Decision cited :

In the case of Gheru Lal Bal Chand v. ITO (1982) 137 ITR 190 (P&H), the Court held that the ITO can resort to powers under sub-section (1) and (2) of section 131, in case the assessee refuses or evades to cooperate in terms of sub-section (6) of section 133A.

In the case of  G. M. Breweries v. UOI 2000(2) BCR 160 (Bom.), the Court held that the powers given to the income tax authorities u/s. 131(1) are powers of the Court of law. While exercising these powers, the income tax authorities act in a quasi judicial capacity. These powers must be exercised strictly for the purpose set out in section 131(1) and not for any extraneous purposes. Powers u/s. 131 can be exercised only if proceedings are pending before the authority concerned under the Income Tax Act.

In the case of M/s. Jamnadas Madhavji & Co. v. ITO (1986) 162 ITR 331 (Bom.), the Bombay High Court observed that the word “proceeding” would mean one actually pending and not one completed and concluded. Also relevant to the context is the form of the summons u/s. 131(1) of the Act which commences with the words “whereas your attendance is required in connection with the proceedings under the Income Tax Act in your case.”.

In the case of Rena Sen v. CIT (1995) 235 ITR 219 (Patna), the Court held that the AO and / or the Appellate Officer have power to issue commission u/s. 131(1)(d) of the Act but the power can be exercised only in connection with pending proceedings.  

In the case of L.R. Gupta v. UOI 1992 (46) DLT 14, the Court held that section 132(1) has to be strictly constructed. NO search can be ordered except for any of the reasons contained in sub-clause (a),(b) and (c) else the authorisation u/s. 132(1) will have to be quashed. While holding this, the Court relied upon the decision of Supreme Court in the case of ITO v. Seth Brothers (1969) 74 ITR 836 wherein it has been held that "Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed.

Facts of the case :

On 06.09.2016 at about 11.30 a.m. the officials of the Respondents entered the business premises of the assessee. The assessee was allegedly asked to sign documents without disclosing their contents. Upon raising a question the Respondents supplied him with a copy of summons dated 06.09.2016 u/s. 131 of the Income Tax Act, 1961 (“the Act”) informing the assessee that the officials wanted to carry a survey operation u/s. 133A of the Act. According to the assessee, during this procedure he voluntarily disclosed the liquidity/cash that he had in the premises and also cooperated in providing the Respondents with the books of accounts, keys of lockers and all other necessary support during the survey.

Grievance of the Assessee before High Court:

(i) Although the summons indicated survey operations but the procedure was converted into search and seizure which is impermissible in law.

(ii) The assessee and all his staff members fully cooperated with the Respondents, thus, summons u/s. 131 of the Act could not be issued in violation of section 133A(6). Besides the summons issued was absolutely silent as to what information was required from the assessee.

High Court’s verdict :

The hon’ble High Court observed that the summon issued u/s. 131 of the Act by the Respondent indicates the assessee to attend the office and give evidence or produce books of accounts, failing which a penalty of Rs.10,000/- for each default will be imposed. Towards the bottom of the summons it was written “Books of accounts/documents specified”.

Accordingly, the High Court held that the action of the Respondent is bad in law for the following reasons:

(i) powers u/s. 131(1) can be invoked only if the proceedings are pending before the authority concerned under the Act ; 

(ii) the summons is absolutely silent as to what information was required of the assessee at the time of attending the office ;

(iii) the Respondent failed to give reason and bring on record any material indicating that there was non-cooperation from the assessee or his employees to issue summons u/s. 131 read with section 133A(6) ;

(iv) no satisfaction was ever recorded by the Respondents of a suspicion that income has been concealed by the assessee warranting resort to the process of search and seizure.