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TMI Blog2019 (6) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... see to assist without anything more and without any consequence in default may stand upon an altogether different footing than a summons u/s 131(1) with penalty in default of compliance therewith. Such, however, is not the case here. Similarly, we are in agreement with the argument of the learned counsel for the petitioner that provisions of Section 131(1) could be invoked only if some proceedings were pending. In the instant case there was only a survey operation and no proceedings were pending at that point of time. But the income-tax authority exercised the powers of a court in the absence of any pending proceedings. This issue was determined by a Division Bench of Patna High Court in Rina Sen v. Commissioner of Income-Tax and others [ 1998 (8) TMI 76 - PATNA HIGH COURT] To our minds the income-tax authority violated the procedure completely. Nowhere was any satisfaction recorded either of noncooperation of the petitioner or a suspicion that income has been concealed by the petitioner warranting resort to the process of search and seizure. No hesitation to conclude that the present petition deserves to succeed. The impugned action of the respondents is quashed. X X X X Extracts X X X X X X X X Extracts X X X X ..... silent as to what information was required from the petitioner during the survey operation. The respondents, on the other hand, justify the action taken by them. Annexure P-3 is the summons issued to the petitioner under Section 131 of the Act, which indicates that the premises of the petitioner were converted into a camp office and advised to attend the office and give evidence or produce books of accounts, failing which a penalty of ₹ 10,000/- for each default would be imposed upon him. Towards the bottom of the summons it is written "Books of accounts/documents specified". This, according to our mind, is totally vague as the summons is absolutely silent as to what information was required of him during the survey operation. Even in the reply filed to the petition it has not been stated so. Thus, there is complete ambiguity in the language of the summons which failed to apprise the petitioner of what is required of him at the time of attending the office. Be that as it may, there is a specific assertion made by the petitioner that he had cooperated with the respondents voluntarily and disclosed the existence of cash to the tune of ₹ 2,09,89,090/- in his safe and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Commissioner (Appeals), Joint Commissioner ,Commissioner (Appeals), Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section (15) of section 144C shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:- (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions. The respondents have relied upon Section 131(1-A) which is extracted herebelow :- "131.(1A) If the Principal Director or Director General or Principal Director or Director or Joint Director or Assistant Director or Deputy Director, or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that subsection, has reasons to suspect that any income has been concealed, or is likely to be concealed, by any person or cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made : Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of Income-tax without obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be. Explanation. - In this section,- (a) "income-tax authority" means a Principal Commissioner or Commissioner, a Joint Commissioner, a Principal Director or Director, a Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax Recovery Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of subsection (3) and sub-section (5), includes an Inspector of Incometax; (b) "proceeding" means any proceeding under this Act in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (4) during the survey under Section 133A. The ITO can, however, resort to powers under Sub-section (1) and (2) of Section 131 of the Act, in case the assessee refuses or evades to cooperate in terms of Sub-section (6) of Section 133A. It is undisputed that the petitioner neither refused nor evaded to co-operate on 11th April, 1978. Under these circumstances, the ITO had no jurisdiction to resort to the powers under Sub-sections (1) and (2) of Section 131 of the Act while surveying the accounts of the petitioner under Section 133A on 11th April, 1978. It is obvious that the ITO issued notices (annexs.P-1 to P-4) under Section 131 of the Act to the petitioner in excess of the jurisdiction vested in him. These notices are, consequently, liable to be quashed." The action of the respondents is therefore bad in the eyes of law. Besides, the summons issued to the petitioner was totally vague. No documents were mentioned which were required of the petitioner and neither was any other thing stated. In G.M.Breweries v. Union of India, 2000(2) BCR 160 a Division Bench of the Bombay High Court held as follows :- "5. ..........The powers given to the Income-Tax Authorities und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in your case." Framed and prescribed at and since about the time section 131(1) was enacted, this form constitutes, in a sense, a contemporaneous exposition aiding and assisting a correct interpretation of section 131 (1). The form also assumes and presupposes the existence of a pending proceeding before the concerned officer. 12. There is yet another infirmity invalidating the impugned summons. The officer(respondent No. 1) issuing it has himself disclosed the reason for doing so. His letter of October 30, 1980 inter alia states: "The purpose of the information called for was with a view to investigate the information with me whether the above assessments should be reopened u/s 147 or not." It is obvious thus that the officer has yet to come to a stage where he can, within the meaning of section 147, be said to have "reason to believe" that income chargeable to tax has escaped assessment. He is still at a pre-reason to believe stage. There is a vital distinction between the pre-reason to believe stage (stage 1) and the post-reason to believe stage (stage 2). The impugned summons here, as the above letter indicates, is at stage 1 viz. pre-reason to believe stage. Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, learned counsel for the petitioner, contended that the Assessing Officer and/or the Appellate Officer have power to issue commission under section 131(1)(d) of the Act but the power can be exercised only in connection with a pending proceeding. The power, it was submitted, is the same as that of a civil court under the relevant provisions of the Code of Civil Procedure and since the civil court has power to issue commission and/or to pass other orders referred to in clauses (a), (b) and (c) of section 131(1) of the Act while trying a suit, as said so in the section itself, the power of the Assessing Officer, etc., under the Income-tax Act cannot be enlarged and be exercised even though no proceeding is pending, under the Act. Counsel relied on Jamnadas Madhavji and Co. v.J.B.Panchal, ITO (1986) 162 ITR 331 (Bom.) and Dwijendra Lal Brahmachari v. New Central Jute Mills Co.Ltd. (1978) 112 ITR 568 (Cal.)." To our minds the income-tax authority violated the procedure completely. Nowhere was any satisfaction recorded either of noncooperation of the petitioner or a suspicion that income has been concealed by the petitioner warranting resort to the process of search and seizure. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an assessee, for example pass books, sale deeds which are registered and about the existence of which the Department is aware, then in such a case it will be difficult to believe that an assessee will not produce those documents. 36. Sub-clause (C) refers to money, bullion or jewellery or other valuable articles which either wholly or partly should have been income of an assessee which has not been disclosed for the purpose of the Act. The said sub-clause pertains only to moveable and not immoveable assets. Secondly it pertains to those assets which wholly or partly represent what should have been income. The expression income "which has not been or would not be, disclosed for the purposes of Income Tax Act" would be mean that income which is liable to tax but which the assessee has not returned in his Income Tax return or made known to the Income-Tax Department. The sub-clause itself refers to this as "undisclosed income or property". In our opinion the words "undisclosed", in that context, must mean income which is hidden from the Department. Clause (c) would refer to cases where the assessee knows that the moveable asset is or represents income which is taxable but whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under sub-clause (a), (b) or (c) of Section 132(1). No search can be ordered except for any of the reasons contained in sub-clause (a), (b) or (c). The satisfaction note should itself show the application of mind and the formation of the opinion by the officer ordering the search. If the reasons which are recorded do not fall under clauses (a), (b) or (c) then an authorisation under Section 132(1) will have to be quashed. As observed by the Supreme Court in Income Tax Officer v. Seth Brothers, 74 ITR 836. "Since by the exercise of the power a serious invasion is made upon the right, privacy and freedom, of the tax payer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of his action. If the action is maliciously taken or power under the Section is exercised for a collateral purpose, it is liable to be struck down by the court. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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