9911796707
TMI Blog1986 (3) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 1972-73 and 1973-74, assessment orders were passed on March 21, 1975, and April 14, 1975, respectively. Appeals against these orders and further appeals therefrom to the Income-tax Appellate Tribunal were all disposed of finally. For the assessment year 1974-75, the assessee did not receive any assessment order. And after March 31, 1977, assessment proceedings for the said year became time-barred. The Department also seems to have accepted this position, vide its communication dated October 25, 1978, to the assessee. Subsequently, in May, 1980, the assessee received from the first respondent (hereinafter " the respondent ") summons under section 131 of the Act calling upon the assessee to furnish books of account, documents and information on various points specified therein in respect of the Samvat years 2027, 2028 and 2029 corresponding to the very Assessment years aforesaid, viz., 1972-73, 1973-74 and 1974-75. In reply thereto, it was submitted that the assessments for the assessment years 1972-73 and 1973-74 were completed long back in March/April, 1975, and the assessment for the assessment year 1974-75, had long back become time-barred. Consequently, as no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain us in these proceedings. The same is best left open. To better appreciate the rival contentions on the main question, a look initially at section 131 would be useful: " 131. (1) The Income-tax Officer, Appellate Assistant Commissioner, Inspecting Assistant Commissioner, Commissioner (Appeals) and Commissioner 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. (1A) If the Assistant Director of Inspection has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under subsection (1) on the income-tax authorities referred to in that sub-section, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g against the assessee was pending before him. Indeed, there was no proceeding at all then pending. There was no occasion, therefore, for any summons (as the one here impugned) to the assessee. Moving ahead, it also requires to be noted that in 1975, the Taxation Laws (Amendment) Act, 1975, introduced sub-section (1A) in section 131. Under this sub-section, if the Assistant Director of Inspection has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons within his jurisdiction, then, for any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) of section 131 " notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority." Absence of this non obstante clause in section 131(1) is significant. Reading section 131 (1) and section 131 (1A) together, it is obvious that whereas an officer mentioned in sub-section (1) can exercise powers thereunder only if a proceeding is pending before him, the officer mentioned in sub-section (1A), viz., the Assistant Director of Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exposition aiding and assisting a correct interpretation of section 13 l(1). The form also assumes and presupposes the existence of a pending proceeding before the concerned officer. 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 under section 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 it 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 131(1) does not confer power to compel (i) attendance of the assessee, or (ii) production of documents at this stage. Indeed, sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a court trying a suit under section 30 of the Civil Procedure Code, read with rules 12, 14 and 15 of Order 11 of the Code. Section 131 empowers the officers mentioned in the section to act for the purpose of the Act, but that cannot be the only limitation set out under section 131 imposed upon the powers of the officers mentioned in the said section to act in the terms of the said section. All statutory bodies must act for the purposes of the statute even though the term 'for the purposes of the Act' be not expressly stated. Secondly, it appears to us that the statutory power cannot be exercised without application of mind as urged by Mr. R. C. Deb appearing on behalf of the respondent. If such powers are granted, then such powers would be so naked that the section itself would become ultra vires. Application of mind must be in regard to the question of relevancy of the documents to the lis involved in the matter before the Income-tax Officer. A civil court cannot order discovery, production or inspection of documents until it is of the opinion that such documents are relevant for the purpose of the issues involved in the suit pending before it. Similarly, it seems to us that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-s. (1) of s. 269C. It will have no application at the first stage when the competent authority forms his belief on the basis of materials available to him for the simple reason, as stated already, that the first stage is preparatory to the initiation of a proceeding which is yet to be initiated. Really, in the first stage, the competent authority discharges some administrative functions in the matter of formation of belief on the subjective satisfaction on the basis of certain materials. When, however, a proceeding is initiated, he proceeds judicially. " The above ruling of the Calcutta High Court was in an appeal against and affirming a learned single judge's judgment in Smt. Bani Roy Chowdhury v. Competent Authority, IAC [1978] 112 ITR 111. This latter judgment was followed by this court in Unique Associates Co-operating Housing Society Limited v. Union of India [1985] 152 ITR 114. And an appeal against the same was, I am so told at the Bar, dismissed in limine by Division Bench of this court. In support of the contention that the Income-tax Officer has no right to make a preliminary enquiry before issuing notice under section 34 (same as section 147 of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, as far as possible, consistent and uniform qua different High Courts. In this respect, the general policy of the High Court has been as per the Division Bench ruling in CIT v. Chimanlal J. Dalal Co. [1965] 57 ITR 285 (Bom) at page 290: " Barring some exceptions, it has been the general policy laid down by this court in income-tax matters that whatever our own view may be, we should follow the view taken by another High Court on the interpretation of a section. Chagla C.J., though he disagreed with the view taken by the Madras High Court, followed that view in Maneklal Chunilal Sons Ltd. v. Commissioner of Income-tax [1953] 24 ITR 375 (Bom). At page 385 of the report, Chagla C. J. observed : ' A Special Bench of the Madras High Court has taken the view favourable to the Commissioner and contrary to the view suggested by Mr. Palkhivala and in conformity with the uniform policy which we have laid down in income-tax matters, whatever our own view may be, we must accept the view taken by another High Court on the interpretation of the section of a statute which is an all India statute.' This is the practice of this court, and, as we have already stated, it has been general ..... X X X X Extracts X X X X X X X X Extracts X X X X
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