2005 (4) TMI 43 - HC - Income Tax

Proceedings of Income-Tax - Investigative machinery of the Income-tax Department can be well utilized for the purpose of unearthing the real persons behind the monetary transactions by resorting to the procedure as specified by different provisions of the Act but definitely not by issuing the impugned proceeding under the provisions which would not authorize the Department to do so. Be it small or big true or ostensible real or benami fish in the applicants pool the resultant of the excise policy of the State Government though the object aimed at by the Income-tax Department is appreciable the mode adopted by the issuance of the impugned proceeding is impermissible in law. Hence this court is left with no other option except to hold that the impugned proceeding issued by the first respondent is without authority or jurisdiction

Issues Involved:
1. Locus standi of the writ petitioners and the maintainability of the writ petition.
2. Validity of the impugned order issued by the first respondent under section 131(1) and (1A) of the Income-tax Act, 1961.
3. Interpretation of the term "document" under section 131 of the Income-tax Act, 1961.
4. Whether the demand drafts fall under the definition of "document" and the jurisdiction of the first respondent to issue the impugned order.

Issue-Wise Detailed Analysis:

1. Locus Standi of the Writ Petitioners and the Maintainability of the Writ Petition:
The court examined the locus standi of the petitioners, emphasizing that the traditional view of locus standi has evolved, allowing broader access to justice. The court referred to rule 4A of the Writ Rules, which permits multiple persons with a common cause of action to join in a single writ petition with a single set of court fees. The court noted that the petitioners were ventilating a common grievance related to the excise policy of the State Government, and the impugned action was a common cause affecting the public at large. The court concluded that the writ petitioners had the locus standi to file the petition and that the writ petition was maintainable.

2. Validity of the Impugned Order Issued by the First Respondent Under Section 131(1) and (1A) of the Income-tax Act, 1961:
The court scrutinized the language of sections 131(1) and 131(1A) of the Income-tax Act, noting that these provisions confer powers on certain authorities to compel the production of documents and conduct investigations. However, the court emphasized that these powers are limited to the purposes specified in the Act. The court held that the first respondent's action of issuing the impugned order to produce demand drafts was beyond the scope of these provisions and lacked legal sanction. The court concluded that the impugned order was issued without authority or jurisdiction and could not be sustained.

3. Interpretation of the Term "Document" Under Section 131 of the Income-tax Act, 1961:
The court examined the definition of "document" under section 2(22AA) of the Income-tax Act and other relevant statutes, including the Indian Penal Code and the General Clauses Act. The court noted that the term "document" is broadly defined to include any matter expressed or described upon any substance by means of letters, figures, or marks. However, the court emphasized that the interpretation of the term "document" under section 131 of the Income-tax Act must be in line with the specific purposes for which the powers under this section can be exercised.

4. Whether the Demand Drafts Fall Under the Definition of "Document" and the Jurisdiction of the First Respondent to Issue the Impugned Order:
The court considered whether demand drafts could be classified as "documents" under section 131 of the Income-tax Act. The court acknowledged that demand drafts are negotiable instruments and may be considered documents in a general sense. However, the court emphasized that the powers under section 131(1) and (1A) are limited to specific purposes, and the impugned order exceeded these limits. The court concluded that even if demand drafts could be considered documents, the first respondent lacked the jurisdiction to issue the impugned order under the provisions of section 131 of the Act.

Conclusion:
The court allowed the writ petition, declaring the impugned order issued by the first respondent as illegal, arbitrary, and in excess of the powers conferred under the Income-tax Act. The court directed the Excise and Prohibition Superintendents to return the original demand drafts to the applicants within two weeks. The court made no order as to costs, considering the public interest involved.

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