2020 (9) TMI 871 - HC - Income Tax

Income-tax Officer (Intelligence) authority to issue notice u/s 133(6) - Jurisdiction of Income Tax Authorities u/s 120 - Whether the notice under section 133(6) issued by the Income-tax Officer (Intelligence) is valid prior to Notification No. 77 of 2014 of the Central Board of Direct Taxes on the delegation of power dated December 10, 2014 ? - Whether the 'Inquiry' under section 133(6) in the absence of an 'enquiry' under any of the provisions of the Act, conducted by the Income-tax Officer (Intelligence) is right in the eye of law ? - HELD THAT - As relying on Kodur Service Co-operative Bank Ltd. v. DIT (Intelligence) 2015 (2) TMI 819 - KERALA HIGH COURT 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, the allegation that the officer who issued exhibit P1 had no authority has to be rejected. Then coming to section 133(6) of the Income-tax Act, in Kathiroor Service Co-operative Bank's case (supra), various co-operative societies registered under the Kerala Co-operative Societies Act engaged in banking business were before this court when notices were issued to the societies under section 133(6) of the Act calling for particulars of cash transaction above rupees one lakh with details of account holders/deposit holders in the format prepared by the authority issuing the notices. The societies challenged the validity of the notices. 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. From the reliance on the notification dated November 1, 2011, it is decipherable that the power of collection, collation and dissemination which earlier vested with Central Information Branch was transferred to Income-tax Officer (Intelligence), which would not mean that the notices issued and imposition of penalty by the Income-tax Officer (Intelligence) lacked jurisdiction.

Issues Involved:
1. Authority of the Income-tax Officer (Intelligence) to issue notice under section 133(6) of the Income-tax Act prior to Notification No. 77 of 2014.
2. Validity of the notice under section 133(6) issued by the Income-tax Officer (Intelligence) prior to Notification No. 77 of 2014.
3. Legality of the 'Inquiry' under section 133(6) in the absence of an 'enquiry' under any provisions of the Act.
4. Validity of the notice under section 133(6) in the absence of a formation of opinion as to its usefulness or relevance to any enquiry or proceeding under the Act.
5. Applicability of notice under section 133(6) to the appellant, which is not a 'person' as per the Income-tax Act.
6. Legality of the order passed by the Joint Director of Income-tax (Intelligence) under section 272A(2)(c).

Issue-wise Detailed Analysis:

1. Authority of the Income-tax Officer (Intelligence) to Issue Notice:
The appellants challenged the jurisdiction of the Income-tax Officer (Intelligence) to issue notices under section 133(6) of the Income-tax Act before the issuance of Notification No. 77 of 2014 by the Central Board of Direct Taxes (CBDT). The court referred to the notification dated August 19, 2011, which empowered the Director or Director General of Income-tax (Intelligence and Criminal Investigation) to initiate proceedings and issue orders to subordinate Income-tax authorities. The court concluded that the Income-tax Officer (Intelligence) had the authority to issue such notices based on the existing notifications.

2. Validity of the Notice Under Section 133(6):
The appellants argued that the notice issued by the Income-tax Officer (Intelligence) was invalid as it was issued before the delegation of power by Notification No. 77 of 2014. The court held that the notifications dated August 19, 2011, and subsequent authorizations were sufficient to empower the Income-tax Officer (Intelligence) to issue the notices. The court emphasized that the expression "Income-tax authorities" is broad and includes the Assessing Officer, thereby validating the notices issued.

3. Legality of 'Inquiry' Under Section 133(6):
The appellants contended that the 'Inquiry' under section 133(6) was not valid in the absence of an 'enquiry' under any provisions of the Act. The court clarified that the terms "enquiry" and "inquiry" have different connotations, and section 133(6) allows for a general inquiry to gather information relevant to any proceedings under the Act. The court found that the notices were part of a legitimate inquiry process.

4. Formation of Opinion for Issuing Notice:
The appellants argued that the notice under section 133(6) was invalid as there was no formation of opinion regarding its usefulness or relevance to any enquiry or proceeding under the Act. The court held that the notifications and authorizations in place provided the necessary framework for the Income-tax Officer (Intelligence) to issue such notices, and the requirement for forming an opinion was met through the procedural adherence to the notifications.

5. Applicability of Notice to the Appellant:
The appellants claimed that they were not 'persons' as defined under the Income-tax Act and thus could not be served notices under section 133(6). The court rejected this argument, stating that the term "person" under the Act is inclusive and broad enough to cover entities like cooperative banks. The court upheld the validity of the notices issued to the appellants.

6. Legality of the Order Under Section 272A(2)(c):
The appellants challenged the order passed by the Joint Director of Income-tax (Intelligence) under section 272A(2)(c), which imposed penalties for non-compliance with the notices. The court found that the appellants' failure to comply with the validly issued notices justified the imposition of penalties. The court upheld the orders passed by the Joint Director of Income-tax (Intelligence).

Conclusion:
The court dismissed the appeals, upholding the validity of the notices issued under section 133(6) of the Income-tax Act and the subsequent penalties imposed. The court concluded that the notifications and authorizations in place empowered the Income-tax Officer (Intelligence) to issue the notices and conduct inquiries, and the appellants' arguments lacked merit. The appeals were dismissed with no order as to costs.

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