1995 (11) TMI 35 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 132A(1)(b) of the Income-tax Act, 1961.
2. Requirement of satisfaction for exercising power under section 132A(1)(b).
3. Application of Explanation 2 in legislative references.
4. Validity of the order of requisition under section 132A(1)(b).
5. Examination of the order and reasons for requisition.

Analysis:
The judgment delivered by the High Court of ALLAHABAD addressed the interpretation of section 132A(1)(b) of the Income-tax Act, 1961. The petitioner argued that for the power under this section to be exercised, both conditions specified in clause (b) must be satisfied. These conditions include the relevance of documents to a pending proceeding and the belief that the person summoned would not produce the required documents. The petitioner contended that since no pending proceeding existed for the assessment year 1993-94, the power under section 132A(1)(b) could not be invoked.

Furthermore, the petitioner emphasized the necessity of the requisitioning authority's satisfaction that the documents would not be produced if summoned. The court examined the legislative references and debated whether Explanation 2, which defines "proceeding," was applicable in this context. The respondent argued that section 132A(1)(b) could be exercised even before the commencement of a proceeding.

The court referred to the decision in ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1 (SC) and reiterated that both conditions must be met for the initiation of proceedings under section 132A. The court scrutinized the order and reasons for requisition and found that there was no recorded satisfaction or belief that the documents would not be produced if summoned. Consequently, the court concluded that the order of requisition was issued mechanically without proper application of mind, rendering it invalid.

As a result, the court quashed the order of requisition for the assessment year 1993-94 and directed the return of documents to the trade tax authorities. The respondents were granted liberty to take appropriate legal steps concerning the assessment year. The writ petition was allowed, with no costs imposed.