2015 (12) TMI 1125 - HC - Income Tax

Validity of notice issued under Section 131 - Single Judge held that the Income Tax Officer is not vested with the power to have a camp office at the residence of the assessee and get his attendance in connection with the proceedings under the Income Tax Act and therefore the notice issued as per Annexure-A is one without authority of law and setting aside of the said notice - Held that - In the instant case, the authorized officer went to the house of the assessee, the respondent herein, served notice on him to depose. In the said notice, as he should be notified whether he would be examined, it is mentioned that you are hereby required personally to attend my camp at your residence . Nothing could be read out of that phrase camp at your residence . All that it means is, as he has already entered the premises of the residence, in order to comply with the legal requirement, he has served summons on him calling upon him to depose. To show the place where he should depose, the phrase, camp at your residence is mentioned. In that view of the matter, the learned Single Judge was not justified in his view that the authorized officer has no right to enter the premises of the residence. The observation of the learned Single Judge that the authorized officer has trespassed into the house of the assessee and it deserves to be prosecuted before the competent criminal court, has no legal basis. In fact, the learned Single Judge has not interfered with the search and seizure of cash of ₹ 40 lakhs from the premises of the assessee and the panchanama drawn on that day. Under these circumstances, the observations made by the learned Single Judge at paragraphs 8 and 10 of the order is unsustainable and are hereby set aside. Even the interpretation sought to be placed by the learned Single Judge on Section 131 and Section 132(1) of the Act, is also contrary to law and is hereby set aside. However the learned Single Judge has not interfered with the search and seizure of cash. Hence, that portion of the order is not interfered with. - Decided partly in favour of revenue

Summary

Issues:
1. Interpretation of Section 131 of the Income Tax Act regarding the power of the Assessing Authority to summon individuals for investigation.

Analysis:
The High Court of Karnataka heard a Writ Appeal where the Revenue challenged a Single Judge's order regarding the power of the Income Tax Officer to set up a camp office at the residence of an assessee for investigation purposes. The Revenue argued that Section 131 of the Income Tax Act empowers authorities to summon individuals if there is suspicion of concealed income, making the notice legal. Conversely, the assessee's counsel contended that the Code of Civil Procedure does not allow for a camp office at the assessee's residence, rendering the notice jurisdictionally flawed.

The crucial question before the Court was whether the Assessing Authority could summon the assessee to provide evidence under Section 131 of the Act. Section 131 grants powers to Income Tax authorities akin to a civil court, including enforcing attendance and examining individuals on oath. Sub-section 1(A) allows officers to suspect concealed income and exercise these powers even before formal proceedings. This provision enables officers to summon individuals to their office or visit the individual's location for examination, enforcing attendance if necessary.

The Court clarified that the officer's visit to the assessee's residence and serving a notice did not constitute trespass, as the officer was authorized to conduct examinations at the individual's place. The phrase "camp at your residence" in the notice simply indicated the examination location. The Court rejected the Single Judge's notion of trespass and upheld the officer's actions as lawful. The Court also noted that the Single Judge did not contest the search and seizure of cash during the investigation, leading to the set aside of certain unsustainable observations and interpretations made by the Single Judge on Sections 131 and 132(1) of the Act.

In conclusion, the Writ Appeal was partly allowed, emphasizing the legality of the officer's actions under Section 131 and dismissing claims of trespass. The Court upheld the authority's power to summon individuals for investigation purposes, ensuring compliance with legal requirements and procedures under the Income Tax Act.