2007 (1) TMI 116 - HC - Income Tax

Summary

Issues Involved:
1. Authority of IDS officials to make queries u/s 131.
2. Applicability of the 1999 circular.
3. Jurisdiction of TDS officials prior to 1999.
4. Implications of the Allahabad High Court and Apex Court decisions.

Summary:

1. Authority of IDS officials to make queries u/s 131:
The appellant, an assessee under the Income-tax Act, 1961, challenged the authority of IDS officials to make queries u/s 131, a power typically vested in Assessing Officers. The appellant argued that IDS officials were not given this power prior to the 1999 circular.

2. Applicability of the 1999 circular:
The learned single judge dismissed the writ petition, considering the 1989 and 1999 circulars. The 1999 circular empowered IDS officials to make queries u/s 131, which was not expressly given before. The appellant contended that the 1999 circular could not be retrospectively applied, citing the apex court decision in CIT v. Patel Brothers and Co. Ltd. [1995] 215 ITR 165.

3. Jurisdiction of TDS officials prior to 1999:
The court examined whether IDS officials had implied powers to make queries before the 1999 circular. The learned single judge held that IDS officials had implied power to make queries as they could assess penalties for defaults. However, the appellate court found that without express authority, IDS officials making such queries were without jurisdiction.

4. Implications of the Allahabad High Court and Apex Court decisions:
The Revenue relied on the Division Bench decisions in Reckitt Colman of India Ltd. v. Asst. CIT (TDS) [2001] 252 ITR 550 and Peerless General Finance and Investment Co. Ltd. v. Assessing Officer [2001] 248 ITR 113. The apex court set aside the Allahabad High Court judgment in Peerless General, emphasizing that the issue of jurisdiction need not be decided as the appellants succeeded on other grounds. The appellate court concluded that the IDS official's queries were without jurisdiction prior to the 1999 circular.

Conclusion:
The appeal succeeded, setting aside the judgment and order under appeal. The requisition made by the IDS official dated September 9, 1996, was quashed. The judgment clarified that authorities could take appropriate steps under the statute and notifications, and the plea of limitation would not be raised by the assessee. The appeal was disposed of without any order as to costs.