Invalid Notice Issued Under Tax Act; Pending Proceeding Required

Rina Sen Versus Commissioner Of Income-Tax And Others

Rina Sen Versus Commissioner Of Income-Tax And Others - [1999] 235 ITR 219, 151 CTR 672, 101 TAXMANN 151 Issues Involved:
1. Validity of the notice issued u/s 131(1)(d) of the Income-tax Act.
2. Requirement of a pending proceeding for exercising power u/s 131(1)(d).
3. Jurisdiction of the Assessing Officer to issue commission in absence of a pending proceeding.

Summary:

1. Validity of the Notice Issued u/s 131(1)(d):
The petitioner challenged the notice issued u/s 131(1)(d) of the Income-tax Act by the Assistant Valuation Officer for the ascertainment of the cost of construction of her house. The petitioner argued that such an investigation can only be conducted in connection with and during the pendency of a proceeding. Since no proceeding was pending, the investigation was deemed illegal and without jurisdiction.

2. Requirement of a Pending Proceeding:
The court examined the provisions of section 131(1) and noted that the power to issue commissions u/s 131(1)(d) is akin to the powers of a civil court under the Code of Civil Procedure. It was emphasized that such powers can only be exercised in connection with a pending proceeding. The court referred to precedents, including Jamnaedas Madhavji and Co. v. J. B. Panchal and Dwijendra Lal Brahmachari v. New Central Jute Mills Co. Ltd., which supported the view that the existence of a pending proceeding is a sine qua non for exercising power u/s 131(1).

3. Jurisdiction of the Assessing Officer:
The respondents argued that the issuance of the notice itself initiated a proceeding. However, the court rejected this argument, stating that the service of the impugned notice cannot be interpreted as the initiation of any proceeding. The court further clarified that the notice dated March 8, 1991, issued u/s 143(2) for the assessment year 1990-91, did not justify the investigation into the construction period of 1967-1973. The court highlighted that the proper course for the respondents would have been to reopen the assessment u/s 148 read with section 147, which was not done.

Conclusion:
The court concluded that the petitioner had made a valid case for interference. The impugned notice dated January 24, 1992, was quashed, and the writ petition was allowed without any order as to costs.