TMI Blog1982 (6) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax, Kerala, that is not in accordance with law. It cannot be said, on the materials available, that the Commissioner had reason to believe that the assets represent either wholly or partly income which had not been, or would not have been disclosed for the purpose of the I.T. Act, 1961, by the person from whose possession or control such assets had been taken into custody ; (2) in regard to a part of the sum recovered by the Special Customs Preventive Unit from the petitioner, the explanation offered was not even noticed by the ITO when he passed the order under s. 132(5); and (3) the officer had evidently collected materials as a result of the enquiry held by him under r. 112A(3) of the I.T. Rules, 1962, but before using such materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with regard to a sum of Rs. 14,172 was that it was amount received from one Abdullakunhi of M/s. Sabina Enterprises, Bombay, to be handed over to two others at Pappinisseri. The rest of the money is claimed to belong to the petitioner's firm. The officers seem to have made enquiries and it is evident from the order of the officer, Ex. P-13, that such enquiries revealed that the three parties who were said to have advanced a sum of Rs.1,50,000 each were not financially sound and they would not have advanced such funds without there being an obligation to do so. On these facts he found that the explanation could not be accepted and that the petitioner failed to prove the real source of the sum of Rs. 4,64,172. This sum was treated as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as assessed was only Rs. 20,840, for 1979-80 Rs. 18,480 and for 1980-81 the assessment was not completed, but the party had estimated the income at Rs.21,000. Taking into, account the smallness, of the income that was brought to tax during the previous years, the amount found in his possession was considered to be substantial. That the amount represented, sale-proceeds, of accounted transactions was not proved. These are the materials on the basis of which the Commissioner seems to have come to his belief on matters required by s.132A(1)(c). Section 132A(1)(c) reads: "132A. Power to requisition books of account, etc.-(1) Where the Director Of Inspection or the Commissioner, in consequence of information in his possession, has reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficiency or adequacy of the reasons can be examined by a court. The question a court would naturally ask is whether there is an application of the mind of the, authority concerned and whether that application has been on the basis of material which bears a nexus to the matter which the authority is called upon to decide. The position is now well settled so that it may not be necessary to advert in detail to the decisions. Reference need only be made to the decisions in Ganga Saran Sons P. Ltd. v. ITO [1981] 130 ITR I (SC), ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) and Ganga Prasad Maheshwari v. CIT [1983] 139 ITR 1043 (All). On the facts of this case we are not prepared to say that the materials which the Commissioner had bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the examination or inquiry under sub-rule (3) is used by the Income-tax Officer against the person referred to in sub-rule (1), the Income-tax Officer shall give reasonable notice to that person to show cause why such material should not be used against him." It is agreed that the ITO did in this case hold an enquiry to collect materials which were used in the order, Ex. P-13. It is a rule of natural justice that materials used against a person should necessarily be put to him to give him an opportunity to answer. In the I.T. Rules this has found a place as a statutory provision. The learned counsel for the Revenue contends that this is only a directory provision and not mandatory and, therefore, a mere violation of this rule need not vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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