1997 (7) TMI 188 - AT - Income Tax

Summary

Issues:
- Imposition of fine under section 131(2) for non-compliance with summons issued by ADI.
- Interpretation of the term 'class' in the context of information sought by income tax authorities.
- Validity of the orders of the revenue authorities.

Imposition of Fine under Section 131(2):
The three appeals before the Appellate Tribunal ITAT Chandigarh involved bank managers/chief managers who were unable to provide information requested by the ADI under section 131 of the Income-tax Act, 1961. The ADI imposed a fine of Rs. 500 on each assessee for non-compliance. The DCIT(Appeals) upheld the fine, citing a Ministry of Finance letter requiring the assessees to furnish the information. However, the Tribunal disagreed, emphasizing that the authorities erred in imposing the penalty as the information requested was not within the scope of the assessees' legal duty of secrecy and confidentiality towards customers.

Interpretation of the Term 'Class':
The crux of the issue revolved around the interpretation of the term 'class' in the context of the information sought by the ADI. The Tribunal referred to legal definitions and Supreme Court precedents to establish that a 'class' must be a well-defined and ascertainable group with elements of permanency and numerosity. It was concluded that purchasers of drafts exceeding Rs. 50,000 did not constitute a 'class.' Therefore, the Tribunal held that the information requested by the ADI did not pertain to a specific class of persons, rendering the imposition of fines unjustified.

Validity of Revenue Authorities' Orders:
The Revenue authorities contended that the ADI was justified in demanding the information under section 131(1A) and that non-compliance warranted the fines imposed. However, the Tribunal, after considering legal provisions and scholarly opinions, disagreed with the Revenue authorities. It was established that income tax authorities cannot conduct roving inquiries or seek general information unrelated to specific cases or classes of persons. As the information requested did not pertain to a specific class, the Tribunal deemed the actions of the Revenue authorities erroneous. Consequently, the Tribunal overturned the penalties imposed and allowed all three appeals filed by the assessees.