Law:

Section:

â- Section 131 of the Income-tax Act, 1961 - Discovery, production of evidence, power regarding - Whether when power has been exercised by an authority not conferred by law, such action cannot be upheld on ground that if otherwise held, it would be detrimental to public exchequer - Held, yes - Several applicants made applications along with demand drafts for grant of licence to run retail liquor shop under State Excise Policy - As said policy could be declared bad by High Court, State might have to return said demand drafts - Meanwhile Deputy Director of Income-tax (Inv.) purporting to exercise power under section 131 directed Superintendents of Prohibition and Excise to produce all demand drafts along with applications of applicants on ground that he had reason to suspect that large amounts of cash from undisclosed sources were involved - Petitioners filed petition assailing impugned order and sought a direction to release demand drafts to applicants - Whether even though Income-tax Department in interest of protecting public exchequer and unearthing benami monetary transactions and to catch hold of real persons behind transactions had commenced that move in question, but it had no legal sanction - Held, yes - Whether impugned proceeding issued by Deputy Director was without authority or jurisdiction inasmuch as Deputy Director lacked such authority under sub-sections (1) and (1A) of section 131 and, hence, impugned proceeding could not be sustained - Held, yes FACTS In the light of the excise policy of the State Government several applicants made applications along with demand drafts for grant of licence to run retail liquor shops. However, in view of the decision of the High Court holding said excise policy bad in law, the State Government might have to return the said demand drafts. Meanwhile the first respondent, i.e., the Deputy Director of Income-tax (Inv.) purporting to act under section 131 issued a letter directing Superintendent of Prohibition and Excise to produce all demand drafts along with applications of applicants. The Deputy Director issued said direction on the ground that he had reason to suspect that large amounts of cash were…

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