1986 (3) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Validity of issuing a summons u/s 131(1) of the Income-tax Act without a pending proceeding.
2. Distinction between powers conferred u/s 131(1) and u/s 131(1A).
3. The stage at which an officer can invoke powers u/s 131(1).

Summary:

1. Validity of Issuing a Summons u/s 131(1) Without a Pending Proceeding:
The main issue was whether a summons u/s 131(1) of the Income-tax Act can be issued to an assessee without any pending proceeding. The court held that the powers conferred by section 131(1) are akin to those of a court under the Code of Civil Procedure, which requires the existence of a pending proceeding. Since no proceeding was pending against the assessee when the summons was issued, the summons lacked legal authority.

2. Distinction Between Powers Conferred u/s 131(1) and u/s 131(1A):
The court noted that section 131(1) and section 131(1A) serve different purposes. While section 131(1) requires a pending proceeding for the exercise of its powers, section 131(1A) allows the Assistant Director of Inspection to exercise similar powers even without a pending proceeding. This distinction is crucial, as it underscores that the officers mentioned in section 131(1) cannot issue summons without a pending proceeding, unlike the Assistant Director of Inspection under section 131(1A).

3. The Stage at Which an Officer Can Invoke Powers u/s 131(1):
The court emphasized that the officer issuing the summons was at a "pre-reason-to-believe" stage, which is purely administrative and does not involve the assessee. The officer had not yet formed a "reason to believe" that income had escaped assessment, a prerequisite for invoking section 147 and subsequently section 131(1). The court clarified that section 131(1) does not permit compelling the attendance of the assessee or the production of documents at this preliminary stage.

Conclusion:
The court concluded that the summons issued u/s 131(1) without a pending proceeding was invalid. The impugned summonses dated May 8, 1980, and October 30, 1980, were set aside and quashed. The petition was allowed, and the rule was made absolute in terms of prayer (a) of the petition, with no order as to costs.