Attorney Client Privilege | Supreme Court Issues Notice On Plea Challenging Seizure Of Client Documents From Advocate's Premises, Stays Coercive Action

The Supreme Court today issued notice on a plea challenging seizure of client's documents and issuance of notices by the Income Tax Department, pursuant to a search conducted at an Advocate's premises.

A bench of Justices Abhay S Oka and AG Masih passed the order, staying coercive action under the notices till pendency of the petition.

"Pending the petition, the respondents shall not take any action on the basis of notices issued to the petitioner on the basis of search", Justice Oka dictated.

To recap, Income Tax Department conducted a search at the residence of petitioner-Advocate at about 6:30 AM on November 3, 2023. The officials allegedly asked the petitioner and his family members to switch off their electronic gadgets and handover the same. While the search continued till November 6, on November 3 itself, one of the officials went to the residence of a lady advocate working as a freelancer with the petitioner and forced her to accompany him to the petitioner's office to unlock the same.

As per allegations, the lady advocate and her family members were also asked to switch off their gadgets and hand them over. When she was forcefully taken by the IT official to the petitioner's office, no female officer accompanied.

Reportedly, the IT officials also took copies of digital data found at the petitioner's residence and office. Aggrieved by this, he approached the Gujarat High Court, claiming that the search and seizure were contrary to Section 132 of the Income Tax Act. One of the issues he raised was with respect to the authorities seizing data belonging to third parties/clients and thus causing breach of attorney-client privilege.

After going through the material, the High Court opined that the search was validly initiated. The petition was disposed of, leaving it to the IT department to exercise its discretion regarding seized documents in a judicious manner.

"Petitioner who is though a practising advocate, but has been searched by valid initiation by invoking provision of Section 132 of the Act and this Court having been satisfied with regard to the initiation of the search in case of the petitioner, the discretion is vested in the respondent authorities who are the highest authority of the Income Tax department to Conduct the Search for taking or not taking upon the incriminating documents and if such discretion is exercised judiciously, we hope that no further litigation would arise in the case of third parties whose documents were found during the course of the search", the High Court said.

Thereafter, the IT Department started issuing notices to the petitioner and his clients. Aggrieved by the High Court order and the subsequent notices, the petitioner approached the Supreme Court.

Senior Advocate Mukul Rohatgi appeared for the petitioner and urged that notices were being issued to third-party/clients pursuant to the search conducted at the petitioner's premises. He assailed the fact that two officials who went to the lady advocate's premises were carrying rifles, and were not accompanied by any female officer.

"Your Lordships have been at the Bar...All kinds of clients come to us, they are not on the right side of the law...25 years this man (petitioner) has been filing returns...I am now receiving notices from the department, as a lawyer, after the search...I am praying that notices to me only pursuant to the search may not be enforced".

In response, Justice Oka lamented that the IT authority chose to decide itself whether attorney-client privilege was applicable or not. When it was mentioned that the Department was directed by the High Court to issue an apology to the lady advocate but the same had not been complied with, the bench recorded that the Department shall state on oath whether the said apology has been tendered.

Case Title: MAULIKKUMAR SATISHBHAI SHETH Versus INCOME TAX OFFICER ASSESSMENT UNIT 4(2) (6) AND ORS., SLP(C) No. 15471/2024