1980 (11) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income Tax Officer (ITO) to investigate the decrees obtained by the petitioners.
2. The validity of the ITO's use of Section 131 of the Income Tax Act for summoning witnesses.
3. The right of witnesses to be represented by counsel during the investigation.
4. The authority of the ITO to delegate the task of recording statements to other officers.
5. The binding nature of civil court decrees on the ITO's investigation.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income Tax Officer (ITO) to Investigate the Decrees:

The petitioners contended that the ITO could not investigate the decrees obtained from civil courts as they should be treated as conclusive. They cited two decisions: Jerome D'Silva v. Regional Transport Authority and K. Sankaralinga Thavar v. Thirumalammal, arguing that quasi-judicial tribunals like the ITO should respect civil court decrees. However, the court noted that the scope of the enquiry before the ITO was different from that before the civil court. The ITO was investigating whether the Federation had earned any income disguised as deposits, which was not the issue before the civil court. The Supreme Court in Chhatrasinhji Kesarisinhji Thakore v. CIT affirmed that the ITO has exclusive jurisdiction to determine whether a receipt is income, irrespective of civil court decrees.

2. Validity of the ITO's Use of Section 131 for Summoning Witnesses:

The petitioners argued that the ITO's use of Section 131 to summon witnesses and record statements was without jurisdiction and in defiance of court orders. The court found that the ITO was acting within his powers under the Income Tax Act to gather evidence. The ITO's investigation aimed to determine the true nature of the deposits, which was a legitimate exercise of his authority.

3. Right of Witnesses to be Represented by Counsel:

The petitioners requested that witnesses be allowed to be represented by counsel during the investigation to prevent prejudice. The court held that there is no provision under the law authorizing a witness to be represented by counsel during the recording of statements. The court cited Sarju Prosad Sharma v. ITO, where it was held that a witness has no right to be represented by an authorized representative. The court emphasized that the presence of counsel might hinder the truth from being recorded.

4. Authority of the ITO to Delegate the Task of Recording Statements:

The petitioners contended that only the ITO with jurisdiction over the Federation should make the enquiries, not other officers. The court examined the files and found that the ITO had issued commissions to other officers to record statements due to the large number of deponents. This delegation was within the ITO's authority to ensure timely completion of the investigation.

5. Binding Nature of Civil Court Decrees on the ITO's Investigation:

The court rejected the argument that civil court decrees should bind the ITO's investigation. It noted that the ITO's task was to determine the true nature of the deposits, which might not have been fully explored in the civil court proceedings. The court cited several decisions, including Hazrat Pirmohamed Shah Saheb Roza Committee v. CIT and Narendrakumar J. Modi v. CIT, affirming that the ITO is not bound by civil court decrees in his investigation.

Conclusion:

The court dismissed the writ petitions, holding that the ITO had the jurisdiction to investigate the decrees, use Section 131 to summon witnesses, delegate tasks to other officers, and was not bound by the civil court decrees. The petitioners were not entitled to any relief, and the writ petitions were dismissed with costs.