TMI Blog2015 (1) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Income Tax Act. In so far as 'Explanation (2)' to Section 132 of the Income Tax Act, dealing with search and seizure, categorically states that the word 'proceeding' includes a future proceeding as well; the inclusion of the word 'enquiry or' under Section 133(6) of the Act, by the law makers as per the Finance Act, 1995, is having more significance and it is incidental to the scope and object to be achieved , which cannot be nullified. A Constitution Bench of the Apex Court has held in Vivian Joseph Ferreira and another v. Municipal Corporation of Greater Bombay and others [2002 (11) TMI 112 - SUPREME COURT OF INDIA) that, taxing statute will become valid, if it is within the legislative competence, if it is for public purpose and further, if it does not violate the fundamental right guaranteed under Part III of the Constitution of India. All the said three requirements are satisfied in the instant case and as such, the challenge raised by the petitioners cannot be held good; more so when the Apex Court has made it clear in R.K. Garg v. Union of India. [1981 (11) TMI 57 - SUPREME Court], that the laws relating to economic activities should be viewed with gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -13 and also to furnish details of payment of interest exceeding ₹ 10,000/- to the depositors including in the case of fixed deposits. 2. Petitioners are Co-operative Banks registered under the relevant provisions of the Kerala Co-operatives Societies Act/Rules engaged in banking business and in some cases members/depositors have also joined hands with the Bank to raise the challenge. W.P.(C).No. 10334 of 2014 is treated as the lead case, wherein a detailed counter affidavit has been filed from the part of the Department and the petitioners have filed a reply affidavit as well. It is stated that, no factual dispute is involved and the contentions raised in the lead case from both the sides are pressed into service in the other cases as well. 3. Mr. Mariarputham, learned Senior Counsel appearing on behalf of the petitioner in W.P.(C). No. 10334 of 2014 led the arguments on behalf of the petitioners, supported by other learned lawyers concerned. The arguments on behalf of the Department/Revenue were led by Sri. P.K.R Menon, learned Senior Central Government Counsel (Taxes), supported by Mr. Jose Joseph, the learned Standing Counsel. 4. History runs back to the time whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erference was declined and ultimately the matter reached the Apex Court. The Apex Court declined interference, clearly holding that, the power under Section 133(6) could be invoked against Co-operative Banks as well, and that there was nothing wrong, arbitrary or illegal on the part of the Department in having issued the impugned notices. Accordingly, the cases before the Apex Court were dismissed as per the decision reported in Kathiroor Service Co-operative Bank Ltd. Others v Commissioner of Income Tax Others [(2013) 263 CTR (SC) 129]. On attaining finality, by virtue of the verdict passed by the Apex Court, the respondent Department proceeded with further steps in this regard. This made the petitioners herein to challenge the notices, mainly raising challenge against the constitutional validity of the amended provisions incorporating the words 'enquiry or' and the 2nd proviso to Section 133(6), pointing out that, constitutional validity of the provision was never under challenge before the Apex Court and hence that the Court had no need, necessity or occasion to have considered it while passing the judgment in Kathiroor case cited supra. 6. Coming back to the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a person having a deposit of ₹ 5 lakhs or in respect of a person to whom interest has been paid to an extent of ₹ 10,000/-. This in turn, is cited as a clear instance of arbitrariness and patent violation of Article 14 of the Constitution of India. 8. Learned Senior Counsel for the petitioners submits that, the State cannot have any unrestricted access to seek information about the financial records maintained by the petitioner Banks without any reliable basis to seek such information. Though the right of privacy has not been explicitly incorporated in the Constitution or by way of any specific legislation, it has now been incorporated as part of Article 21, through various judicial precedents, including Govind v. State of Madhya Pradesh Another([1975) 2 SCC 148], MR.X v. H ospital 'Z'. [1998] 8 SCC 296) and People Union for Civil L iberty v. Union of India another (2003) 4 SCC 399). Thus, it is contended that, right to privacy is an integral part of fundamental rights guaranteed under part III of the Constitution of India and as such, the attempt made by the concerned respondent is liable to be intercepted by this Court. 9. Reliance is also sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Bank of India/NABARD to strengthen the Co-operative sector, the steps being pursued by the respondent Department on the other hand, virtually contribute to undermine the same; as furnishing of details of deposit to third parties will clearly violate the commercial secrecy that exists between the Bank/financial institution and its customer. While admitting in Ground 'T' of the writ petition that, even though Banks and other financial institutions can be required to share information regarding deposits, it is stated that the same can be done only when the concerned authority shows some reason for suspicion or material based on which they are seeking information. 12. Since Section 133(6) of the Income Tax Act expressly uses the words for the purpose of this Act.. in the opening paragraph, it is contented that the same must relate to a specific tax payer/assessee; otherwise, it would not serve any purpose and as such, the impugned notices are arbitrary and illegal having no nexus to the scope and object of the Income Tax Act, 1961. 13. The averments and allegations raised by the petitioners have been rebutted by the 1st respondent by filing a detailed counter affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State, because of intervention of the Court, which came to be cleared only on 27.8.2013, i.e., on finalization of the issue as per the decision rendered by the Apex Court in Kathiroor case. It is also pointed out that, there is absolutely no basis for the apprehension expressed from the part of the petitioners with regard to the steps to be conducted to furnish the data in the prescribed form, as the Department, even as per their 1st notice under Section 133(6) issued to the petitioner on 06.09.2013, had conveyed the undertaking to assist the petitioner Co-operative Societies/Banks, also giving the telephone number of the officer concerned, to be contacted, in case any difficulty was experienced; besides undertaking that, the Department was ready to depute the Inspector of Income Tax to the Banks/Societies to render necessary assistance to enable the Banks to comply with the terms of notices issued under Section 133(6) of the Act, a copy of which has been produced as Ext.R4 (A). It is further pointed out that, as many as 44 seminars/awareness campaigns were organized by the Department in various Districts in Kerala, for Co-operative Societies/Banks, to educate and equip them to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on fixed Deposits. 17. As mentioned already, the said information was sought to be collected by the Department to implement the project conceived and approved by the Minister for Finance, to be executed by the officers of the CBDT (Central Board of Direct Taxes)- apex body of the tax administration under the Ministry of Finance, for curbing the menace of black money. The challenge raised from the part of the petitioners and other similarly situated persons stating that they stand on a different footin, being governed by the relevant provisions of the Kerala Co-operative Societies Act and Rules; that they do not come within the purview of the term any person contemplated under Section 133(6) of the Income Tax Act; that the power under Section 133(6) cannot be invoked in the absence of any pending proceedings ; that there was no prior approval/sanction of the Director/Commissioner , as the case may be ( in cases where no proceeding is pending); the scope of calling for such information as beyond the competence of power and jurisdiction of the authorities of the Department etc., no more remain res integra (except the question of constitutional validity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting aside the addition of the word inquiry in Section 133 (6) of the Income Tax Act 1961 and the two provisos thereto is illegal and unsustainable in law; (ii) issue an appropriate writ, order or direction quashing Exhibits P1, P3 and P4 notices issued by the 5th respondent. (iii) pass any other order in the interests of justice, equity and good conscience. 20. The provision for calling for information in a 'pending proceedings' was very much there in the Statute even before 1995 and the said power/authority is not under challenge in this writ petition. The inadequacy of the provisions, to meet the need of the hour, was felt by the law makers in the year 1995. It was felt necessary to obtain data by way of enquiry, though no proceeding was pending, so as to take remedial measures to curb the menace of black money and to prevent tax evasion. Even otherwise, if at all effective steps have to be taken against any individual/establishment, collection of preliminary data is very much essential, without which no proceedings can be pursued, as made clear by the Apex Court on many an occasion. Data collection is an elementary step/course to be completed before proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent Banks as part of implementation of the project from all the available sources and no Co-operative Bank is exempted or spared in this attempt. 23. Yet another contention raised by the petitioners is that, for meeting the requirement, the petitioners may have to deploy several employees to furnish the information, virtually for no return, and thus incurring huge expenses. This Court is not much impressed with the above contention, for the reason that the petitioners being establishments doing banking business, are supposed to maintain all the relevant records and there is a 'public duty' cast upon them as well, to see that they are not made instrumental by any unscrupulous individual, who wants to pursue tax evasion, undermining the economic backbone of the country. The plea with regard to hardship in this regard had already come up for consideration before the Apex Court in Sardar Baldeo v. CIT [1961 AIR SC 736], wherein it has been categorically held that in the case of any enactment preventing evasion of tax, consideration of hardships is irrelevant for deciding the questions of legislative competence. 24. With regard to the contention of the petitioners th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to furnish information sought for, in tune with the requirement of Section 133(6). Even otherwise, the petitioners cannot dictate terms to the Income Tax Department to satisfy them first, whether there is a taxable event, if the information sought for is furnished. Further, there is no basis for the plea set up in paragraph 12 of the writ petition with reference to the total figure of ₹ 5 lakhs, to be divided by 'three' years and to contend that it will not attract any tax liability. The position has been clarified by the respondents in paragraph '8' of the counter affidavit, that the threshold limit of ₹ 5 lakhs has been fixed for each financial year and not for the three financial years added together. 26. What should be the extent of enquiry to be conducted, fixing an appropriate ceiling, is a matter for the IT Department to consider, taking note of the factual scenario in the field of tax evasion. It could be said that, fixation of ceiling as ₹ 5 lakhs (in the case of deposits) and ₹ 10000/- (as interest being paid) while seeking for the particulars in this regard, is as a measure at the first step. After getting particulars in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' bank accounts is a separate matter. However, the State cannot compel citizens to reveal, or itself reveal details of their bank accounts to the public at large, either to receive benefits from the State or to facilitate investigations, and prosecutions of such individuals unless the State itself has, through properly conducted investigations, within the four corners of constitutional permissibility, been able to establish prima facie grounds to accuse the individuals of wrongdoing. It is only after the State has been able to arrive at a prima facie conclusion of wrongdoing, based on material evidence, would the right of others in the nation to be informed enter the picture. 28. It was a case where, investigation was sought to be made with regard to the unaccounted wealth acquired through unlawful activities by the concerned persons in violation of national/international laws. The Apex Court concurred with the formation of a 'High Level Committee' to act as a Special Investigation Team under the Chairmanship of an Hon'ble Judge of the Supreme Court and gave specific directions as to the course to be pursued. The portion extracted by the petitioners itself re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the performance of his functions under this Act, the Chief Commissioner or Commissioner may , if he is satisfied that it is in the public interest so to do, furnish or cause to be furnished the information asked for and his decision in this behalf shall be final and shall not be called in question in any court of law. (2) Notwithstanding anything contained in sub-section (1) or any other law for the time being in force, the Central Government may, having regard to the practices and usages customary or any other relevant factors, by order notified in the Official Gazette, direct that no information or document shall be furnished or produced by a public servant in respect of such matters relating to such class of assessees or except to such authorities as may be specified in the order. 30. With regard to the contention of the petitioners that there is absolutely no mechanism in the Statute, nor is there any guideline to govern the proceedings for invoking the power under Section 133(6), it is to be noted that the law makers were vigilant enough to ensure that the power is not misused under any circumstance. It was accordingly stipulated that, if no proceeding was pending, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered under the Kerala Co-operative Societies Act/Rules and that there is a separate procedure for incorporation/registration/functioning/control and regulation including auditing of funds etc., are not at all germane to the course and proceedings to be pursued in terms of Section 133(6) of the Income Tax Act. The provisions of the Co-operative Societies Act/Rules may be relevant in so far as the day-to day activities of the Society are concerned . But scope of the enquiry under the Income Tax Act is entirely different and so also is the object/purpose to be achieved . The said enquiry is not in relation to the particulars of loans given, but in relation to the particulars of the deposits made by the depositors or as to the extent of interest received by them, to the extent it is relevant under the provisions of the Income Tax Act. In so far as 'Explanation (2)' to Section 132 of the Income Tax Act, dealing with search and seizure, categorically states that the word 'proceeding' includes a future proceeding as well; the inclusion of the word 'enquiry or' under Section 133(6) of the Act, by the law makers as per the Finance Act, 1995, is having more significan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onomic activities should be viewed with greater latitude, than the laws touching civil rights, such as freedom of speech or religion etc. Further, in view of the law declared by the Apex Court in Punjab Distilling industries Ltd. v. Commissioner of Income Tax, Punjab [AIR 1965 SC 1862], constitutional validity of an Act can be supported on the ground that it was enacted to prevent evasion of tax. The amendment brought about as per the Finance Act 1995, adding the words 'enquiry or' and also the 'second proviso' is quite incidental to the 'main provision' and hence beyond challenge. 35. In testing the validity of a statute, particularly fiscal statute, the Court has to maintain more self- restraint, as held in Government of Andhra Pradesh v. Laxmi Devi [(2008) 4 SCC 720]. The apprehension expressed from the part of the petitioners that, if the information as sought for is given to the respondent Department, there is a chance for misuse/abuse, is without any basis. The confidentiality of the information gathered by the Income Tax Department is well taken care of by Section 138 of the Income Tax Act, as discussed already. 36. The further contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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