2015 (2) TMI 819 - HC - Income Tax

Legality of notice u/s 133(6) exhibit P1 - societies were required to furnish the details of entire cash deposits in savings bank accounts where the aggregate cash deposit is rupees five lakhs and above in an year for the last three previous years - Power of Income-tax officer (Intelligence), to issue such notice - Held that - The authority who issued exhibit P1 under section 120(2) of the Income-tax Act by notification dated August 19, 2011, at Sl. No. 18 is the Director of Income-tax, having head quarters at Kochi, Kerala, who has jurisdiction over the area within the State of Kerala, Union Territory of Lakshadweep and Minicoy. He has all powers envisaged under the Income-tax Act related to and in connection with collection, collation, verification and dissemination of information in respect of the area over which he has jurisdiction. By office order dated November 1, 2011, the Income- tax Officer, Thiruvananthapuram, Alappuzha, Kochi and Thrissur were authorised to function as Income-tax Officer (Intelligence) of the above three places. Letter dated September 2, 2013, is issued by the Director of Income-tax (Intelligence) to the above Income-tax Officers (Intelligence) authorising them to issue notices to co-operative banks/urban co-operative banks/credit co-operative societies coming under the respective jurisdiction calling for information as contemplated under section 133(6) of the Income-tax Act. By virtue of these documents, the Income-tax Officer (Intelligence) is the authorised person who could issue exhibit P1, therefore After referring to section 133(6) of the Act, prior to the introduction of the second proviso and its effect and after the introduction of the second proviso to section 133(6), their Lordships opined that there was no scope for interfering with validity of notices. In the light of the dictum laid down in Karnataka Bank Ltd. v. Secretary, Government of India 2002 (2) TMI 1285 - SUPREME COURT there is no much scope for considering the arguments of the learned counsel appearing for the appellants, according to whom, Kathiroor Co-operative Bank's case 2013 (11) TMI 728 - SUPREME COURT has no application. Also it clearly indicate what exactly section 133(6) subsequent to the introduction of the second proviso would mean, thus to concluded that notices issued under section 133(6) are justified. it is in the nature of general enquiry by the authorities in order to ascertain whether any person who has taxable income has failed to comply with the provisions of the Act. Definitely, it is not with reference to constitution of appellant-societies and its functioning or any disputes between the society and its members. If the subject matter of information attracts any of the matters which has to be considered under the Co-operative Societies Act, then alone the argument of the appellants is meaningful, otherwise the said argument has no legs to stand. The information sought is under section 133(6) and has nothing to do with any of the provisions of the Co-operative Societies Act. - Decided against assessee.

Summary

Issues Involved:
1. Legality and authority of the notice issued under Section 133(6) of the Income-tax Act.
2. Jurisdiction of Income-tax authorities over co-operative societies.
3. Interpretation and application of Section 133(6) of the Income-tax Act.
4. Conflict between State and Central legislative powers concerning co-operative societies.

Detailed Analysis:

1. Legality and Authority of the Notice Issued Under Section 133(6):
The appellants, various co-operative societies, challenged the legality of exhibit P1 notice issued by the second respondent, arguing it was illegal and arbitrary. They contended that the notice was issued without proper authority and lacked details regarding its purpose. The court examined the orders and notifications issued by the Director of Income-tax, which authorized the Income-tax Officer (Intelligence) to issue such notices. The court concluded that the officer who issued exhibit P1 was duly authorized, thus rejecting the appellants' allegations of lack of authority.

2. Jurisdiction of Income-tax Authorities Over Co-operative Societies:
The appellants argued that co-operative societies fall under the exclusive jurisdiction of the State Legislature as per Entry No. 32 of List II of the Seventh Schedule of the Constitution of India. They claimed that the Income-tax authorities, governed by Entry No. 43 of List I, could not interfere in the affairs of co-operative societies without State approval. The court clarified that the information sought was general and aimed at identifying persons with taxable income, not interfering with the constitution or functioning of the societies. Therefore, the argument regarding jurisdiction was dismissed.

3. Interpretation and Application of Section 133(6) of the Income-tax Act:
The court referred to the Supreme Court's judgment in Kathiroor Service Co-operative Bank Ltd. v. CIT (CIB), which upheld the validity of notices issued under Section 133(6) for collecting general information, even in the absence of pending proceedings. The court emphasized that Section 133(6) allows for gathering information useful for any enquiry or proceeding under the Act, with the necessary approval from higher authorities. The court concluded that the notices issued under Section 133(6) were justified and within the legal framework.

4. Conflict Between State and Central Legislative Powers:
The appellants contended that the State Legislature had exclusive power over co-operative societies, and the Income-tax authorities could not extend their jurisdiction without State approval. The court clarified that the information sought under Section 133(6) was not related to the internal affairs of the societies but was a general enquiry to ensure compliance with tax laws. The court held that the Income-tax authorities' actions did not encroach upon the State's legislative domain, and the challenge based on legislative conflict was unsustainable.

Conclusion:
The court dismissed the appeals, upholding the validity of the notices issued under Section 133(6) of the Income-tax Act. The court found that the notices were issued by duly authorized officers, aimed at gathering general information for tax compliance, and did not interfere with the jurisdiction of the State over co-operative societies. The appellants' challenges on various grounds were deemed unsustainable, and the court reaffirmed the legal framework allowing such enquiries by Income-tax authorities.