29 May 2012
Section 131 of the Income-tax Act, 1961 gives power to Tax Authorities toissue summons or to force attendance of any person for being examined onoath or to compel production of books of account and other documents.Likewise, section 133 gives tax authorities power to call for information incircumstances specified in that section. Under both provisions, the powers can be exercised "for the purposes of thisAct". The expression "for the purposes of this Act" has been considered bythe Bombay high court in G M Breweries Ltd v Union of India (241 ITR 446).
The facts in this case were that by a writ petition the company sought tochallenge the summons dated August 2, 1994, issued by the Income Tax Officer(TDS) Circle-Thane, and the summons dated November 10, 1994, issued by theIncome-tax Officer (TDS-IS), Pune "under sections 131/37/36 of theIncome-tax Act, 1961/Wealth-tax Act, 1957/Gift-tax Act, 1958" directing thepetitioner-company to produce the books of account and documents asspecified therein as also the notices issued to show cause for imposition ofpenalty for non-compliance of the same. It was stated in the above summonsthat the books of account and documents were required in connection with theproceedings "under the Income-tax Act, 1961/Wealth-tax Act, 1957/Gift-taxAct, 1958".
On a writ petition challenging the summons, the Bombay high court held thatit was clear even from a look at the two summons which had been reproducedverbatim that neither the blanks had been filled up nor the inapplicableportions scored out. The total non-application of mind was manifest on theface of the summons. Further action pursuant to the above summons was stayedby the court on December 16, 1994.
As stated above, the above summons clearly demonstrated totalnon-application of mind by the concerned assessing officer. It was not evenclear from the summons whether these were under the Income-tax Act orWealth-tax Act or Gift-tax Act. It was not stated by the revenue departmentbefore the court in what connection and under which Act the books of accountand documents were required to be produced by the petitioners. According tothe court, so far as the scope and ambit of section 131(1) of the Income-taxAct was concerned, it was clear from a plain reading of the provision itselfthat the powers thereunder could be exercised only "for the purposes of thisAct". The expression "for the purposes of this Act" should mean for thepurposes of proceedings under the Act pending before the concernedauthority.
The powers given to the income-tax authorities under section 131(1) arepowers of the court of law. While exercising these powers, the income-taxauthorities act in a quasi-judicial capacity. These powers must be exercisedstrictly for the purposes set out in section 131(1) of the Act and not forany extraneous purposes. The powers under section 131 can be exercised onlyif proceedings are pending before the authority concerned udner the Income-tax Act. The same is the position under the Wealth-tax Act and the Gift-taxAct.
The various powers of income-tax authorities - survey, discovery andinspection, search and seizure, requisitioning books and documents, callingfor information, etc. - are set out in sections 131 to 135. An overview ofthese provisions leads to the following conclusions, which are supported byjudicial decisions:
(a) Proceedings under the Act are always against an individual or otherassessable entity. That individual or entity may not actually be assessedbut may be suspected to have assessable income.
(b) Powers, e.g. under section 131(1), are to be exercised "for the purposesof this Act. Therefore, such powers are to be exercised for the purpose ofproceedings in particular cases as set out in (a) above.
(c) The power to call for information which would be "useful for, orrelevant to, any proceeding under this Act" (section 133(6)), should beconstrued as a power confined to a particular case or particular cases,because proceedings can only be in a particular case or particular cases.
(d) Some powers are to be exercised, e.g. under section 131 (1-A), wherethere is reason to suspect that any income has been concealed or is likelyto be concealed "by any person or class of persons". In this context, "classof persons" must mean a class of persons whose coherence as a class isrelated to the Act. The quoted words do not cover a class between whom andthis Act the link is too remote to make the class coherent for the purposesof this Act. To take an example, Indian citizens may be treated as a "classof persons"; but surely not for the purpose of section 131(1-A) of theAct.
An income-tax authority cannot make a roving or fishing inquiry, or call forgeneral information which does not pertain to specific cases or to aspecific class of persons. To illustrate, an income-tax authority cannotmake a blanket inspection of a bank's books, because that would amount to aroving inquiry; nor can he require the bank, which is under a legal duty ofsecrecy and confidentiality towards its customers, to supply informationpertaining to all account-holders having a certain credit balance or allpurchasers of bank drafts or travellers cheques above a certain monetarylimit, because such an inquiry cannot be said to relate to a "class ofpersons".
The Finance Act, 1995 amended section 133(6) of the Act by adding the words"any inquiry" which have been added by the amendment have to be given theirdue significance. The word "inquiry" has to be in respect of a particularassessee who is presently assessable under the provisions of the Act. Thisis made clear by the words "for the purposes of this Act" used in theopening paragraph of section 133. Therefore, the information called for mustbe useful for or relevant to any inquiry under this Act, which can only meanthat it must relate to a specific tax-payer because only in his case wouldthe information be useful or relevant.
What is stated above is further made clear by the words of section 133(6)which stipulate that the "information" must be "in relation to such point ormatters as in the opinion of the assessing officer, the Deputy Commissioner(Appeals), the Deputy Commissioner or the Commissioner (Appeals), will beuseful for, or relevant to, any inquiry or proceedings under this Act".These words clearly restrict the power to gather information in respect ofsuch points or matters as will be useful for or relevant to any inquiry orproceedings under the Act. The assessing officer and other officers havejurisdiction in respect of particular tax-payers. Hence, the informationcalled for can only be in relation to such specific tax-payers.
While the power under section 133(6) can be exercised by the director ofinvestigation or any authority below him with the prior approval of thedirector, such power can only be exercised if, and only if, the informationwill be useful for or relevant to any inquiry or proceeding "in the opinionof the assessing officer, deputy commissioner (appeals), the deputycommissioner or the commissioner (appeals)".
In other words, while an assessing officer has the power to call forinformation, he has first to establish that, in his opinion, suchinformation will be useful for, or relevant to, any inquiry or proceedingunder the Act. The assessing officer or commissioner (appeals) can obviouslyfind the information useful or relevant only in respect of a tax-payer whomhe is assessing, or whose appeal is pending. Therefore, the informationcalled for under section 133(6) must necessarily relate to a specifictax-payer who is being assessed by an assessing officer or whose appeal ispending before the commissioner (appeals).
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