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TMI Blog1998 (8) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... (or can be initiated) the proposed investigation is an abuse of the process of law and liable to be quashed. The relevant facts are as follows. The petitioner purchased four kathas of land being portion of plot No. 1175 at Village Hesal (Aryapuri), Ratu Road, Ranchi, for a consideration of Rs. 2,000 on March 6, 1965. She got her name mutated in the revenue records of the State in Case No. 786 R-27 of 1965-66 by the Circle Officer, Ranchi. In furtherance of the said order of mutation a correction slip was issued in her name on January 4, 1966, and she was granted rent receipt. On December 28, 1966, the petitioner applied for permission to build a new house before the Executive Officer of the Ranchi Municipality along with a building plan. Permission was granted vide letter No. 376/B/Engineering of 1966 on July 15, 1967. It is said that after the sanction of the building plan, the petitioner started construction of the house some time in the year 1967 and constructed a major portion on the ground floor some time in the month of September, 1968. She thereafter applied for electric connection before the Ranchi Electric Supply Company Ltd. After due enquiry and verification an estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, i.e., 1990-91. The petitioner in compliance with the said notice appeared before the Income-tax Officer through her advocate who was asked to give details of the house. The petitioner filed an affidavit on June 14, 1991, stating therein that the house had been constructed and investments made in the construction between June, 1967, and December, 1973. Thereafter, it is said, the Income-tax Officer asked the. Valuation Officer, Income-tax Department, Ranchi, vide his letter dated January 22, 1992, to inspect the property and make investigation as may be considered necessary to determine the true and correct cost of construction of the house property and to submit the valuation report. The impugned notice was thereafter issued to the petitioner by the Assistant Valuation Officer, Income-tax Department, Ranchi, on January 24, 1992, requiring her to produce certain documents, as mentioned in the notice, on February 7, 1992, informing her further that he would like to inspect the property on February 11, 1992. The petitioner at this stage filed the present writ petition challenging the validity of the said notice dated January 24, 1992, as indicated at the outset. The respondents h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding is pending, under the Act. Counsel relied on Jamnaedas Madhavji and Co. V. J. B. Panchal, ITO [1986] 162 ITR 331 (Bom) and Dwijendra Lal Brahmachari v. New Central Jute Mills Co. Ltd. [1978] 112 ITR 568 (Cal). Mr. K. K. Jhunjhunwala, learned counsel for the respondents, did not, very fairly, dispute the proposition that commission can be issued under section 131(1)(d) of the Act only in connection with a pending proceeding; he however, reiterated the stand of the respondents that by reason of the issuance of the notice, a proceeding within the meaning of section 131 would be deemed to have commenced. Alternatively, he argued that the notice dated March 8, 1991 (supra), issued in terms of section 143(2) of the Act asking the petitioner to appear and furnish information as may be required of her in connection with the assessment year 1990-91 would amount to commencement and pendency of proceeding. Before considering the submission of counsel for the parties it would be appropriate to notice the provisions of section 131(1) as follows "131, Power regarding discovery, production of evidence, etc.--(1) The Assessing Officer, Deputy Commissioner (Appeals), Deputy Commissioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d arbitrary powers upon such officers which would make the section itself liable to be struck down." The above observations of the Calcutta High Court were quoted with approval by the Bombay High Court in Jamnadas Madhavji and Co. v. J.B. Panchal, ITO [1986] 162 ITR 331 and it was held that the existence of a pending proceeding was a condition precedent and sine qua non for the exercise of power under section 131(1). Reference to the provisions of sub-section (IA) of section 131, which was inserted by the Taxation Laws (Amendment) Act, 1975, would make the intention of the Legislature clear. Sub-section (1A) reads as follows : "(1A) If the Director General or Director or Deputy Director or Assistant Director, or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that subsection, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any inquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the definite case of the petitioner that the house in question was constructed during the period from 1967 to 1973. While considering the question of ascertainment of income during the period relevant to the assessment year 1990-91 under section 143(3) of the Act, the Assessing Officer cannot travel back to the alleged period of construction. I must observe that the petitioner has produced evidence which strongly suggests that after purchase of the land in 1965, she constructed a portion of the house at least prior to December, 1968-, when she was granted electric connection vide Consumer No. G-3579 and completed the construction prior to 1974 when the Ranchi Municipality started collection holding tax, etc., with respect to the house. It is be kept in mind that in her return filed for the assessment year 1982-83, the petitioner had declared rental income, allegedly from the said house, at Rs. 5,714 which after due enquiry her return was accepted by the Income-tax Officer under section 143(3) of the Act. This also shows, prima facie, that the house was in existence prior to April 1, 1982. If the respondents so thought it was open to them to reopen the assessment taking recou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to compel the assessee to produce the particulars or to ask him to show cause why the assessment should not be reopened." Earlier, in Gaya Ram Gabbu Lal v. CII- [1951] 19 ITR 114, the Allahabad High Court had observed : "The Income-tax Officer has no right to make a preliminary enquiry before issuing notice under section 34 and the assessee is not bound at that stage either to produce his books or to give any information or explanation. But, if in the course of the performance of his usual duties, while assessing the income of other assessees or for other years of the assessee himself, definite facts come to the knowledge of the Income-tax Officer, which relate to a year about which the assessment has already been concluded, the Income-tax Officer is not bound to shut his eyes to them nor is it necessary that when the Income-tax Officer gets some information, he should not verify the correctness thereof or trace it out further so long as he can do it without calling upon the assessee either to supply him with facts or explanations or produce his books. Within those limits he may inform himself. Before notice can be issued, the Income-tax Officer must be satisfied, and the satis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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