Latest News Budget 2020

Understanding Section 131 of the Income Tax Act

Firstly, it is important to understand that Section 131 is part of Chapter X111 C of the Income Tax Act, 1961. Through the power bestowed through section 131, the tax officials can summon for –

  1. Conduct 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 in their hands as and when needed. In addition to this, there are an additional two more 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) related to allowing the jurisdictional assessing officer to be able to issue any summons that might be needed for the purpose of implementation of the section

In other words, Section 131 of the Income Tax Act, 1961 empowers the Tax Authorities so that they can issue summons and also have the right to enforce any individual or person 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


Section 131(1A) of the Income Tax Act

Section 131(1A) works with empowering the officers related to the investigation wings. The notice under section 131(1A) can be used even if there is no proceeding pending.

Section 131(1A) helps in giving the officers more power, there are certain situations that find the need that the Income Tax officers should 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.

Understanding how to apply logic when it comes to issuing the summons

It’s again important to understand here that when it comes to any action taken illogically, it can lead to questioning of the entire situation. The same is applicable when it comes to the Income Tax Department – If there are summons sent to a particular person or even for that matter a group of people and if the information that surfaces creates the first impression of being illogical, then there will be a chance that questions raised on the reasons for the summons that were issued. Hence, it becomes of utmost importance is that there needs to be care taken and there has to be proper logical reasoning that needs to be applied before having the summons issued. There has been added and a lot of authority that has been provided to the income tax officers under section 131(1A) and hence there needs to be care taken while having the notices issued. It definitely should not be used as a cover for examining any investigation or a meandering inquiry.


What is the validity of the summons that is issued under Section 131?

Earlier when a summons was issued under section 131 (instead of section 131-1A), the summon was considered to be invalid. However, this situation changed after section 292(B) under the Income Tax Act, 1961 was introduced.

When the summons is issued, there are certain particulars that need to be filled out or the portion that is not applicable has to be scored out. When these actions or items are not followed, the court then would assume that the summons was issued without any logical application of the mind. The reason for the summons has to be clearly stated and the specific Act should be mentioned.


Understanding the Nature and what is the Purpose of the Proceedings

The main thing is that the person who is the recipient of the summons or whom the summons is used against never knows the full details. In other words, to say that he is not entitled to know the full details of why the summons has been issued or the purpose behind the summons being issued.


Personal Appearance of the Person During the Hearing

Personal Appearance is of the utmost importance when it comes to the witness. In saying so, it has been very clearly stated in the law that the witness cannot be represented by an authorized representative and he or she himself or herself need to be present in person at the court. However, on the other hand, there has been a notice circulated that states that any person other than the witness can choose or can be represented through the presence of an authorized representative. This notice was in response to the notice under section 131.


Did you receive tax notice? Let us help you respond to the IT Department.

- Tax2win has expertise in responding to Income Tax Department

- Our experts would help you avoid legal consequences by assisting in responding accurately.

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) after the search has been concluded and there is another one that is issued under section 131, which is during the survey.


Issue of notice under section 131(1A)

The notice that is issued under section 131(1A) has been very controversial so far. The reason for the controversy is the conflicting decisions that have been taken by the various courts. There was a case handled by the Gujarat High Court, in which the court has mentioned that notices under section 131(1A) can be issued after the relevant searches have been completed that was undertaken under the provisions of section 132. When looked at it from this perspective, it sounds completely logical that the information should have been called for later, so that a better idea or a more complete understanding of the particulars could have been obtained in connection with the materials that were seized during the search.

In another case, held in the Allahabad High Court, the court ruled the decision that the authorizing officer had no reason to believe nor did they have any material to the context on which the warrant under section 132 needs to be issued.


Issue of notice under section 131 during the survey

There is no notice that 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 behaviour of the assessee. Notice under section 131 can be issued if the assessee has not cooperated 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 cannot be issued even for the recording of the survey. Additionally, there is no notice under section 131 that can be issued once the survey has been completed. In other words, it would mean that it can be issued only when the proceeding is ongoing or pending.

Most of the times, when it comes to actually have 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 proceeding that is pending), hence 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 not be issued during the course of conducting or proceeding with the survey unless the survey team receives the relevant cooperation from the assessee.


How to Reply to a Summon Notice under 131(1A)?

To begin with, a notice under Section 131(1A) is very common nowadays, which means there is not much to fuss about. The first thing you must do is to keep all the summoned documents ready. What you must be careful is not to ignore such notice, and if you have been asked to be present physically, make sure you do. If you have a valid reason, you can seek extension, but it is limited to once generally.


How to Prepare and Submit a Response on Time?

The notice under Section 131(1A) primarily shows up when the AO thinks that there is income that you may have been concealing. If you have purchased a property recently, there are chances that you will 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 demanded, 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. In case some document is missing, make sure you seek an extension from AO.


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

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


Conclusion

The conferring of the various powers should no way mean that there are illogical and irrelevant usages made of the same. Also, misuse needs to be kept in check with the intention of avoiding duplication or even triplication at times, which is most of the times unnecessary and uncalled for. Additionally, this also serves as a botheration when it comes to the taxpayers or the assessee and unnecessary inconvenience to them. When it comes to the using of powers entitled to the authorities they need to be used with utmost care and guidance and ensuring that there is the proper logical path to the same for the issue of the relevant notices. Also, the guidelines that have been laid down need to be followed for ensuring there is no discrepancy.

Frequently Asked Questions

Q- What is survey under Income Tax Act?

There are specific surveys conducted under the section 133A(1) of the Income Tax Act. Any Income Tax authority can enter any place or visit any person during business hours, where the business or profession of the concerned person or entity is carried on. The Income Tax authorities take this action for the purpose of conducting the survey under the section 133A(1) of the Income Tax Act which further helps in having jurisdiction over the case.


Q- What are the powers of income tax officer?

An Income tax officer can be authoritative to investigate the suspected person and some of his powers are:
  • Discovery and inspection.
  • Enforcing the attendance of any person, including any officer of a banking company and examining him on oath.
  • Compiling the production of books of accounts and other documents.
  • Issuing commissions

Q- Is Inspector of income tax a gazetted officer?

The officers who are gazetted belong to the rank of Income Tax Officers or such officers who are equivalent to those ranks. All the other officers who are below the rank of Income Tax officers are non-gazetted. When an officer reached the rank of Assistant Commissioner, then they are accorded as Group A by the President of India.


Q- What is Work of income tax inspector?

For a person to achieve the rank of an Income Tax officer is one of the most popular and prestigious jobs which is offered through SSC CGL. The department of Income Tax is a central agency which is responsible for the collection and monitoring of Income Tax. Tax can be defined as a compulsory contribution which is imposed on the income of the workers and government and business profits.


Q- Who regulates the income tax department?

The Income Tax Department is headed by the apex body CBDT - Central Board of Direct Taxes. The IT Department has many responsibilities and mostly it takes care of the enforcement of various direct tax laws. The most important act among these laws is the Income Tax Act of 1961 which is responsible for the collection of revenue for the government of India.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.