCATE)

AND:

DIRECTOR GENERAL OF INCOME TAX (INV) UNITY BUILDING, 5TH FLOOR, MISSION ROAD, BANGALORE - 560 027.

PRINCIPAL COMMISSIONER OF INCOME TAX UNITY BUILDING, 5TH FLOOR, MISSION ROAD, BANGLORE - 560 027.

THE ADDITIONAL COMMISSIONER OF INCOME TAX CENTRAL RANGE,-1, UNITY BUILDING, 5TH FLOOR, MISSION ROAD, BANGALORE - 560 027.

DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1 (1), 3RD FLOOR, CENTRAL REVENUES BUILDING, QUEENS'S ROAD, BANGALORE - 560 001. …RESPONDENTS (BY SRI.DILIP M.,ADVOCATE)

Digitally signed by SHARADA VANI B Location: HIGH COURT OF KARNATAKA

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECT THE RESPONDENTS TO HANDOVER THE ORIGINAL DOCUMENTS SEIZED DURING THE TIME OF RAID CONDUCTED ON 04/05/2013 VIDE DIN NO. ITBA/REC/M/154/2022- 23/1043125179(1) WHICH IS AT ANNX-A DATE 23.09.2021 WITHIN THE STIPULATED TIME AS SPECIFIED BY THIS HONBLE COURT.

THIS PETITION COMING ON FOR PRELIMIANRY HEARING IN B GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

Petitioner assessee has approached this court with the following prayer: “To issue a Writ of mandamus directing the Respondents to handover Original Documents seized during the time of raid conducted on 04/05/2013 vide DIN No. ITBA/ REC/M/154/2022-23/1043125179 (1) which is at Annexure-A date 23.09.2021 within the stipulated time as specified by this Hon’ble Court.”

After service of notice, the Director General of Income Tax and others have entered appearance through their Sr. Panel Counsel, now submit that all the original documents that were seized on 04.05.2023 have been now returned to the petitioner and therefore nothing survives for consideration.

Having heard the learned counsel for the parties and having perused the petition papers, the original prayer of the petitioner has become infructuous inasmuch as the eight documents enlisted in the memo filed by the petitioner on 30.08.2023 have been handed back to him. There is no dispute from the petitioner that what has been handed back are the original documents. Counsel for the Revenue also vouches the same.

Petitioner’s memo dated 27.08.2023 reads as under: “The undersigned Counsel for the Petitioner herewith reports the Release of the seized documents on 11.08.2023 which was seized by the Respondents during the raid conducted on 04.05.2013. The Copy of the Mazhar is herewith produced as ANNEXURE-A.

The undersigned Counsel further submits that during the raid conducted on 04.05.2013 at the residence of the Petitioner, some of the Original Documents relating to the Sale of various properties were seized by Respondent and the same was not tendered by the Respondents even after 30 days as contemplated under Section 132(8) of the Income Tax Act. Further, due to the unjustified withholding of the Original Documents, which is

specified under annexure-B, viz Sale Deeds, Sale Agreements and Cheques could not be specifically enforced by the executants and the cheques which were given for withdrawal to the Petitioner could not be presented for payment, therefore, the person/s were prevented from sufficient cause to enure the benefit of those Deeds and Agreements and the factum of execution of the same is also affirmed by his Highness Sri Kanta Datta Narasimha Raja Wadiyar in the Sworn Statement tendered before the Income Tax Authorities. Hence, the Petitioner most respectfully prays before this Hon’ble Court to exclude the computation of limitation in the legal recourse taken by the person/s in enforcing/registering Sale Agreements and Sale Deed which is mentioned in Annexure-B being the subject matter of seizure by the Respondents in the interest of justice and equity. The Original Documents seized by respondents are herewith annexed in ANNEXURE-B Series.”

Learned counsel for the petitioner contends that the subject documents having been abruptly seized way back on 4.5.2013 by the Income Tax department during the course of raid, they continued to be in their custody for all these years i.e., till 11.8.2023, disregarding the request for the return or for the furnishment of copies thereof. He also brings to the notice of court that there were bank cheques and many if not all of them, have

become invalid by the efflux of time; similarly, a few of the documents which comprised bilateral transactions affecting immovable property, that required discharge of certain obligations in a time bound way, may run the risk of non- justiciability because of arguable delay, latches or bar of limitation. He also mentions about some Regular First Appeal being allowed against his client or persons claiming under him for want of those documents. The counsel grieves that his client is put to a manifest injustice, a great hardship and a huge loss because of the unauthorized retention of original documents for a decade & more, in the guise of investigation. Therefore, he prays that court should make an appropriate observation for saving the limitation period or for repelling the possible contention of delay & latches, should petitioner bring legal proceedings founded on these documents. Learned Panel Counsel appearing for the Revenue contends that the seizure & retention of the subject documents having been done in due discharge of official duties, statutorily ordained, the officials have the protection of good faith doctrine. This

court is not very sure of availability of this defense in the fitness of things.

The subject documents came to be returned to the petitioner by the Income Tax department immediately after issuance of Emergent Notice by this court and without waiting for any direction in the matter. This is appreciable. It hardly needs to be stated that the pendency of a litigation per se does not come in the way of answering respondents granting relief/reprieve to the dominant litis, of course in accordance with law. However, no explanation is offered for the long delay brooked in returning the documents. This court deprecates the culpable action of the Revenue in retaining the original documents of a citizen for more than a decade sans any justification. Original documents could have been returned retaining authentic copies thereof with the stipulation that whenever instructed, the petitioner should produce the same; in the alternative, copies could have been furnished retaining the original documents in the cupboard, in all

fairness. Neither of these things has happened. The plea that still the inquiry/investigation is pending and therefore, the originals were not returned to the petitioner, is too feeble a justification, to say the least. There is absolutely no explanation for not furnishing the copies of the original documents. No affidavit or objection is filed by the Revenue explaining as to how return of the original documents or furnishing of their copies would have prejudiced the pending inquiry/investigation. The officials of the Revenue have acted as law unto themselves, to say the least. This militates against the rules of reason & justice, that should animate the acts of officials in a Welfare State. That being said, it is for the petitioner to initiate appropriate proceedings against the erring officials for the redressal of his grievance i.e. for damages, compensation or the like from them personally.

The above being said, section 17(1)(d) of the Limitation Act, 1963 postpones the starting point of limitation period for suits and applications where any

document necessary to establish the right of plaintiff has been fraudulently concealed by the defendant/opponent. This provision embodies the fundamental principle of justice & equity that no party should be prejudiced for failing to institute legal proceedings in time when the facts or material necessary for him to do so have been willfully concealed from him. It hardly needs to be stated that, to the transactions comprised in the seized documents, the government or the Income Tax officials are not a party. Nor can it be said that the erring officials of the Income Tax department, howsoever grave the error may be, have acted in fraud & duplicity in seizing the documents or retaining the same too far beyond a reasonable period. Therefore, the said provision stricto sensu may not be invocable. However, that is not the end of matter: where court commits the error, a litigant is not put to prejudice vide actus curiae neminem gravabit. Similarly, the arguable sovereign act of the State namely the seizure & retention of original documents by the Income Tax department also should not prejudice the citizen, in the

sense that whatever justiciable rights that are foundable on these documents, should not be rendered time barred or unenforceable due to lapse of time. Therefore, the period during which the subject original documents continued to be in the custody of Income Tax department, shall be liable to be discounted while computing the period of limitation for the institution of suit or other legal proceedings even against others. An argument to the contrary cannot be sustained without exposing the petitioner or anyone claiming under him to enormous prejudice or loss, which a constitutionally ordained Welfare State needs to shun.

In the above circumstances and with the above observations, this Writ Petition is disposed off, costs having been very reluctantly made easy, on the passionate submission of Panel Counsel appearing for the Revenue.

Nothing observed herein above shall come in the way of petitioner taking up appropriate proceedings against the

erring officials of Income Tax department, for the redressal of his grievance, and all contentions in that regard, are kept open.

Sd/- JUDGE

Snb/ List No.: 1 Sl No.: 54

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