2009 (11) TMI 916 - HC - Income Tax

Validity of the notices u/s 133(6) - calling for particulars of cash transactions above ₹ 1 lakh - contentions of the cooperative societies that they do not answer the description of person referred to in the section and that details could be called for only pertaining to enquiry pending were turned down based on the amendments - HELD THAT - As in view of the consistent judgments of this Court and the decision of the Supreme Court, we do not think there is any scope for interference with the judgments of the learned Single Judges upholding the validity of notices after overruling the contentions raised by the appellants. Whether the general notice calling for cash particulars including deposits of various depositors above ₹ 1 lakh is issued by the concerned officer with the prior approval of the Director or the CIT, as the case may be? - HELD THAT - In the first place, we feel that the notices do not pertain to loans advanced by societies and even renewals granted by them by closing the old loans against fresh loans. In our view, particulars of the transactions called for are cash transactions above ₹ 1 lakh and deposit amount of ₹ 1 lakh and above, the details of which the appellants/petitioners are liable to furnish. We therefore extend the time for furnishing details called for till 31st Jan., 2010. In view of the extension of time granted by us, we direct the respondent officers to recall the penalty proceedings, if any, initiated u/s 272A of the Act after receipt of information. It any appellant/petitioner after collecting substantial details requires further time, such society is free to furnish the collected details and then apply to the officer for further extension of time, and we are sure, the officer concerned will grant reasonable time if there is bona fide in the request made by the society and if substantial details are already furnished.

Summary

Issues:
1. Validity of notices issued under s. 133(6) of the IT Act, 1961 to cooperative societies engaged in banking.
2. Whether the general notice calling for cash particulars above Rs. 1 lakh is issued with the prior approval of the Director or the CIT.
3. Challenges faced by societies in collecting and furnishing transaction details within the specified time frame.

Issue 1: Validity of Notices under s. 133(6) of the IT Act:
The judgment addresses the challenge by cooperative societies against notices issued under s. 133(6) of the IT Act, 1961, by various IT authorities. The societies contended that the notices were invalid. Two learned Single Judges upheld the validity of the notices, citing the power conferred under the section as a survey by the Department, applicable to private banks, cooperative societies, and nationalized banks. The judgment overlooked a Supreme Court ruling stating that information can be sought under s. 133(6) even without pending proceedings, subject to approval by the Director or CIT. The Division Bench confirmed the Single Judge's decision, making the issue settled law. The judgments of other High Courts on the pre-amendment version of s. 133(6) were deemed irrelevant due to consistent rulings of the Kerala High Court and the Supreme Court.

Issue 2: Approval Requirement for Notices Calling for Cash Particulars:
The judgment deliberated on whether the general notice seeking cash particulars above Rs. 1 lakh was issued with the prior approval of the Director or CIT. The standing counsel for respondents clarified that some notices explicitly mentioned approval by the CIT or Director, rendering those challenges inadmissible. However, for other notices, it was evident that they were issued by the same authority, implying prior approval. The judgment allowed appellants to seek clarification from the issuing officer and mandated the recall of notices issued without proper approval. The officer could reissue notices after obtaining the necessary approval, ensuring compliance with procedural requirements.

Issue 3: Challenges in Collecting and Furnishing Transaction Details:
Concerns were raised by appellants regarding the collection and submission of transaction details within a short timeframe. The judgment extended the deadline for furnishing details till 31st Jan., 2010, acknowledging the nature of transactions sought and emphasizing the obligation of societies to provide the required information. Penalty proceedings initiated under s. 272A were to be recalled upon receipt of information. Societies needing additional time were permitted to submit collected details first and then request further extensions, which the concerned officer was expected to grant reasonably if the request was genuine and substantial details had been furnished.

In conclusion, the judgment dismissed the writ appeals and petitions while granting an extension for furnishing transaction details and providing clear directions for compliance with notice requirements and penalty proceedings.