D.K. Seth, J. - (1.) MR. Upadhyaya, appearing on behalf of the petitioner, contends that in order to exercise the power under Section 132A(1)(b) of the Income-tax Act, 1961, both the tests, as provided in Clause (b), are to be satisfied, namely, that the documents must be useful for, or relevant to, any proceeding which, according to him, means a pending proceeding only and that the person to whom a summons has been issued or might be issued will not or would not produce or cause to be produced such books of account, etc. According to him, unless both the tests are satisfied, the said power cannot be exercised. In this case, MR. Upadhyaya has confined his case only with regard to the books of account and other documents relevant to the assessment year 1993-94 on the ground that no proceeding is pending in respect of the said assessment and, therefore, the power under Section 132A(1)(b) cannot be invoked. His further contention was that in the absence of any finding that in case summons is issued or might be issued, the said documents will not or would not be produced or cause to be produced, the power under Section 132A(1)(b) cannot be invoked.
(2.) IN support of his contention, Mr. Upadhyaya submits that Section 132A does not provide that the said power can be exercised even in a case in which the proceeding is yet to be commenced as is specifically provided in Section 132A(1)(b) on account of Explanation 2, provided in Section 132, explaining that the word "proceeding" includes also all proceedings under the said Act which may be commenced after such date in respect of any year. He refers to Section 152A(3) and contends that Sub-sections (4A) to (14) of Section 132 have been made applicable only after the requisitioned documents are delivered to the income-tax authorities. This being a legislation by reference, it adopts only under which reference is being made and, therefore, Explanation 2 would not be attracted. His second contention is that there is no finding about the satisfaction on the part of the requisitioning authority that in case any summons is issued or might be issued, the assessee will not or would not produce or cause to be produced the said documents. In the absence of such satisfaction, the second condition has not been fulfilled and unless both the conditions are fulfilled or in case one condition is not fulfilled, the order of requisition under Section 132A(1)(b) would be a nullity and void. In reply, Mr. Bharatji Agarwal submitted that while adopting Subsection (4A) to Sub-section (14) by reference under Section 132A(3), Explanation 2 is also adopted, inasmuch as Explanation 2 explaining proceedings in Section 132 refers to the whole section and not to a particular Subsection. The word "proceeding" is present in the proviso to Sub-sections (8) and (8A). Therefore, it cannot be said that the said Explanation has not been adopted while legislating by reference. According to him, Section 132A(1)(b) can be exercised even in respect of a proceeding yet to be commenced,
(3.) REFERRING to the decision in the case of ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1 (SC), Mr. Upadhyaya contended that unless both the tests are satisfied, the institution of the proceedings under Section 132A is invalid. He further contended that unless there is material to support satisfaction or formation of opinion, the initiation cannot be supported, The original file consisting of the correspondence and the order containing reasons on the basis of which opinion was formed for taking action under Section 132A(1)(b) was produced. We have examined the said file and the order. From the perusal of the said file and the order it is apparent that nothing has been recorded in respect of any apprehension or belief that in case any summons is issued or might be issued, the documents may not be produced, The order does not speak about satisfaction or formation of opinion in respect of the condition that the document will not or would not be produced or cause to be produced if the summons are issued or might be issued, riot to speak of any material or reasons for arriving at such belief. This shows that the said order was issued mechanically and without any proper application of mind, inasmuch as there was no recording of satisfaction or of belief that the assessee will not or would not produce the documents.;