Notice u/s Section 131(1A) Of Income Tax Act: What is Section 131 & Response of Summons Issued

What is Section 131(1) of the Income Tax Act?

Section 131(1) grants the tax authorities the power to conduct comprehensive investigations. It is aimed at ensuring proper investigation of income and preventing tax evasion in any way. This section allows the authorities to summon individuals, inspect books of accounts, examine them on oath, and gather evidence to fulfill their objectives.

Firstly, it is important to understand that Section 131 is part of Chapter XIII C of the Income Tax Act, 1961. Through the power bestowed through section 131, the tax officials can summon for –

1. Conducting inquiries for the purpose of discovering and inspecting the various people and the necessary documents;
2. Imposing that any person, including any officer of a banking company, be present in attendance and further scrutinizing him or her under oath;
3. Forcibly demand the books of accounts and other documents to be produced; and
4. Issuance of commissions.

This is the generalized view of the powers that have been given to certain individuals, empowering them to take the matter into their own hands as and when needed. In addition to this, there are two additional corresponding sub-sections. These two additional sub-sections, section 131(1) and section 131(1A), relate to the diverse classes of the officers. Section 131(1) is related to allowing the jurisdictional assessing officer to issue any summons that might be needed for the purpose of implementing the section.

In other words, Section 131 of the Income Tax Act of 1961 empowers the Tax Authorities to issue summons and have the right to enforce any individual or person who can be brought in for questioning under oath. It empowers the Tax Authorities to demand the production of the necessary book of accounts and/or any other related documents in case the proceeding is pending for any reason.

What is Section 131(1A) of the Income Tax Act?

Section 131(1A) of the income tax act works to empower the assessing officer to exercise their powers. The notice under section 131(1A) can be used even if no proceeding is pending.
Section 131(1A) helps give the officers more power; there are certain situations that need the Income Tax officers to have a little more authority and power. Below are the situations which make use of Section 131(1A) and allow the Income Tax officers to have notices issued –

1. The income tax office can issue a notice before he goes ahead with taking any action under clauses (i) to (v) of Section 132;
2. The income tax officer can issue a notice, even if he or she has a reason to suspect that there is a concealment of the income earned by the person;
3. The income tax officer can even issue a notice, even if there are no proceedings currently withstanding with respect to that person or even a group of people.

What is the Validity of the Summons Issued Under Section 131?

Earlier, when a summon was issued under Section 131 (rather than Section 131-1A), it was deemed invalid. However, this situation changed with the introduction of Section 292(B) in the Income Tax Act of 1961.
Now, when a summon is issued, specific particulars need to be completed, or any irrelevant portion must be crossed out. Failure to adhere to these actions or items can lead the court to presume that the summon was issued without due application of logical reasoning. The purpose of the summon must be clearly stated, and reference to the relevant Act should be provided."

Key factors that determine the validity of a summons issued under Section 131 of the Income Tax Act

The summon issued under section 131 is a legal order that individuals are required to comply with. The validity of such a summon depends on various factors -

• The summons issued should specifically state the purpose of the summon issued and the specific documents or information required.
• The summon should be based on the belief that the summoned individual possesses information or documents that are relevant to a tax investigation.
• Summons must comply with legal formalities and procedures outlined in the Income Tax Act. It also includes details like specified time, place, and date for compliance.

Rights Available with the Assessee

• Fair Treatment: Individuals summoned under section 131 should be rightly treated during the examination. They should not be subject to harassment or undue pressure.
• Right to legal representation: Individuals have the right to be represented by a legal counsel during the examination.
• Right to Appeal: If an individual believes that the summon was issued in an unfair manner or in violation of their rights, then they have the right to appeal the summon legally.

Understanding the Nature and Purpose of the Proceedings?

The key point is that the individual who receives the summon or against whom the summon is employed is often unaware of the complete details. In essence, this means that they are not entitled to be fully informed about the reasons for issuing the summon or the underlying purpose behind it.

Personal Appearance of the Person During the Hearing

The personal presence of the witness holds paramount significance. In emphasizing this point, the law unequivocally specifies that an authorized representative cannot stand in for the witness; rather, the witness must be physically present in court. Nevertheless, a notification has been disseminated, indicating that individuals other than the witness can opt for representation by an authorized agent. This notification was issued in response to the notice pursuant to Section 131.

Issue of notice

There are two points where the notice is issued under different sections of the Income Tax Act 1961. There is one issued under section 131 (1A) of the income tax act after the search and seizure have been concluded and another under section 131, which is during the survey.

Issue of notice under section 131(1A)

The notice issued under Section 131(1A) has been subject to significant controversy. This controversy stems from the divergent decisions rendered by various courts. A notable case before the Gujarat High Court articulated that notices under Section 131(1A) might be issued subsequent to the conclusion of pertinent searches conducted under the provisions of Section 132. This perspective aligns logically with the notion that soliciting information at a later stage could provide a more comprehensive grasp of the particulars concerning the materials seized during the search.
Conversely, in another case adjudicated by the Allahabad High Court, the court determined that the authorizing officer lacked both a reasonable basis for belief and substantive material to support the issuance of a warrant under Section 132.

Issue of notice under section 131 during the survey

No notice can be issued during the course of conducting the survey under section 133A, except the survey under section 133 A(6), and this, too, can only be issued under undeniable circumstances. The issuing of the notice under section 131 depends on the behavior of the assessee. Notice under section 131 can be issued if the assessee has yet to cooperate with the survey team during the course of the survey. On the other hand, if the assessee has offered or helped the survey team with all the necessary materials while conducting the survey, then there is no way that it can be issued. Further, it can only be issued for the recording of the survey. Additionally, no notice under section 131 can be issued once the survey has been completed. In other words, it can be issued only when the proceeding is ongoing or pending.
When it comes to having the notices issued in practice, the assessing officer or the authorizing office mainly issues the notice under section 131, and that too during the course of the survey. The main outcome of issuing it is that they want the assessee to be called once the survey has been completed. Since the notice under section 131 cannot be used once the survey has been completed (and there is no pending proceeding), the matter of practice issues the notice under section 131 during the course of the survey. There have also been a number of court decisions that mention that the notice under section 131 should only be issued during the course of conducting or proceeding with the survey if the survey team receives the relevant cooperation from the assessee.

How to Respond to a Summon Notice Under 131(1A)?

To begin with, a notice under Section 131(1A) of the Income Tax Act is very common nowadays, which means there is little to fuss about. Here’s how to respond to notice under section 131(1A).

Also, responding to a notice can be intimidating. If you also panic at the thought of receiving an income tax notice or want to avoid penalties and consequences at all costs, you should contact tax experts who can guide you through the process of responding to an income tax notice.

How to Prepare and Submit a Response on Time?

The notice under Section 131(1A) primarily shows up when the AO thinks there is income you may have been concealing. If you have purchased a property recently, you may be asked to prove such a purchase and the source of its funding. In such a case, you can do it electronically.
In any other case, if your physical presence is required, see if it allows hiring an Authorized Representative (AR). You may ask him to represent you or accompany you during the proceedings. You can also send all the documents within the deadline mentioned in the notice. If some document is missing, make sure you seek an extension from AO.
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Steps to Respond to a Summon Notice Under Section 131(1A)

• Understand the Notice - A notice under section 131(1A) typically indicates that the assessing officer believes that there might be some undisclosed income or concealed financial transactions. It might be related to recent transactions or financial dealings.
• Electronic Responses - If the notice asks for proof of recent transactions or property transactions. You can provide electronic documents as evidence in support of your claims to help the income tax department cross-verify the transactions.
• Physical Presence - If the department requires you to be physically present, you can hire an Authorized representative to represent you during the proceedings. An AR can help protect your interests and navigate the proceedings effectively.
• Document Submission - Submit all the required documents within the deadline specified in the notice. If any documents are missing, ask the assessing officer for an extension.

The Relation Between 131(1A) and the Civil Code of Procedure

The Civil Code of Procedure manages civil proceedings in India. It gives Section 131(1A) the power to issue commissions and enforce an individual's attendance, discovery, and inspection of any property. It also allows the section to examine the assessees on oath and produce the necessary books of accounts and documents.

Implications of Section 131(1A)

• Increased Cooperation Between Law Enforcement Agencies: Section 131(1A) promotes information sharing between different agencies. It helps the agencies work together and combat financial fraud and tax evasion.
• Protecting Confidential Information: Section 131(1A) consists of strict provisions that ensure that confidential information shared by Income Tax Authorities cannot be disclosed in an unauthorized manner. This helps keep a check on the misuse of taxpayers’ sensitive information.
• Fast and Effective Investigation: The sharing of information provisions helps improve the speed and accuracy of the investigation as various agencies can work together. It also enables agencies to access relevant information and conduct successful investigations.
• Checking Tax Evasion: Information sharing serves as a threat to tax evaders and therefore helps keep a check on tax evasion by increasing the risk of punishment and detection.

Have you received a notice under section 131(1)? If yes, don’t panic. Just make sure to respond to it within time and be prepared with all the relevant documents. Also, make sure you get professional help, as tax experts can help you resolve such notices and avoid further penalties and legal consequences. Book a Tax Expert Now!