Section 131 powers need a pending proceeding; they cannot be used for fishing or roving inquiries.

Section 131 of the Income-tax Act, 1961 confers powers comparable to a civil court for discovery, attendance, production and inspection, but those powers are exercisable only when a proceeding is pending and the authority has applied its mind to the relevancy of the material sought. The provision is not meant for fishing inquiries or roving investigations. A limited exception exists under section 131(1A) for specified suspicion of concealment by the Assistant Director of Inspection, but that exception does not extend to an Income-tax Officer issuing notice without a pending proceeding for the relevant assessment year.

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Issues: Whether a notice under section 131 of the Income-tax Act, 1961 could be issued by the Income-tax Officer in the absence of any pending proceeding for the relevant assessment year.

Analysis: The power under section 131(1) is co-extensive with the powers of a civil court in the matters specified therein and, like the discovery and inspection powers under Order XI of the Code of Civil Procedure, 1908, it presupposes the existence of a pending proceeding. The statutory power must be exercised only after application of mind to the relevancy of the documents or evidence sought, and not as a device for making a fishing inquiry or roving investigation. Sub-section (1A) carves out a limited exception for the Assistant Director of Inspection on specified suspicion of concealment, but that exception was not applicable to the impugned notice issued by the Income-tax Officer. Since no proceeding was pending for the relevant assessment year, the notice could not be sustained.

Conclusion: The notice under section 131 was jurisdiction and invalid; the challenge failed and the revenue's appeal was not accepted.

Ratio Decidendi: The powers conferred by section 131 of the Income-tax Act, 1961 to compel discovery, attendance, production, and inspection can be exercised by the Income-tax authorities only when a proceeding is pending, except in the limited case expressly provided by sub-section (1A).

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