TaxTMI 
TaxTMI 
2003 (5) TMI 55
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.... per which the petitioner was requested to furnish the true and complete details of all payments made by them to their distributors in Kerala, during the period from April 1, 1996, to March 31, 2001, with the names and complete addresses of the respective payees and the amount paid in each financial year, etc., and any other relevant details. This letter is issued in lieu of summoning the petitioner under section 131 of the Income-tax Act. Exhibit P2 is a reply thereto from the petitioner under date June 15, 2001, by which the petitioner sought for a clarification as to the exact provision of section 131 of the Income-tax Act, 1961, under which exhibit PI notice has been issued. By exhibit P3 letter dated June 19, 2001, the second respondent informed the petitioner that the exact provision of section 131 of the Act under which exhibit P1 was issued was made clear from the letter itself. It was further informed that there is reason to suspect that the distributors of the petitioner company's products in Kerala are in receipt of remuneration (by whatever name called) from the petitioner-company which has not been fully and properly offered for income-tax assessment in their respectiv....
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.... detail or transaction. According to them, requisition of books of account which run into a truckload, is neither proportionate nor legitimate but in the case of identification of any person or class of persons for whom there is reason to suspect, once the identity is disclosed they can provide the details of such person. The standard contract entered into between the distributors and the company is enclosed along with the basis of calculation of remuneration contained therein. The reply also highlights the fact that in the absence of the names and addresses of the distributors about whom the details are called for, the question of entertaining suspicion as contemplated under section 131 did not arise. Exhibit P8 is a letter dated August 10, 2001, from the second respondent referring to the letter dated August 9, 2001, of the senior manager of the petitioner-company on the subject of summons under section 131 issued on August 2, 2001. In this letter, the reason to suspect is stated as concealment of income. It is further stated that the reasons need not be communicated to the petitioner and class of persons referred to is distributors based in Kerala. Hence, according to them, the ....
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....r to produce the books of account for the period April 1, 1996, onwards as exhibit P8 finally issued only requires the petitioner to produce the details of payments of commission or remuneration paid by the petitioner to their distributors in Kerala limiting the period from September 1, 1999, to August 31, 2001. If the petitioner complies with exhibit P8 it is unnecessary to comply with any other previous requests made in this behalf. Hence, the question as to whether exhibit P8 is validly issued alone is to be considered in this original petition. I say so, because even though the petitioner would contend that a truckload of books of account is not practical to be produced before the second respondent, and they have started their business only in 1998, and therefore, whether they can be asked to produce the books of account prior to the commencement of business, etc., actually does not arise for consideration at this point of time especially after exhibit P8 which has given a go-by to the earlier notice issued and exhibit P8 confines to the production of details regarding payments of remuneration made to the distributors of the petitioner in Kerala for the limited period from Sept....
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....ding discovery, production of evidence, etc.--(1) The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals) and Chief Commissioner or 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 Director-General 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 sub-section 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 sub-section (1) ....
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....ation, it will be open for him to exercise the powers under section 131 notwithstanding that no proceedings with respect to such person are pending before him. Thus, it can be seen that section 131 empowers the Assessing Officer, during the course of assessment proceedings, to issue summons for discovery or inspection or for production of books of account, as the case may be, as are vested in the civil court. On the other hand, section 131(1A) empowers the specific officer referred to therein including the Deputy Director to exercise the power under sub-section (1) notwithstanding the fact that no proceedings are pending before such authority and the summons so issued could be for the purpose of conducting an enquiry or investigation thereto provided he has reason to suspect that any income has been concealed or is likely to be concealed by a person or class of persons within his jurisdiction. If there is any reason to suspect concealment of income by any class of persons within his jurisdiction then he can exercise the power vested in him under section 131. The contention of the petitioner is that the second respondent has acted in excess of his jurisdiction because he canno....
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....ase arising under the Foreign Exchange Regulation Act. Under section 19(2) of the said Act, an order was passed requisitioning documents for examination some of which were found to have no connection with the purpose for which documents would be called for under the relevant provision. The apex court held that there was no application of mind in respect of the remaining documents and, therefore, there is non-compliance of the requirements under the statute. There, the appellants were directed by the order impugned therein to furnish the documents mentioned in the schedule attached to the order. There were six items. The first five items related to letters and one telegram and the seventh item referred to are books, papers and other documents in the possession of the Registrar of the Supreme Court. On a perusal of the documents, it was found that hundreds of documents and letters are in the custody of the Registrar. It was in that context that it was held that there was no application of mind as an essential condition precedent to the making of an order is that the authority should have considered it necessary to obtain, and examine for the purpose of the Act the specified informati....
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....ng his powers in issuing a commission under section 131(1)(d) and that his act fell within the four comers of section 131(1A). In this connection, it is relevant to note the decision of the Madhya Pradesh High Court in Arjun Singh v. Asst. Director of Income-tax [2000] 246 ITR 363, wherein it was held as follows: "The purpose of the power under sub-section (1) of section 131 of the Income-tax Act, 1961, is in aid of action under some provision under the Act and it is a well settled principle of law that all statutory bodies must act for the purpose of the statute, even though the term 'for the purpose of the Act' is not expressly stated. The purpose of exercise of power under sub-sections (1) and (1A) of section 131 is not the same, as the power under sub-section (1) operates in the field where the person is an assessee and proceedings are pending against him; whereas, the power under sub-section (1A) operates in the field where there is no proceedings for assessment pending) against any such person or class of persons and the enquiry/investigation is necessary for the purpose of making any enquiry/investigation on the basis of reason to suspect concealment or likelihood of c....
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....period from September 1, 1999, onwards only in respect of those distributors to whom the total commission paid during the relevant accounting year and years amounted to Rs. 50,000 and above. It was further averred in para. 8 of the counter-affidavit as follows: "There was reason to suspect, in the light of the, Income-tax Inspector's report, that the petitioners distributors in Kerala, a class of persons, had taxable income and were potential taxpayers, by virtue of the commission the petitioner had paid them while no tax was being paid thereon, and thereby they were 'concealing income' within the meaning of section 131(1A)... The satisfaction was in good faith being based on the Income-tax Inspector's report, and not a pretence." It is further averred in the same paragraph that: "It was because the petitioner's local office in Kerala did not have the details required, that its head office was requested to furnish the same. The furnishing of the standard form of contract between the distributors and the petitioner was neither required, nor equivalent to furnishing the specific details called for." In para. 11, it is averred thus: "In the light of the Income-tax Inspe....