AO's powers u/s131

Section 131

Income-tax authorities - Power regarding discovery, production of evidence, etc.

There must be a pending proceeding - Unless there is a proceeding pending before the authorities concerned, power under section 131(1) cannot be exercised - ITO v. James Joseph O’Gorman 1989 Tax LR 871 (Cal.).

Pendency of proceedings, relevance of - Expression ‘for the purpose of the Act’ as occurring in section 131(1), must mean for purposes of proceedings under Act pending before concerned authority and powers under said section can be exercised only if proceedings are pending before concerned authority -G.M. Breweries Ltd. v. Union of India [2000] 108 Taxman 547 (Bom.).

Assessing Officer cannot refer matter to Valuation Officers in exercise of power under section 131 or 133 - The power of the Assessing Officer under sections 131(1) and 133(6) is distinct from and does not include the power to refer a matter to the Valuation Officer under section 55A - Smt. Amiya Bala Paul v. CIT [2003] 130 Taxman 511/262 ITR 407 (SC).

Calling for documents from courts - Section 131(1) must be construed as conferring on the ITO all the relevant powers which the civil courts have under the Code of Civil Procedure regarding the production of books of account and other documents. Since Order XIII, rule 10, confers such power on civil courts to call for documents from other courts, the ITO too has such powers under section 131(1) - Jhabarmull Agarwalla v. Kashiram Agarwalla [1969] 71 ITR 269 (Cal.).

Impounding a Will - The income-tax department has no jurisdiction to decide the genuineness of a Will, and therefore, there will be no justification for impounding it. A Xerox copy could be taken and the original returned to the petitioner on his furnishing an undertaking that he will produce the original Will as and when called upon to do so - K. Jayaraman v. ITO [1988] 172 ITR 447 (Mad.).

Recording of reasons - The ITO must record reasons separately for impounding documents - Sugan Chand Vinod Kumar v. CIT [1989] 175 ITR 273 (Raj.).

Recording/communication of reasons - Although earlier it was necessary that the authorities concerned should not only have reason to believe, but such reason should be recorded in writing, after the amendment in 1975 of rule 112 it is no longer necessary to record the reasons - Subir Roy v. S.K. Chattopadhyay [1986] 158 ITR 472 (Cal.).

Reasons for retention must be communicated to assessee - There is no difference between the intention of section 132 and the intention of section 131. If reasons are to be kept secret, this defeats the section altogether. This is no compliance of the section if reasons are not recorded and not communicated - Plycast (Delhi) (P.) Ltd. v. ITO [1986] 159 ITR 750 (Delhi).

Approval for retention of documents - The approval to be granted by the Commissioner under the proviso to section 131(3) is to be a prior approval and cannot be an approval ex post facto. While it is not necessary to mention the reasons given by the Commissioner for the approval, inasmuch as no right to file objections has been given to the concerned person, it is sufficient if the factum and fate of the approval by the Commissioner is communicated to the concerned persons. This is however not mandatory and will not vitiate the proceedings - Sri Ramakrishna Talkies v. ITO [1985] 153 ITR 794 (AP).

Section 131(3) does not provide that either the reason recorded or order of approval has to be communicated to the person concerned. Where order of approval has admittedly been communicated to the petitioner and recorded reasons have been duly disclosed in counter-affidavit, extended retention of books cannot be said to be invalid merely because of non-communication of recorded reasons - M.L. Enterprises v. CIT [1994] 209 ITR 872 (Pat.).

Summoning of witnesses - It is the duty of the ITO to enforce the attendance of the witness if his evidence is material, in exercise of his powers under section 131(1) read with Order XVI, rule 10, of the Code of Civil Procedure - Nathu Ram Premchand v. CIT [1963] 49 ITR 561 (All.).

When summons issued could not be served - Where, in order to decide whether the assessee is a ‘commission agent’ as claimed by him or a ‘trader’, the Assessing Officer issued summons to five traders but the summons could not be served since the traders were residing outside the State, pursuant to which they did not appear, the Assessing Officer would not be justified in drawing an adverse inference against the assessee in respect of transac­tions between the assessee and those traders, since the assessee could not be held responsible for the non-appearance of those five traders, and also since the assessee had led satisfactory evidence to show that its business was only that of a commission agent - Anis Ahmad & Sons v. CIT (Appeals) [2008] 167 Taxman 84 (SC).

Representation through counsel - A witness before an ITO cannot have the assistance of counsel to see him through his cross-examination - V. Datchinamurthy v. Asstt. Director of Inspection [1984] 149 ITR 341 (Mad.).

A partner who is a witness is not entitled to be represented by an authorised representative; but the firm has such a right, including examination of the partner - Sarju Prosad Sharma v. ITO [1974] 93 ITR 36 (Cal.).

Issue of commissions - The ITO could under the law take recourse to issuing commissions for recording statements, especially when a large number of persons were involved - V. Datchinamurthy v. Asstt. Director of Inspection (supra).