Kerala High Court
Kechery Service Co-Operative Bank Ltd. vs The Commissioner Of Income Tax (C.I.B.) on 25 February, 2003
Equivalent citations: (2003)182CTR(KER)517, [2003]263ITR161(KER), 2003(2)KLT32
Author: G. Sivarajan
Bench: G. Sivarajan, J.M. James
JUDGMENT G. Sivarajan, J.
1. The scope and ambit of Section133(6) of the Income Tax Act, 1961 (for short 'the Act') as amended by the Finance Act, 1995 arise for consideration in these appeals. All these writ appeals arise from a common judgment of the learned single Judge in O.P. No. 30610 of 2002 and connected cases. The petitioner in the writ petitions are the appellants. All the appellants are either co-operative societies or co-operative banks registered under the Co-operative Societies Act. Being aggrieved by a communication of the nature of Ext.P2 in O.P. No. 30610 of 2002 received from the Income Tax authority having jurisdiction over the petitioners calling for information such as a list of persons, who have made term/recurring deposits of Rs. 50,000/- and above as on date along with their complete postal addresses, etc. they have filed the writ petitions. In the notice it is stated that the information is required in connection with the investigation of the appellants' case and the same is required under Section 133(6) of the Act. According to the appellants Section 133(6) does not clothe the respondents with any power for conducting a roving enquiry into the affairs of the appellants or regarding the deposits of money made by the customers of the appellants. According to them such power can be exercised only for gathering information in relation to any point or matter relevant to any proceedings under the Act. It is further stated that if the said sub-section is understood as giving a wide power it will affect the secrecy of their customers' account. It is their case that in order to invoke the provisions of Section 133(6) of the Act some proceedings under the Act must be pending against the person with respect to whom the details are called for but no such details are furnished in the notice. The learned single Judge dismissed the writ petitions by holding that the notices issued to the appellants in the nature of Ext.P2 mentioned earlier are within the powers of the officers who issued the same and the co-operative societies and co-operative banks are bound to furnish the particulars called for in the notices, failing which the Department will be free to conduct search or take penal action permissible under the Act. Hence these appeals.
2. Sri. P. Balachandran, learned counsel for the appellants submits that in order to invoke the provisions of Section 133(6) of the Income Tax Act there must be some proceedings under the Act pending before the authority with respect to whom the information is called for from the appellant banks. He further submitted that even though the notice under challenge purports to have been issued in connection with the investigation of the appellants' case really, it is intended to gather general information in respect of the deposits made by the customers and even in respect of investigation regarding the appellants such enquiry must be confined to any point or matter relevant to any proceeding under the Act. The counsel further submitted that if Section 133(6) is understood to give a blanket power to the officers to conduct a roving enquiry in regard to the business transacted by the co-operative societies and co-operative banks such power must be held to be arbitrary and attracts the provisions of Article 14 of the Constitution. The counsel also submitted that this power is being invoked only against co-operative societies and co-operative banks and not against banking companies and other financial institutions engaged in receiving deposit from customers. The counsel pointed out that the analogy drawn by the learned single Judge based on the provisions of Section 269SS was not justified since the proviso to the said section specifically excludes any loan or deposit taken or accepted by any banking company, post office or cooperative bank and as such there was no question of verification of the compliance with Section 269SS of the Act. The counsel further submitted that by furnishing the details of deposit to third parties the secrecy that should exist between a banker and customer is also lost and that under law the obligation is only to furnish the details of his customers' account only in specified case. Counsel also relied on a decision of the English Court in Parry Jones v. Jaws Society ((1969) 1 ct at page 9) in support. The counsel also submitted that the learned single Judge erred in relying on the decision rendered in the context of the provisions of Section 269S of the Income Tax Act to hold that the roving enquiry is permissible under Section 133(6) of the Act. The counsel further submitted that the Calcutta High Court in Grindlays Bank Ltd. v. Income Tax Officer and Ors. ((1998) 231 ITR 612) had held that even after the insertion of the word 'enquiry' in Clause (6) of Section 133 by the Finance Act, 1995 and the insertion of the second proviso thereto with effect from 1.7.1995 unless there is a proceeding pending against the asssssee when the notice under Section 133(6) was issued, the notice was liable to be quashed. The counsel further submitted that though the Supreme Court in Karnataka Bank Ltd. v. Secretary, Government of India and Ors. ((2002) 255 ITR 508) has held that the officers have got power under Section 133(6) second proviso to call for statement of the nature specified in the notices issued to the appellants the Supreme Court did not have occasion to consider the arbitrary nature of the power given to the officers while deciding the matter.
3. We have also heard the learned standing counsel for the revenue. He submitted that an amendment was made to Section 133(6) with effect from 1.7.1995 only to enable the officers of the Income Tax Department to collect the details regarding the deposits made by persons in co-operative societies and co-operative banks for the purpose of improving information gathering and its processing to be in line with its plans of computerisation. The standing counsel in support of the said contention relied on Circular No. 717 dated 14.8.1995 issued by the Central Board of Direct Taxes regarding the scope and effect of the amendment made in the Finance Act, 1995. The standing counsel further submitted that the Supreme Court in Karnataka Bank's case mentioned above has clearly explained the scope of the provisions of Section 133(6) of the Act after the amendment made by the Finance Act, 1995. He accordingly submitted that the notices issued by the respondents are well within the powers conferred under Section 133(6) of the Act.
4. We have considered the rival submissions. The respondents had issued notice to all the appellants who are either co-operative societies or co-operative banks stating that in connection with investigation of their cases certain informations relating to their business are required. One such 'information' is regarding the deposits exceeding Rs. 50,000/- made by customers and the details of such customers besides other informations regarding the appellants. There is no other proceedings pending in respect of the appellants nor stated in the notices. It is clear that the information sought for is of general nature in the nature of general survey in regard to the business of cooperative societies and co-operative banks. The main ground on which the appellants are canvassing the notices is that if all the information regarding the deposits made by the customers of the appellants are to be disclosed that will prejudicially affect the interest of the customers and consequently affect the secrecy that should exist between a banker and a customer and further adversely affect the business of the appellants. The other contention of the appellants is that Section 133(6) does not clothe the officers with power to conduct a roving enquiry into the details of deposits made by the customers of the appellants. Here, it must be noted that the appellants did not challenge the provisions of Section I 33(6) of the Act. They have only contended that Section 133(6) of the Act does not give any power to the officers of the department to gather information regarding all the deposits made by the customers of the appellants and the name and addresses of those customers. In other words, the dispute is only regarding the scope and content of the provisions of Section 133(6) of the Act.
Section 133(6) of the Act as amended by Act 22 of 1995 w.e.f. 1.7.1995 read as follows:
"133(6). Require any person, including a banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs verified in the manner specified by the Assessing Officer, the Deputy Commissioner (Appeals) the Joint Commissioner or the Commissioner (Appeals) giving information in relation to such points or matters as, in the opinion of the Assessing Officer, the Deputy Commissioner (Appeals) will be useful for, or relevant to, any inquiry or proceeding under this Act:
Provided that the powers referred to in Clause (6), may also be exercised by the Director-General, the Chief Commissioner, the Director and the Commissioner:
Provided further that the power in respect of an inquiry, in a case where no proceeding is pending, shall not be exercised by any income tax authority below the rank of Director or Commissioner without the prior approval of the Director or, as the case may be, the Commissioner."
The effect of the amendments made by the Finance Act (Act 22 of 1995) was explained by the Central Board of Direct Taxes in the circular No. 717 dated 14.8.1995 as follows:
"Power to call for information when no proceeding is pending:- 41.1. The Income Tax Department has taken steps to improve information gathering and its proceeding to be in line with its plans of computerisation. Allotment of permanent account numbers is being done with the help of computers. Quoting of such numbers in high value transactions may be made a statutory requirement.
41.2. At present the provisions of Sub-section (6) of Section 133 empower the income tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. This acts as a limitation or a restraint on the capability of the Department to tackle evasion effectively. It is, therefore, thought necessary to have the power to gather information which after proper enquiry, will result in initiation of proceedings under the Act.
41.3. With a view to having a clear legal sanction, the existing provisions to call for information have been amended. Now the income tax authorities have been empowered to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income Tax Act in the case of any person. The Assessing officer would, however, continue to have the power to requisition information in specific cases in respect of which any proceeding is pending as at present. However, an income-tax authority below the rank of Director or Commissioner can exercise this power in respect of an enquiry in a case where no proceeding is pending, only with the prior approval of the Director or the Commissioner."
5. A Division Bench of the Calcutta High Court in Grindlays Bank Ltd v. ITO ((1998) 231 ITR 612) considered the scope of the amended provisions of Section 133(6) and held that even after the 1995 amendment the power under Section 133(6) of the Act can be invoked only for the purpose of deciding the case pending before the Officer. However, there is no detailed reasoning given for taking the said view.
6. The learned single Judge observed that a co-operative society or a co-operative bank will come within the definition of 'person' in Section 2(31) of the Act and therefore cooperative societies/banks are not immune from proceedings under Section 133(6) of the Act. It was further observed thus:
"The objection is only against the calling for particulars of depositors by the Department. This is only as part of survey conducted by the Department to ensure that moneys deposited in the Co-operative Societies and Co-operative Banks are accounted by such depositors. The society by itself cannot have any grievance against the notice because the notice does not contemplate any action against the society. Since it is a settled position that the authority empowered to do a thing will have auxiliary and necessary power to achieve the objective, hone can have a doubt that the income tax authorities whose duty it is to trace tax evaders and to bring them to book and compel them to pay tax cannot ask for details on deposits. Therefore, a survey or investigation conducted to trace black money is absolutely within the powers of the income tax authorities and the Co-operative Societies or Banks cannot claim any immunity for hoarding black money. Even though no specifically conceded by the petitioners, their case is that unless the societies enjoy immunity from Section 133(6) proceedings and the information on deposits and depositors are kept out of reach of the Income Tax Department, they will not get deposits, or the existing depositors will withdraw the deposits leading to liquidity problem for them. I do not think, this is a ground to resist a notice under Section 133(6). If the Co-operative Banks and Co-operative Societies are allowed to maintain deposits beyond the scrutiny of the Income Tax Department, then the Societies will become safe haven for hoarding black-money in the country which is opposed to public policy. Besides this, statutory authorities vested with responsibility to levy tax on income will be prevented from achieving their objective and that will defeat the very purpose of the Income Tax Act."
It was further observed as follows:
In fact proceedings under Section 133(6) is essentially to ensure as to whether there is violation of Section 269SS of the Income Tax Act. If Section 269SS is observed by the Co-operative Societies and Cooperative Banks which they are bound to observe, then there should be no difficulty for them to furnish details called for under Section 133(6). Therefore, the notice issued under Section 133(6) is essentially to verify whether there is compliance of Section 269SS by both depositors and the acceptors, namely, Co-operative Societies and Co-operative Banks and since Section 269SS is upheld by the Supreme Court in the decision referred to above, I do not think the petitioners can challenge the notice issued calling for details of deposits.".
7. It was also observed that the powers under Section 133 are in the nature of survey and a general inquiry to identify persons who are likely to have taxable income and so whether there is compliance by them in regard to payment of tax.
8. Meeting the contention of the appellants that banking companies including nationalised banks are not called upon to furnish details generally with regard to deposits held by the customers the learned single Judge observed thus:
"They further contended that banking companies including nationalised banks are not called upon to furnish details generally with regard to deposits held by them. The learned Standing Counsel for the respondents denied this allegation and he has contended that banking companies including nationalised banks are not immune from any enquiry under Section 133(6). I do not think, any banking company including nationalised banks can claim any immunity from proceedings under Section 133(6) of the Income Tax Act and all such institutions are bound to furnish information called for, though general in nature. The Department is free to ask for information about any particular person or to call for general information in regard to any matter they consider necessary. Section 133(6) does not refer to any enquiry about any particular person or assessee, but pertains to information in relation to "such points or matters" which the authority issuing notices needs. This clearly shows that the information of general nature can be called for and names and addresses of depositors who hold deposits above a particular sum is certainly permissible. In fact as the section presently stands Section 133(6) is a power of general survey and is not related to any person and no banking company including the nationalised bank is entitled to claim any immunity from furnishing such information as contended by the petitioners. Therefore, their allegation of discrimination against them as against immunity alleged to be given to banking companies is non-existent and therefore, this argument also has to rejected."
9. Excepting the observation that the notices under Section I33(6) of the Act calling for the details of deposits, etc. was also to verify whether there is compliance of Section 269SS by the Co-operative Societies and Co-operative Banks all other observations made by the learned single Judge by and large represents the correct position regarding the scope of Section 133(6) of the Act.
10. The object of the amendment of Section 133(6) by the Finance Act, 1995(Act 22 of 1995) as explained by the CBDT in its circular shows that the legislative intention was to give wide powers to the officers, of course, with the permission of the Commissioner of Income Tax or the Director of Investigation to gather general particulars in the nature of survey and store those details in the computer so that the data so collected can be made use of for checking evasion of lax effectively.
11. It is unnecessary for us to deliberate much on the scope of Section 133(6), for it is no longer re integra in view of the decision of the Supreme Court in Karnataka Banks's case mentioned supra. In that decision the Supreme Court after extracting the provisions of Section 133(6) of the Act as amended held as follows:
"It is clear from the mere reading of the said provision that it is not necessary that any inquiry should have commenced with the issuance of notice or otherwise before Section 133(6) could have been invoked. It is with the view to collect information that power is given under Section 133(6) to issue notice, inter alia, requiring a banking company to furnish information in respect of such points or matters as may be useful or relevant. The second proviso makes it clear that such information can be sought for even when no proceeding under the Act is pending, the only safeguard being that before this power can be invoked the approval of the Director or the Commissioner, as the case may be, has to be obtained. In the instant case, the notice dated July 7, 2000, indicates that it was at the instance of the Director of Income Tax (Investigation) that the information was sought for."
12. From the above quoted passage, it is clear that it is not a condition for the issuance of a notice under Section 133(6) of the Act that any proceedings under the Act against the person with respect to whom the information is called for should be pending. The Supreme Court has clearly stated that the only limitation is that before issuing a notice requiring a banking company to furnish information in respect of such points or matters as may be useful or relevant is to get the prior approval of the Director or the Commissioner, as the case may be. Admittedly in the present case notice was issued only after obtaining approval of the Commissioner. In these circumstances, we agree with the conclusion reached by the learned single Judge that the impugned notices are issued validity and with jurisdiction. There is no merit in these appeals. They are accordingly dismissed.
13. The counsel for the appellants submits that the learned single Judge has granted six week's time from the date of the judgment for compliance of the directions contained in the impugned notices. The counsel submits that the said period has already expired and the appellants require some more time for furnishing the details called for in the said notices. We grant two months' time more to the appellants to comply with the directions in the impugned notices.