2013 (11) TMI 728 - SC - Income Tax

Tax authorities can issue Section 133(6) notices seeking customer transaction details above Rs 1 lakh without pending proceedings

Kathiroor Service Cooperative Bank Ltd. Versus Commissioner of Income Tax (CIB) & Others

The SC upheld the assessing authority's power to issue notices under Section 133(6) of the Income Tax Act seeking information about customers with cash ... Interpretation of statutes - Scope and ambit of Section 133(6) - notice issued under Section 133(6) - Powers available to assessing officer under 133(6) of the Income tax act - Power of enquiry, when the cases are not pending - Meaning of words 'Inquiry or Enquiry' - In the instant case, by the impugned notice the assessing authority sought for information in respect of its customers which have cash transactions or deposits of Rs. 1,00,000/- or above for a period of three years, without reference to any proceeding or enquiry pending before any authority under the Act. Held that:- The language of the Section 133(6) is wholly unambiguous and clear, reliance on interpretation of statutes would not be necessary. Before the introduction of amendment to Section 133(6) in 1995, the Act only provided for issuance of notice in case of pending proceedings. As a consequence of the said amendment, the scope of Section 133(6) was expanded to include issuance of notice for the purposes of enquiry. 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 CIT 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 tax effectively. Reliance has been placed on the judgment in the case of Karnataka Bank Ltd. v. Secretary, Government of India and Ors., [2002 (2) TMI 1285 - SUPREME COURT], wherein it was observed 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. Powers under section 133(6) are in the nature of survey and a general enquiry to identify persons who are likely to have taxable income and whether they are in compliance with the provisions of the Act. It would not fall under the restricted domains of being 'area specific' or 'case specific.' 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 assessing authority issuing notices requires. This clearly illustrates 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 the present case notice was issued only after obtaining approval of the Commissioner of Income Tax, Cochin. In light of the aforesaid, Assessing Authority has not erred in issuing the notice to the assessee- financial institution requiring it to furnish information regarding the account holder with cash transactions or deposits of more than Rs. 1,00,000/- - Decided against the Assessee. Issues Involved:1. Validity of the notice issued under Section 133(6) of the Income Tax Act, 1961.2. Scope and interpretation of Section 133(6) of the Income Tax Act, 1961.3. Requirement of pending proceedings for issuing notice under Section 133(6).4. Authority and approval required for issuing notice under Section 133(6).Detailed Analysis:1. Validity of the Notice Issued under Section 133(6):The primary issue was whether the notice issued by the Income Tax Officer (CIB), Calicut under Section 133(6) of the Income Tax Act, 1961, calling for information on transactions and deposits of Rs. 1,00,000/- or above, was valid. The High Court of Kerala upheld the validity of the notice, and the Supreme Court affirmed this decision, stating that the notice was within the powers of the assessing authority.2. Scope and Interpretation of Section 133(6):The Court examined the interpretation of Section 133(6), which allows authorities to call for information useful for or relevant to any enquiry or proceeding under the Act. The term 'enquiry' was interpreted broadly to include the process of gathering information before or during the pendency of proceedings. The Court emphasized that the addition of the word 'enquiry' by the Finance Act, 1995 expanded the scope to include general information gathering, not limited to specific cases or areas.3. Requirement of Pending Proceedings:The appellant contended that Section 133(6) could only be invoked when proceedings were pending. However, the Court clarified that the amended Section 133(6) permits issuing notices even when no proceedings are pending, provided prior approval from the Director or Commissioner is obtained. This interpretation aligns with the legislative intent to empower authorities to gather information to tackle tax evasion effectively.4. Authority and Approval Required:The Court noted that the notice in question was issued with the prior approval of the Commissioner of Income Tax, Cochin, satisfying the requirement under the second proviso to Section 133(6). This provision ensures that lower-ranking officers cannot exercise these powers without appropriate oversight, thus maintaining a balance between authority and accountability.Conclusion:The Supreme Court upheld the validity of the notice issued under Section 133(6), affirming that the powers under this section are broad and include the authority to gather general information for tax enquiries. The requirement for prior approval from higher authorities when no proceedings are pending was met, justifying the issuance of the notice. Consequently, the appeal was dismissed, and the judgments of the lower courts were affirmed.