Decided on August 20,1999



- (1.) THE notices issued by the respondent No. 2 whereby the petitioners were called upon to indicate the cost of construction of property mentioned in the notices is the subject-matter of challenge in these petitions. The basic challenge made is that these notices which are said to have been issued in terms of S. 131(1)(d) of the IT Act, 1961 ('the Act') are beyond the authority of the officer issuing the same. It is stated that the said officer has taken resort to the provisions of S. 55A of the Act also. It is stated that this section is not attracted to the facts of this case. It is stated that the income of the assessee has already been assessed. It is urged that the assessees are not transferring the property and, therefore, the question of making the assessment in terms of S. 55A does not arise. It is further urged that this section would apply only if the assessee sells his property. The fact that S. 55A comes in Chapter 4 and deals with the capital gains, is sought to be projected in this regard. It is stated that as S. 55A is part of that set of sections which deals with capital gains, this section can be resorted to only if the question for determination before the authority is vis-a-vis assessment of capital gains.
(2.) THE respondents have filed objections. The stand taken by them is that in terms of S. 131(1)(d), the assessing authority has the power to issue commissions. This power as per the Revenue has been properly exercised. The determination of the value as per the respondents is not only required for the purposes of determining the capital gains but is also relevant for going into the question of income of an assessee. It is, accordingly, submitted that this power has been rightly exercised. Before adverting to the submissions made by the learned counsel for the parties, it would be apt to notice S. 131(1)(a) to (d). This reads as under : "Power regarding discovery, production of evidence, etc.-(1) The AO, Dy. CIT(A), Dy. CIT, CIT(A) and Chief CIT or CIT shall, for the purposes of this Act, have the same powers as are vested in a Court under the CPC, 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." The provisions of S. 55A may also be noticed. These read as under : "Reference of Valuation Officer.-With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the AO may refer the valuation of capital asset to a Valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the AO is of opinion that the value so claimed is less than its fair market value; (b) in any other case, if the AO is of opinion- (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-ss. (2), (3), (4), (5) and (6) of s. 16A, cls. (ha) and (i) of sub-s. (1) and sub-ss. (3A) and (4) of S. 23, sub-s. (5) of S. 24, S. 34AA, s. 35 and S. 37 of the WT Act, 1957 (27 of 1957), shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-s. (1) of S. 16A of that Act."
(3.) A reading of S. 131 of the Act makes it apparent that sufficient power is vested with the officers mentioned therein for discovery and production of evidence. At the same time, this power is not to be exercised with a view to have a roving or fishing enquiry. The proceedings which are taken under S. 131 are against an individual or an assessable entity. The individual or entity may not actually be assessed but may be suspected to have assessable income. In this regard, it would be apt to refer to the Law & Practice on Income-tax by Palkhivala, 8th Edn., p. 1069, where the powers which are exercisable in terms of ss. 131 to 135 have been summarised. This paragraph is reproduced below : "Power to be exercised after due application of mind. Roving or fishing inquiry.-The various powers of IT authorities survey, discovery and inspection, search and seizure, requisitioning books and documents, calling for information, etc., are set out in ss. 131 to 135. An overview of these provisions leads to the following conclusions, which are supported by judicial decisions cited under the appropriate sections : (a) Proceedings under the Act are always against an individual or other assessable entity. That individual or entity may not actually be assessed but may be suspected to have assessable income. (b) Powers, e.g., under S. 131(1), are to be exercised 'for the purposes of this Act'. Therefore, such powers are to be exercised for the purpose of proceedings in particular cases as set out in (a) above. (c) The power to call for information which would be 'useful for, or relevant to, any proceedings under this Act' [Sec. 133(6)], should be construed 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, i.e., under S. 131(1A), where there is reason to suspect that any income has been concealed or is likely to be concealed 'by any person or class of persons'. In this context, 'class of persons' must mean a class of persons whose coherence as a class is related to the Act. The quoted words do not cover a class between whom and this Act the link is too remote or attenuated to make the class coherent for the purpose of this Act. To take an example, Indian citizens may be treated as a 'class of persons'; but surely not for the purpose of S. 131(1A) of the Act. (e) An IT authority cannot make a roving or fishing inquiry, or call for general information which does not pertain to specific cases or to a specific class of persons. To illustrate, an IT authority cannot make a blanket inspection of a bank's books, because that would amount to a roving inquiry; nor can he require the bank, which is under a legal duty of secrecy and confidentiality towards its customers, to supply information pertaining to all account holders having a certain credit balance or all purchasers of bank drafts or travellers cheques above a certain monetary limit, because such an inquiry cannot be said to relate to a 'class of persons'." ;

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