2003 (2) TMI 28 - HC - Income Tax

Scope and ambit of section 133(6) as amended by the Finance Act, 1995, arise for consideration in these appeals - 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 validly and with jurisdiction. There is no merit in these appeals

Issues Involved:
1. Scope and ambit of section 133(6) of the Income-tax Act, 1961.
2. Validity of notices issued under section 133(6) requiring information from co-operative societies and co-operative banks.
3. Whether section 133(6) permits a roving enquiry into the affairs of the appellants.
4. Impact of such notices on the secrecy of customers' accounts.
5. Applicability of section 133(6) to co-operative societies and co-operative banks versus banking companies and other financial institutions.
6. Relevance of pending proceedings under the Act for invoking section 133(6).

Detailed Analysis:

1. Scope and Ambit of Section 133(6) of the Income-tax Act, 1961:
The judgment examines the scope of section 133(6) as amended by the Finance Act, 1995. The provision empowers income-tax authorities to require any person, including banking companies, to furnish information useful for any inquiry or proceeding under the Act. The amendment allows for information gathering even when no proceedings are pending, provided prior approval from the Director or Commissioner is obtained.

2. Validity of Notices Issued Under Section 133(6):
The appellants, co-operative societies, and co-operative banks, challenged the notices issued by the income-tax authorities requesting details of deposits exceeding Rs. 50,000. The court held that these notices were within the powers conferred under section 133(6), as they were issued with the necessary approval from the Commissioner, thus validating the notices.

3. Whether Section 133(6) Permits a Roving Enquiry:
The appellants argued that section 133(6) does not authorize a roving enquiry into their affairs or the deposits made by their customers. The court, however, noted that the legislative intent behind the amendment was to enable the collection of general information to tackle tax evasion effectively. The Supreme Court's ruling in Karnataka Bank Ltd. affirmed that section 133(6) allows for information gathering even without pending proceedings, provided the required approval is obtained.

4. Impact on the Secrecy of Customers' Accounts:
The appellants contended that disclosing deposit details would breach the secrecy between bankers and customers. The court acknowledged this concern but emphasized that the primary objective of section 133(6) is to prevent tax evasion and ensure compliance with the Income-tax Act. The court found that the need for transparency in financial transactions outweighed the appellants' concerns about customer secrecy.

5. Applicability to Co-operative Societies and Banks vs. Banking Companies and Other Financial Institutions:
The appellants argued that section 133(6) was being selectively enforced against co-operative societies and banks, while banking companies were not subjected to similar scrutiny. The court dismissed this claim, stating that all financial institutions, including banking companies, are subject to section 133(6). The court clarified that the provision allows for general information requests and is not limited to inquiries about specific individuals.

6. Relevance of Pending Proceedings Under the Act:
The appellants argued that section 133(6) should only be invoked when proceedings under the Act are pending. The court, referencing the Supreme Court's decision in Karnataka Bank Ltd., clarified that the provision can be used to gather information even in the absence of pending proceedings, as long as the requisite approval is obtained. This interpretation aligns with the legislative intent to enhance the income-tax authorities' ability to gather relevant information for tax enforcement.

Conclusion:
The court concluded that the notices issued under section 133(6) were valid and within the jurisdiction of the income-tax authorities. The appellants' arguments regarding the scope of section 133(6), the impact on customer secrecy, and the selective application of the provision were rejected. The court upheld the legislative intent to empower income-tax authorities to gather information necessary for effective tax enforcement, even in the absence of pending proceedings. The appeals were dismissed, and the appellants were granted an additional two months to comply with the notices.

← Previous Next →