Kathiroor Service Co-operative Bank Ltd. v. Commissioner of Income-tax (CIB)
[Citation -2013-LL-0827-54]

Citation 2013-LL-0827-54
Appellant Name Kathiroor Service Co-operative Bank Ltd.
Respondent Name Commissioner of Income-tax (CIB)
Court SUPREME COURT
Relevant Act Income-tax
Date of Order 27/08/2013
Judgment View Judgment
Keyword Tags financial institution • legislative intention • legislative history • issuance of notice • co-operative bank • nationalised bank • fishing enquiry • banking company • black money
Bot Summary: Thereafter, the assessee approached the Division Bench of the High Court by way of Writ Appeal No. 1854 of 2009 questioning the said notice on grounds, inter alia, that the issuance of such notice under section 133(6) is bad in law as section 133(6) only provides for power to seek information in case of pending proceedings under the Act and does not contemplate the powers to seek fishing information which is unrelated to any existing proceedings or which may enable the assessing authority to decide upon institution of proceedings under the Act. Sub-section of section 133 of the Act, as it stood originally, had provided for calling for information in relation to such points or matters which would be useful for or relevant to any proceeding under the Act from any person including a banking company or any officer thereof. 41.2 At present the provisions of sub-section of section 133 empower 41.2 At present the provisions of sub-section of section 133 empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. In common parlance, to enquire would mean to seek information and enquiry would refer to the process of gathering such information. The Longman Dictionary of Contemporary English defines enquiry as 1 countable a question you ask in order to get information; 2 uncountable the act or process of asking questions in order to get information; 3 countable an official process to find out about something. The Oxford Advanced Learner's Dictionary defines enquire as: an official process to find out the cause of something or to find out information about something; a request for information about somebody/something; a question about somebody/something; the act of asking questions or collecting information about somebody/ something. The word enquiry would thus connote a request for information or questions to gather information either before the initiation of proceedings or during the pendency of proceedings; such information being useful for or relevant to the proceeding under the Act.


JUDGMENT Order Leave granted in all special leave petitions. Since facts involved in all these appeals are similar, we take Civil Appeal No. 7460 of 2013 @ S. L. P. (C.) No. 3976 of 2010 as lead case. Civil Appeal No. 7460 of 2013 @ S. L. P. (C.) No. 3976 of 2010 This appeal by special leave is directed against common judgment and order passed by High Court of Kerala at Ernakulam in Writ Appeal No. 1854 of 2009 and other connected matters, dated November 24, 2009, whereby Division Bench has dismissed said writ appeals and writ petitions filed by appellant-assessee(s) herein and upheld judgments and orders of learned single judge and notices issued under section 133(6) of Income-tax Act, 1961 (for short "the Act"), respectively. Since appellant-assessee(s) herein are similarly placed societies registered under Kerala Co-operative Societies Act engaged in banking business, for brevity and convenience of reference, we would confine discussion to factual matrix in lead case. appellant-assessee before us is service co-operative rural bank. Income-tax Officer (CIB), Calicut, issued notice bearing F. No. ITO (CIB)/Clt/2008-09 to assessee under section 133(6) of Act calling for general information regarding details of all persons (whether resident or non- resident) who have made (a) cash transactions (remittance, transfer, etc.) of Rs. 1,00,000 and above in any account and/or (b) time deposits (FDs, RDs, TDs, etc.) of Rs. 1,00,000 or above for period of three years between April 1, 2005, and March 31, 2008, dated February 2, 2009. It was expressly stated therein that failure to furnish aforesaid information would attract penal consequences. assessee objected to said notice on grounds, inter alia, that such notice seeking for information which is unrelated to any existing or pending proceeding against assessee could not be issued under provisions of Act and requested for withdrawal of said notice by its letter- inreply, dated February 26, 2009. assessing authority addressed to objections raised by assessee and accordingly rejected them by letter dated March 5, 2009. relevant paragraphs of said letter are as under: "2. Your contention that this office does not enjoy powers to call for information under section 133(6) does not hold water in view of hon'ble High Court's judgment dated December 24, 2002, in case of M. V. Rajendran v. ITO reported in [2003] 260 ITR 442 (Ker), wherein it is categorically stated that (page 450): '... Department is free to ask for information about any particular person or to call for general information in regard to any matter they consider necessary. 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 authority issuing notices needs. This clearly shows that information of general nature can be called for and names and addresses of depositors who hold deposits above particular sum is certainly permissible. In fact as section presently stands section 133(6) is power of general survey and is not related to any person and no banking company including nationalised bank is entitled to claim any immunity from furnishing such information... In circumstances, I hold that notices are within powers of officers who issued same and co-operative societies and co- operative banks are bound to furnish particulars called for in notices, failing which Department will be free to conduct search or take penal action permissible under Act.' Since hon'ble High Court of Kerala is jurisdictional High Court and decisions relied upon by you are superseded by order of hon'ble Kerala High Court, I failed to find any merit in your objection for not furnishing information called for under section 133(6). In this connection, you may also refer following decisions of hon'ble High Court of Kerala- Alanallur Service Co-op. Bank Ltd. v. CIT [2004] 186 CTR 310 (Ker); Kechery Service Co-operative Bank Ltd. v. CIT [2003] 263 ITR 161 (Ker). 3. As can be seen from paragraph 1 above, powers to initiate inquiry, in case where no proceedings is pending, can only be exercised by authority above rank of Director or Commissioner. Accordingly, prior permission has been obtained from Commissioner of Income-tax (CIB), Cochin, before issuing notice to you calling for details of transactions/deposits above Rs. 1 lakh made by customers in your institution. It is hereby pointed out that I am well within my authority calling for information from you and have not exceeded my powers. Further, hon'ble High Court in its above judgment has stated that (page 448 of 260 ITR): '... If co-operative banks and co-operative societies are allowed to maintain deposits beyond scrutiny of Income-tax Department, then societies will become safe havens for hoarding black money in country which is opposed to public policy. Besides this, statutory authorities vested with responsibility to levy tax on income will be prevented from achieving their objective and that will defeat very purpose of Income-tax Act...'" assessee, aggrieved by aforesaid, filed Writ Petition No. 9737 of 2009 before High Court challenging notice dated February 2, 2009. learned single judge has discussed case of assessee including submissions made by parties in extenso and reached conclusion that impugned notice was validly issued under provisions of Act and, therefore, dismissed said petition by judgment and order dated March 27, 2009. Thereafter, assessee approached Division Bench of High Court by way of Writ Appeal No. 1854 of 2009 questioning said notice on grounds, inter alia, that issuance of such notice under section 133(6) is bad in law as section 133(6) only provides for power to seek information in case of pending proceedings under Act and does not contemplate powers to seek fishing information which is unrelated to any existing proceedings or which may enable assessing authority to decide upon institution of proceedings under Act. Division Bench has observed that questions raised therein are no longer res integra in view of decision of this court in Karnataka Bank Ltd. v. Secretary, Government of India [2002] 9 SCC 106, and, accordingly, dismissed said appeal by impugned judgment and order dated November 24, 2009. Aggrieved by aforesaid, assessee is before us in this appeal. We would refer to submissions made by learned counsel for parties to lis little later. In instant case, point which arises for our consideration and decision is with respect to possible construction that could be placed on interpretation of section 133(6) of Act. At outset, we would briefly refer to relevant provisions of Act and legislative history thereto. Section 133 provides for power of authorities under Act to call for information for purposes prescribed therein. Sub-section (6) of section 133 of Act, as it stood originally, had provided for calling for information in relation to such points or matters which would be useful for or relevant to any proceeding under Act from any person including banking company or any officer thereof. It was settled law that unless proceeding is pending, powers under section 133(6) could not be exercised by assessing authorities. In such circumstances, amendment was made by Finance Act, 1995 (Act 22 of 1995), with effect from July 1, 1995, inserting words "enquiry or" before "proceeding" in section 133(6) and second proviso to said provision. Besides aforesaid amendment in 1995, section 133(6) was amended by Finance Act, 1977, and Direct Tax Laws (Amendment) Act, 1987, whereby certain authorities were included and first proviso was inserted, respectively. Further, Finance Act, 2011, inserted third proviso with effect from June 1, 2011. amended section 133(6) reads as under: "133. Power to call for information.-(1) Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner or Commissioner (Appeals) may, for purposes of this Act,... (6) require any person, including banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs verified in manner [2002] 255 ITR 508 (SC). specified by Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner or Commissioner (Appeals), giving information in relation to such points or matters as, in opinion of Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner or Commissioner (Appeals), will be useful for, or relevant to, any enquiry or proceeding under this Act: Provided that powers referred to in clause (6), may also be exercised by Director General, Chief Commissioner, Director and Commissioner: Provided further that power in respect of inquiry, in case where no proceeding is pending, shall not be exercised by any incometax authority below rank of Director or Commissioner without prior approval of Director or, as case may be, Commissioner : Provided also that for purposes of agreement referred to in section 90 or section 90A, income-tax authority notified under subsection (2) of section 131 may exercise all powers conferred under this section, notwithstanding that no proceedings are pending before it or any other income- tax authority." (emphasis supplied) addition of word "enquiry" expanded ambit of exercise of powers by authorities under section 133(6) to seek for information which would be useful for or relevant to any enquiry besides proceeding under Act. second proviso to section 133(6), specified that power in respect of enquiry, in case where no proceeding is pending, shall not be exercised by any income-tax authority below rank of Director or Commissioner without prior approval of said authorities. effect of amendments made by Finance Act, 1995 (Act 22 of 1995) was explained by Central Board of Direct Taxes in Circular No. 717, dated August 14, 1995 (See Taxmann's Direct Taxes Circulars, Vol. 4, 2002 Ed., page 2.1759, 2.1782) as follows: "Power to call for information when no proceeding is pending.-... 41.2 At present provisions of sub-section (6) of section 133 empower 41.2 At present provisions of sub-section (6) of section 133 empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under Act which means that these provisions can be invoked only in cases where proceedings are pending and not otherwise. This acts as limitation or restraint on capability of Department to tackle evasion effectively. It is, therefore, thought necessary to have power to gather information See [1995] 215 ITR (St.) 70. which after proper enquiry, will result in initiation of proceedings under Act. 41.3 With view to having clear legal sanction, existing provisions to call for information have been amended. Now, incometax authorities have been empowered to requisition information which will be useful for or relevant to any enquiry or proceedings under Income-tax Act in case of any person. Assessing Officer would, however, continue to have power to requisition information in specific cases in respect of which any proceeding is pending as at present. However, income-tax authority below rank of Director or Commissioner can exercise this power in respect of inquiry in case where no proceeding is pending, only with prior approval of Director or Commissioner." [emphasis supplied] Keeping in view aforesaid, we would now refer to contentions of learned counsel for parties. It is case of assessee that though this court in Karnataka Bank's case (supra) has considered powers of respondent-authorities to issue notice under section 133(6) but has not considered as to whether said provision clothes respondentauthorities with any power for conducting roving or fishing enquiry into affairs of assessee or regarding deposits made by its customers. Further, that this court has considered only "case specific" or "area specific" information sought under section 133(6). Learned counsel for assessee would, therefore, submit that High Court has erred by not appreciating decision of this court in Karnataka Bank's case (supra) and erroneously dismissed case of similarly placed banks. Au contraire learned Solicitor General for assessing authority, would support impugned judgment and order and contend that for purposes of enquiry under provisions of Act, assessing authority can issue such notice under said section. Having noticed aforesaid, in order to appreciate contentions canvassed by parties to lis, we must examine import of term "enquiry" under section 133(6) of Act. In common parlance, "to enquire" would mean to seek information and "enquiry" would refer to process of gathering such information. Longman Dictionary of Contemporary English defines "enquiry" as "1 [countable] question you ask in order to get information; 2 [uncountable] act or process of asking questions in order to get information; 3 [countable] official process to find out about something". Merriam-Webster Unabridged Dictionary states that words "inquiry or enquiry" connote: "1: examination into facts or principles 2: request for information 3: systematic investigation often of matter of public interest." Cambridge Advanced Learner's Dictionary and Thesaurus defines inquiry or enquiry as "question" or "the process of asking question." Oxford Advanced Learner's Dictionary defines enquire as: "an official process to find out cause of something or to find out information about something; request for information about somebody/something; question about somebody/something; act of asking questions or collecting information about somebody/ something." Black's Law Dictionary, 9th Ed., 2009, page 864, defines "enquiry" as "a request for information, either procedural or substantive". expression inquiry under Encyclopedia Law Lexicon, Vol. 4, Ashoka Law House, 2008/09, page 2356 and K. J. Aiyar's Judicial Dictionary, Vol. 1, Lexis Nexis Butterworths Wadhwa, 15th Edition, 2011, page 838 follows explanation hereunder: "According to New Standards Dictionary, word'inquiry' includes investigation into facts, causes effects and relations generally; 'to inquire', according to same dictionary means to'exert oneself to discover something'. Chambers 20th Century Dictionary lays down that meaning of term'to inquire' is'to ask, to seek' and meaning of term'inquiry' is to give as:'in search for knowledge; investigation; question' (Also Real Value Appliances Ltd. v. Canara Bank [1998] 5 SCC 554 )." Since language of section 133(6) is wholly unambiguous and clear, reliance on interpretation of statutes would not be necessary. Before introduction of amendment to section 133(6) in 1995, Act only provided for issuance of notice in case of pending proceedings. As consequence of said amendment, scope of section 133(6) was expanded to include issuance of notice for purposes of enquiry. object of amendment of section 133(6) by Finance Act, 1995 (Act 22 of 1995), as explained by Central Board of Direct Taxes in its circular shows that legislative intention was to give wide powers to officers, of course with permission of Commissioner of Income-tax or Director of Investigation to gather general particulars in nature of survey and store [1998] 93 Comp Cas 26 (SC). those details in computer so that data so collected can be made use of for checking evasion of tax effectively. assessing authorities are now empowered to issue such notice calling for general information for purposes of any enquiry in both cases: (a) where proceeding is pending, and (b) where proceeding is not pending against assessee. However, in latter case, assessing authority must obtain prior approval of Director or Commissioner, as case may be, before issuance of such notice. word "enquiry" would thus connote request for information or questions to gather information either before initiation of proceedings or during pendency of proceedings; such information being useful for or relevant to proceeding under Act. This court in Karnataka Bank Ltd. v. Secretary, Government of India [2002] 9 SCC 106, has examined proposition whether notice under section 133(6) could be issued to seek information in cases where proceedings are not pending and construed section 133(6) of Act. petitioner therein was financial institution which had impugned notice issued under section 133(6) on grounds that notice requiring furnishing of information in respect of its customers regarding payment of loans when no enquiry was pending was not envisaged by said sub-section. This court has observed as follows: "3. It is clear from mere reading of said provision that it is not necessary that any inquiry should have commenced with issuance of notice or otherwise before section 133(6) could have been invoked. It is with view to collect information that power is given under section 133(6) to issue notice, inter alia, requiring banking company to furnish information in respect of such points or matters as may be useful or relevant. second proviso makes it clear that such information can be sought for even when no proceeding under Act is pending, only safeguard being that before this power can be invoked approval of Director or Commissioner, as case may be, has to be obtained." In view of aforesaid, we are of view that powers under section 133(6) are in nature of survey and general enquiry to identify persons who are likely to have taxable income and whether they are in compliance with provisions of Act. It would not fall under 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 assessing authority issuing notices requires. This clearly illustrates that [2002] 255 ITR 508, 510 (SC). information of general nature can be called for and names and addresses of depositors who hold deposits above particular sum is certainly permissible. In instant case, by impugned notice assessing authority sought for information in respect of its customers which have cash transactions or deposits of Rs. 1,00,000 or above for period of three years, without reference to any proceeding or enquiry pending before any authority under Act. Admittedly, in present case, notice was issued only after obtaining approval of Commissioner of Income-tax, Cochin. In light of aforesaid, we are of considered opinion that assessing authority has not erred in issuing notice to assessee-financial institution requiring it to furnish information regarding account holder with cash transactions or deposits of more than Rs. 1,00,000. Therefore, we hold that Division Bench of High Court was justified in its conclusion that for such enquiry under section 133(6) notice could be validly issued by assessing authority. In view of above, appeal requires to be dismissed and accordingly, stands dismissed. In C. A. Nos. 7487-7517 of 2013 @ S. L. P. (C.) No. 3994-4024 of 2010 with C. A. Nos. 7518-32 of 2013 @ S. L. P. (C.) No. 5194-5208 of 2010 with C. A. No. 7461 of 2013 @ S. L. P. (C.) No. 11135 of 2010 with C. A. Nos. 7468-81 of 2013 @ S. L. P. (C.) No. 11454-11467 of 2010 with C. A. No. 7483 of 2013 @ S. L. P. (C.) No. 13778 of 2010 with C. A. Nos. 7482-7484 of 2013 @ S. L. P. (C.) No. 11909-11911 of 2010 with C. A. No. 7534 of 2013 @ S. L. P. (C.) No. 4442 of 2011 and with C. A. No. 7486 of 2013 @ S. L. P. (C.) No. 21114 of 2011 In view of order passed in Civil Appeal No. 7460 of 2013 @ S. L. P. (C.) No. 3976 of 2010 above, all these appeals also stands dismissed. Ordered accordingly. *** Kathiroor Service Co-operative Bank Ltd. v. Commissioner of Income-tax (CIB)
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