Information about transactions can be called by general notices – says the Supreme Court.

[CA DEV KUMAR KOTHARI]

Section 133 (6) of the Income-tax Act, 1961.

Kathiroor Service Cooperative Bank Ltd. v. CIT (CIB) [2013 (11) TMI 728 - SUPREME COURT]

Collection of information for tax purposes:

Government authorities can collect information in different manner by asking various concerned parties to furnish information as per prescribed forms and returns and also specific enquiry can be made.

Calling information of certain type of transactions:

The Assessing officer can call for information of certain type of transactions from any person. The information called may be relevant to any proceedings or a general information may be called which can be used to cross examine transactions recorded by other concerned parties and also to initiate enquiry to ensure that other parties to such transactions have disclosed their income, investment etc.

Kathiroor Service Cooperative Bank Ltd. v. CIT (CIB) [2013 (11) TMI 728 - SUPREME COURT]

In this case the authorities called for general information from Co-operative Bank and others about cash transactions and deposits made by their account holders. These parties claimed that unless any proceedings are pending, enquiry cannot be called in general manner by issuing notice u/s 139 (6).

The Supreme Court held that

Powers under section 133(6) are in the nature of survey and a general enquiry to identify persons who are likely to have taxable income and whether they are in compliance with the provisions of the Act. It would not fall under the restricted domains of being 'area specific' or 'case specific'.

Section 133(6) does not refer to any enquiry about any particular person or assessee, but pertains to information in relation to 'such points or matters' which the assessing authority issuing notices requires.

This clearly illustrates that the information of general nature can be called for and names and addresses of depositors who hold deposits above a particular sum is certainly permissible.

Possible scope of general enquiry by tax department:

In view of the ruling of the Supreme Court it is likely that now the tax department will try to get more and more information from companies, banks, mutual funds, service provider etc to seek information in a general manner. For example, a general notice can be given to a manufacturer to seek information about payments made during nay period in excess of specified limit for supply of goods, or for availing services. In such cases, the payments which are subject to TDS and TCS need not be enquired because the information is available through returns of TDS and TCS. However, payments which are not subject to TDS e.g. for supply of goods, can be enquired through general notices.

Information should also be collected about agriculturists who supply agricultural produce to manufacturers for processing such produce and also from whole sellers, commission agents, auctioneers etc. of agricultural produce who purchase agricultural produce or arrange auction or sale of such produces.

Other mode of collection of information:

Annual Information Return (AIR):

Annual Information Return (AIR) is one of system designed to collect information by casting duty on concerned parties to furnish information in form of AIR for various specified transactions entered into during any previous year.

AIR is one of statutory returns for making available information to tax department on various transactions which are potential for enquiry. However, in many such transactions limits fixed are very low and they need to be revised. Fro example limits in case of investment in mutual funds, payment through credit cards, applications in public issues of shares. For many other items of information, amount of exempted limit need to be increased.

Return of TDS and TCS:

Returns of TDS and TCS are also source of information relevant to tax administration. From TDS and TCS returns tax department can get information about payments made after TDS/ TCS and can initiate enquiry and can also make cross verifications.

Vehicles registered:

Details of motor cars and other vehicles registered with Road Transport Authorities are obtained and notices are sent to buyers of car to examine the source of funds for purchase of vehicles.