2003 (5) TMI 55 - HC - Income Tax

The question that arises for consideration is as to whether the second respondent has authority to issue summons under section 131 read with section 131(1A) - In the light of the clear averments made by the second respondent and in the light of the fact that the details called for as per exhibit P8 is only relating to distributors within the State of Kerala to whom the total commission, etc., paid during the accounting year amounted to Rs. 50,000 and above and fur their limiting the period from September 1, 1999, to August 31, 2001, and the power having been exercised by the second respondent as per the provisions specified under section 131(1A) of the Act and the fact that there is likelihood of concealment of income, it cannot be said that the second respondent has exceeded his jurisdiction while issuing exhibit P8.

Issues Involved:
1. Authority to issue summons under Section 131 read with Section 131(1A) of the Income-tax Act.
2. Jurisdiction of the second respondent over the petitioner.
3. Validity of the summons issued requiring the production of books of account and other documents.
4. Reason to suspect concealment of income by the distributors in Kerala.
5. Compliance with the summons and the scope of information required.

Detailed Analysis:

1. Authority to Issue Summons under Section 131 read with Section 131(1A) of the Income-tax Act:
The petitioner, a private limited company, challenged the authority of the second respondent to issue summons under Section 131 read with Section 131(1A) of the Income-tax Act. The court examined the relevant provisions, noting that Section 131(1A) empowers specified officers, including the Deputy Director, to exercise powers for discovery, inspection, and production of documents if there is reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons within their jurisdiction. The court concluded that the second respondent had the authority to issue the summons as per the provisions specified under Section 131(1A).

2. Jurisdiction of the Second Respondent Over the Petitioner:
The petitioner contended that the second respondent lacked jurisdiction as the petitioner was assessed under the Company Circle 1(3), New Delhi, and not within the jurisdiction of the second respondent in Kerala. The court rejected this argument, stating that for invoking the power under Section 131 read with Section 131(1A), the person to whom the summons is issued need not be within the jurisdiction of the officer concerned. The summons can be issued for the purpose of an enquiry or investigation if there is reason to suspect that any person or class of persons within the officer's jurisdiction is likely to conceal income.

3. Validity of the Summons Issued Requiring the Production of Books of Account and Other Documents:
Initially, the summons required the production of books of account and other documents for the period from April 1, 1996, to March 31, 2001. However, Exhibit P8 limited the requirement to details of payments of commission or remuneration paid to distributors in Kerala for the period from September 1, 1999, to August 31, 2001. The court held that it was unnecessary to consider the validity of the earlier summons as Exhibit P8 had superseded them, confining the requirement to a specific period and type of information.

4. Reason to Suspect Concealment of Income by the Distributors in Kerala:
The petitioner argued that there was no basis for suspecting concealment of income by the distributors in Kerala. The court referred to the report from the Income-tax Inspector, which indicated that many distributors were earning substantial commissions without filing income-tax returns. The court found that the second respondent had sufficient reason to suspect concealment of income by the distributors in Kerala, thus justifying the issuance of the summons under Section 131(1A).

5. Compliance with the Summons and the Scope of Information Required:
The petitioner raised concerns about the practicality of producing a large volume of books of account. The court clarified that Exhibit P8 did not require the production of complete books of account but only details of commission or remuneration paid to distributors in Kerala for the specified period. The court found that the second respondent had acted within his jurisdiction and authority in issuing Exhibit P8 and that the summons was validly issued. The court extended the time for the petitioner to furnish the required details by one month from the date of the judgment.

Conclusion:
The court dismissed the petition, upholding the validity of Exhibit P8 and the authority of the second respondent to issue the summons under Section 131 read with Section 131(1A) of the Income-tax Act. The court extended the deadline for the petitioner to comply with the summons by one month.

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