2016 (7) TMI 209 - HC - Income Tax

Court upholds constitutional validity of Income Tax Act amendment balancing privacy rights with economic interests

The court upheld the constitutional validity of the amendment to Section 133(6) of the Income Tax Act, 1961, emphasizing the government's need for ... Constitutional validity of the amendment to Section 133(6) - right to privacy - it was contended that, the Co-operative Banks are not expected to give out the details of its customers even under the Right to Information Act, the attempt to elicit such details through a notice issued under Section 133(6) is totally vitiated and arbitrary. - Held that:- The learned single Judge in its decision [2015 (1) TMI 1121 - KERALA HIGH COURT] after considering the safeguards incorporated in the statute found that sufficient guidelines were provided to guard against possible misuse of the provision. The decisions cited on either side have also been considered in extenso. The learned single Judge came to the conclusion that there was no arbitrariness or constitutional invalidity in the amendment in question. The standards to be applied when deciding the constitutional validity of a fiscal statute were also dealt with. The question whether right to privacy is a fundamental right or only a legal right as recognized in the Law of Torts is itself pending consideration before a Constitution bench of the Apex Court having been referred for an authoritative pronouncement by a three member bench in Justice K.S.Puttuswamy v. Union of India [2015 (8) TMI 526 - SUPREME COURT]. Even if it is a necessary corollary to the right to life, such a right would be subject to the reasonable restrictions which could be imposed by the State in exercise of its legislative power. When a legislation, especially one in the fiscal realm is being examined by courts to check whether it infringes the right of individuals to privacy in own affairs, it has to be borne in mind that the larger public and economic interest of nation is to be balanced against such right to privacy. All decisions which have espoused the right to privacy have been cautious in pointing out that such rights would not extend to militate against right of the State to gather information under its fiscal administration. - writ petition dismissed - Decided against the assessee. We do not find any ground to interfere with the decision of the learned single Judge in exercise of appellate jurisdiction through this intra court appeal filed under Section 5 of the Kerala High Court Act. These appeals therefore fail. Issues:Constitutional validity of the amendment to Section 133(6) of the Income Tax Act, 1961 regarding right to privacy and information gathering.Detailed Analysis:1. Constitutional Validity of Amendment to Section 133(6):The appellants challenged the amendment to Section 133(6) of the Income Tax Act, 1961, which added the words 'inquiry or' and introduced a second proviso. The contention was that the right to privacy guaranteed under Article 21 of the Constitution was infringed by the impugned provisions. The court considered the balance between the right to privacy and the government's need for financial information to combat black money. The court held that the right to privacy cannot invalidate a provision aimed at obtaining details of financial transactions associated with black money.2. Contentions of the Appellants:The appellants argued that the right to privacy is fundamental and cannot be violated lightly. They contended that the widened scope of Section 133(6) allowed arbitrary inquiries into private citizens' financial transactions, even without any suspicion of wrongdoing. The relationship between a banker and customer was highlighted as fiduciary, and the attempt to extract transaction details from cooperative banks was deemed arbitrary.3. Revenue's Perspective:The Revenue argued that Section 133(6) aimed to gather information crucial for the nation's economic interests, particularly to combat black money. The notices issued sought details of customers with specific deposit values, emphasizing the national interest in verifying the sources of funds deposited in cooperative banks.4. Balancing Privacy and National Interest:The court emphasized the need to balance the right to privacy with the collection of information for the nation's economic well-being. Citing previous judgments, the court highlighted the importance of upholding the constitutionality of taxing statutes and the latitude given to laws related to economic activities compared to civil rights laws.5. Judicial Precedents and Constitutional Validity:The court referred to previous judgments upholding the validity of notices issued under Section 133(6) to cooperative credit societies. It was argued that the safeguards in the statute prevented misuse of power, and the amendment in question was found not to be arbitrary or unconstitutional.6. Right to Privacy and Legislative Power:The court acknowledged the ongoing debate on whether the right to privacy is a fundamental or legal right, subject to reasonable restrictions by the State. It emphasized that the State's right to gather information for fiscal administration should be balanced against individual privacy rights, considering the larger public and economic interests of the nation.In conclusion, the court dismissed the writ appeals, upholding the learned single Judge's decision regarding the constitutional validity of the amendment to Section 133(6) of the Income Tax Act, 1961.