1985 (1) TMI 110 - AT - Income Tax

Summary

Issues:
Imposition of fine under section 131(2) of the IT Act, 1961 without affording an opportunity to the assessee, validity of the notice issued under section 131, jurisdiction of the ITO, compliance with summons under section 131, refusal to sign a statement, remedy for default in signing a statement, principles of natural justice.

Analysis:

The appeal before the Appellate Tribunal ITAT Chandigarh concerned the imposition of a fine of Rs. 500 on the assessee by the ITO under section 131(2) of the IT Act, 1961. The assessee, a Director of a company, was issued a notice under section 139(2) to file the return of income and a summons under section 131 to produce specific information. The assessee appeared before the ITO but did not provide the required information, raising legal issues about jurisdiction. The ITO imposed the fine for non-compliance, which was upheld by the AAC.

The counsel for the assessee argued that the proceedings for imposing the fine were criminal in nature and the ITO should have given an opportunity to the assessee before imposing the fine. It was contended that the notice issued under section 131 was defective as it asked for information instead of documents or books of account. The counsel also challenged the jurisdiction of the ITO and argued that the assessee believed he was not obligated to produce the documents. Additionally, it was argued that the remedy for the refusal to sign a statement did not lie under section 131(2).

The departmental representative supported the orders of the authorities, stating that the ITO had rightly assumed jurisdiction and imposed the fine for non-compliance with the summons. However, the Tribunal disagreed with this view. It held that the ITO was not justified in imposing the fine without giving the assessee an opportunity, especially in criminal proceedings. The Tribunal also found that the first requirement of the notice was beyond the scope of section 131 as it sought information, not documents. The Tribunal agreed that the remedy for the refusal to sign a statement was not under section 131(2) and that the ITO had exceeded his jurisdiction. Consequently, the orders of the authorities below were annulled, and the appeal was allowed.