Possession or control of documents: notice to produce third party books cannot be enforced absent evidence of control, so assessment invalid.

Whether an income tax officer can compel production of a foreign affiliate's books turns on possession or control of those documents by the person served; statutory power to require production is confined to documents in the recipient's possession or control, and penal/consequential measures are inconsistent where legal incapacity to produce exists. On the facts prior findings showed no agency or business connection and no evidence the assessee possessed or controlled the foreign company's books or that asserted confidential information existed; the notice under Section 22(4) and assessment under Section 23(4) were therefore unjustified in favour of the assessee.

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Issues: Whether, under Section 22(4) of the Income-tax Act, the Income-tax Officer could validly require the Bombay Company to produce or cause to be produced the books of the Hongkong Company and, failing production, make an assessment under Section 23(4).

Analysis: Section 22(4) permits the Income-tax Officer to require production of accounts or documents by a person on whom a return notice has been served; the scope of that power is confined to accounts or documents that are in the possession or under the control of the person served. Penal and consequential provisions such as assessment under Section 23(4) and fines under Section 51 would be inconsistent with requiring production of documents which the person is legally incapable of producing. On the facts presented, prior judicial determinations established there was no evidence of a business connection or agency relationship between the Bombay Company and the Hongkong Company; no evidence was put before the Court showing the Bombay Company had the Hongkong Company's books in its possession or control. The Income-tax Officer's asserted confidential information was not in evidence and therefore cannot support a finding of possession or control. Accordingly the notice under Section 22(4) and the resulting assessment under Section 23(4) were not justified.

Conclusion: The question is answered in the negative; the requirement to produce the Hongkong Company's books and the consequential assessment were not justified. The decision is in favour of the assessee.

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