KECHERY SERVICE CO OPERATIVE BANK LTD Vs. CIT
HIGH COURT OF KERALA
KECHERY SERVICE CO-OPERATIVE BANK LTD.
COMMISSIONER OF INCOME TAX (C.I.B.)
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(1.) The scope and ambit of S.133(6) of the Income Tax Act, 1961 (for short the Act) as amended by the Finance Act, 1995 arise for consideration in these appeals. All these writ appeals arise from a common judgment of the learned single Judge in O.P. No. 30610 of 2002 and connected cases. The petitioner in the writ petitions are the appellants. All the appellants are either cooperative societies or cooperative banks registered under the Cooperative Societies Act. Being aggrieved by a communication of the nature of Ext. P2 in O.P. No. 30610 of 2002 received from the Income Tax authority having jurisdiction over the petitioners calling for information such as a list of persons, who have made term / recurring deposits of Rs.50,000/- and above as on date along with their complete postal addresses, etc. they have filed the writ petitions. In the notice it is stated that the information is required in connection with the investigation of the appellants case and the same is required under S.133(6) of the Act. According to the appellants S.133(6) does not clothe the respondents with any power for conducting a roving enquiry into the affairs of the appellants or regarding the deposits of money made by the customers of the appellants. According to them such power can be exercised only for gathering information in relation to any point or matter relevant to any proceedings under the Act. It is further stated that if the said sub-section is understood as giving a wide power it will affect the secrecy of their customers account. It is their case that in order to invoke the provisions of S.133(6) of the Act some proceedings under the Act must be pending against the person with respect to whom the details are called for but no such details are furnished in the notice. The learned single Judge dismissed the writ petitions by holding that the notices issued to the appellants in the nature of Ext. P2 mentioned earlier are within the powers of the officers who issued the same and the cooperative societies and cooperative banks are bound to furnish the particulars called for in the notices, failing which the Department will be free to conduct search or take penal action permissible under the Act. Hence these appeals.
(2.) Sri. P. Balachandran, learned counsel for the appellants submits that in order to invoke the provisions of S.133(6) of the Income Tax Act there must be some proceedings under the Act pending before the authority with respect to whom the information is called for from the appellant banks. He further submitted that even though the notice under challenge purports to have been issued in connection with the investigation of the appellants case really, it is intended to gather general information in respect of the deposits made by the customers and even in respect of investigation regarding the appellants such enquiry must be confined to any point or matter relevant to any proceeding under the Act. The counsel further submitted that if S.133(6) is understood to give a blanket power to the officers to conduct a roving enquiry in regard to the business transacted by the cooperative societies and cooperative banks such power must be held to be arbitrary and attracts the provisions of Art.14 of the Constitution. The counsel also submitted that this power is being invoked only against cooperative societies and cooperative banks and not against banking companies and other financial institutions engaged in receiving deposit from customers. The counsel pointed out that the analogy drawn by the learned single Judge based on the provisions of S.269SS was not justified since the proviso to the said section specifically excludes any loan or deposit taken or accepted by any banking company, post office or cooperative bank and as such there was no question of verification of the compliance with S.269SS of the Act. The counsel further submitted that by furnishing the details of deposit to third parties the secrecy that should exist between a banker and customer is also lost and that under law the obligation is only to furnish the details of his customers account only in specified case. Counsel also relied on a decision of the English Court in Parry Jones v. Jaws Society (1969 (1) ct at page 9) in support. The counsel also submitted that the learned single Judge erred in relying on the decision rendered in the context of the provisions of S.269S of the Income Tax Act to hold that the roving enquiry is permissible under S.133(6) of the Act. The counsel further submitted that the Calcutta High Court in Grindlays Bank Ltd. v. Income Tax Officer and Others ( 1998 (231) ITR 612 ) had held that even after the insertion of the word enquiry in Cl. (6) of S.133 by the Finance Act, 1995 and the insertion of the second proviso thereto with effect from 1.7.1995 unless there is a proceeding pending against the assessee when the notice under S.133(6) was issued, the notice was liable to be quashed. The counsel further submitted that though the Supreme Court in Karnataka Bank Ltd. v. Secretary, Government of India and Others ( 2002 (255) ITR 508 ) has held that the officers have got power under S.133(6) second proviso to call for statement of the nature specified in the notices issued to the appellants the Supreme Court did not have occasion to consider the arbitrary nature of the power given to the officers while deciding the matter.
(3.) We have also heard the learned standing counsel for the revenue. He submitted that an amendment was made to S.133(6) with effect from 1.7.1995 only to enable the officers of the Income Tax Department to collect the details regarding the deposits made by persons in cooperative societies and cooperative banks for the purpose of improving information gathering and its processing to be in line with its plans of computerisation. The standing counsel in support of the said contention relied on Circular No.717 dated 14.8.1995 issued by the Central Board of Direct Taxes regarding the scope and effect of the amendment made in the Finance Act, 1995. The standing counsel further submitted that the Supreme Court in Karnataka Banks case mentioned above has clearly explained the scope of the provisions of S.133(6) of the Act after the amendment made by the Finance Act, 1995. He accordingly submitted that the notices issued by the respondents are well within the powers conferred under S.133(6) of the Act.;
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