U.G. Upadhya vs The Director of Income Tax and Another

N.K. Jain, C.J.—These Writ Appeals are directed against the common order of the learned Single Judge, passed in Writ Petition No. 36445 of 2000 and connected matters, dated 4th January, 2001.

In Writ Appeal No. 1133 of 2001 the Respondents have issued a notice dated 7.7.2000 produced as Annexure-A calling upon the Appellant to furnish the information regarding repayment of loans for the period from 1.4.1997 to 31.3.2000 of all the customers of the bank as mentioned in the said notice. In all other Writ Appeals Respondents have issued notice to the Appellants-bank to furnish information for the period from 1.4.1998 to 31.3.1999 in respect of the term depositors who have held cumulative balance of Rs. 50,000/- and above during the said period in the proforma mentioned in the said notice. It is stated in the said notice that such enquiry is necessary for widening the tax base and unearthing black money and initiate proceedings in such cases. The aforesaid notices are issued u/s 136(6) of the Income Tax Act, 1961 (for short the ''Act'').

The learned Single Judge considering the rival contentions, the arguments and the decisions of this Court in Controllerate of Quality Assurance Electronics (COAL) Campus Employees Credit Co-operative Society Limited v. The Income Tax Officer (CIB) III, Writ Petition No. 38360 of 1999, decided on 3rd November, 1999 and South Canara District Central Co-operative Bank Limited v. The Income Tax Officer, Writ Petition No. 37905 of 1998 and also the decision of the Bombay High Court in D.B.S. Financial Services Pvt. Ltd. Vs. Smt. M. George, Second Income Tax Officer and others, , has not interfered with the issuance of notice and dismissed the Writ Petitions.

In Writ Appeal No. 1144 of 2001 Annexure-A notice dated 16.11.1999 was issued asking to furnish information for the period from 1.4.1998 to 31.3.1999. In Writ Appeal Nos. 1145 of 2001 and 1189 of 2001 Annexure-A notices dated 4th October, 1999 were issued asking to furnish the information for the same period. So also notices were issued to 4 other respective assessee banks in four other Writ Appeals as stated.

Since the controversy and points involved are identical in nature, they can be disposed of by a common order as agreed.

The main contention of the learned Counsel for the Appellant is that notice is not issued as per the requirement of Section 133(6) of the Act and it cannot be used to collect information unless there is an enquiry pending and therefore issuance of notice is illegal and the learned Single Judge has erred in not setting aside the same. The other argument is that in the absence of any specific amount regarding repayment of loan and relevant requirement shown, the Respondents are not entitled to seek for information, if the deposit relates to Rs. 50,000/- or more. The learned Counsel also submits that various safeguards have been made in the Act itself and in view of Section 139A and Rules 114B and C, the assessee has to comply with and for non-compliance the Department can initiate enquiry as per law and therefore issuance of notice is bad. The learned Single Judge wrongly relied on the earlier decision in South Canara District Central Co-operative Bank and has not considered properly the decisions of the Bombay High Court in D.B.S. Financial Services Private Limited and Calcutta High Court in Director of Income Tax (Exemption) (supra).

The learned Advocate for the Income Tax submits that in South Canara District Central Co-operative Bank''s case the power to issue notice was accepted, but the point raised is as to the mode of exercise of that power, which was disapproved by this Court and it was held that if proceedings are not pending, the Assessing Officer should obtain a prior approval of the Commissioner or the Director of Income Tax as at that time no prior approval was obtained. He further submits that with a view to find out the black money and to tackle the evasion of tax effectively necessary amendment on 1.7.1995 was made and accordingly the authorities have been empowered to collect information which will be useful or relevant to any enquiry or proceeding under the Act in case of any person. He also submitted that in South Canara District Central Co-operative Bank''s case, this point was considered, but the Writ Petition was allowed on the ground that prior approval of the Director of Income Tax had not been obtained and now necessary approval has been taken and notice has been issued. Therefore, the Appellant cannot agitate the same issue and is not entitled for any relief. He also submitted that the cases relied on, that is, D.B.S. Financial Services Private Limited and Director of Income Tax (Exemption) (supra) are prior to the Amendment and in those cases no permission was taken. He also submitted that in Calcutta case there is a mention about the Amended Act, but since no permission was accorded, the issuance of notice was set aside and that case will not be helpful and the learned Single Judge has rightly distinguished those cases and not interfered in the Writ Petitions. The learned Counsel for the Income Tax further submits that the impugned notice issued is in accordance with law and as per Section 133(6) of the Act and this Court in Writ Petition No. 38360 of 1999 disposed of on 3.11.1999 has considered the same issue and held that the authorities have the power to seek such information u/s 13(6) of the Act. The same was affirmed by the Division Bench in Writ Appeal No. 8043 of 1999 by order dated 7.12.1999. Therefore the notice issued is within jurisdiction and not in violation of any law.

In rejoinder, the learned senior Counsel argued that the point pending enquiry is a pre-condition was not agitated in earlier cases and therefore the Department cannot take advantage and the Bank cannot be stopped to argue its case on that basis.

We have heard the learned Counsel for the parties and perused the material on record and the case laws.

Before considering the controversy that enquiry must be pending before issuance of notice, for appreciation it will be appropriate to consider Section 133 which gives power to call for information. As per Section 133(6) the Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals) may, for the purposes of the Act may require any person, including a 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 the manner specified by the Assessing Officer, the Deputy Commissioner (Appeals), giving information in relation to such points or matters as in the opinion of the Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals), will be useful for, or relevant to, any enquiry or proceeding under the Act.

A perusal of the above section will reveal that the concerned Authority mentioned in the section can ask any person including a banking company to furnish information in relation to such points or matters or to furnish statements of accounts and affairs verified in the manner specified by the Authorities mentioned in the said section and giving information in relation to such points or matters as in the opinion of the concerned Authority will be useful or relevant to any enquiry or proceeding.

In the aforesaid Section, the word enquiry has been inserted by the Finance Act of 1995 with effect from 1.7.1995. Prior to the amendment when similar notices were issued calling for information without any proceeding pending under the Act, in the aforesaid decisions of the Bombay and Calcutta High Court it was held that the requirement of Section 133(6) of the Act were not satisfied and in the absence of any pending enquiry such information could not be sought for. However, after the amendment by insertion of the word "enquiry" in Section 133(6) of the Act, a second proviso was also inserted which provides that in respect of an enquiry, in a case where no proceeding is pending, the power shall not be exercised by any income tax authority below the rank of Director or Commissioner without the prior approval of the Director or, as the case may be, the Commissioner. Therefore, even after the amendment in the absence of prior approval no such information could be called for in the absence of any pending enquiry. In fact that is the view taken by this Court in the South Canara District Central Co-operative Bank''s case. However, if such prior approval is obtained, the power to call for information could be legitimately exercised by the Officers mentioned in the said section. In that view of the matter the notices which are impugned in these proceedings are valid and legal as prior approval as contemplated in second proviso to Section 133(6) is obtained before issuing of such notices.

The next contention of the learned Counsel for the Appellant was that the second proviso to Section 133(6) could be exercised only in respect of "an enquiry" and in "a case" and therefore a roving enquiry of general nature cannot be made as such the impugned notices are bad and the Respondents have no power to make such roving enquiry.

This argument proceeds on the assumption the enquiry means a specific case against an assessee. The word enquiry has been defined in the Chambers 20th Dictionary as "to ask a question; to make an investigation; eager to acquire information; to ask, to seek, to make an examination". Therefore, as is clear from the section itself the whole object of issuing such notice is to collect information which is useful for or relevant to an enquiry for widening the tax base and to unearth black money and to initiate proceedings in such cases. Therefore, only on the basis of information collected and after examination if the authorities find evasion of tax or accumulation of unaccounted money they could initiate proceedings. Therefore, the said enquiry has to be necessarily prior to initiation of any proceedings. Secondly, a case referred to in second proviso does not mean a case pending in respect of a customer of the bank. A case referred to applies to the assessee namely the bank to whom the notice is issued. In the instant case the authorities are seeking information from the Bank and as per the requirement of law they are seeking information from a particular assessee. The assessee may have several customers and therefore the interpretation suggested by the learned Counsel for the appellant is not tenable. So far as the cardinal law of interpretation is concerned, if the language is simple and unambiguous, it has to be read with clear intention of the legislature. Otherwise also, any addition/subtraction of word from the statute is not permissible and one has to read as a whole while interpreting and the intention and object of the legislation has to be looked upon. It is settled that words of common parlance have to be considered. Though each case depends upon the facts of its own, as stated and discussed the amendment is clear that prior approval is necessary before proceeding with the enquiry, meaning thereby the authorities can seek information or collect information with a view to make enquiry and it is not necessary that some enquiry should be pending as suggested. To our mind the argument is not acceptable that the word ''enquiry'' should be read as ''pending enquiry'' and unless there is some pending enquiry the authorities cannot invoke Section 133(6). As already discussed, a perusal of the Act reveals that any information which is useful can be called for. So according to us enquiry includes collection of information before proceeding with an enquiry. As the Bombay High Court and Calcutta High Court cases were prior to the amendment and no permission was taken, the argument that even the Calcutta High Court has observed the amendment made is not helpful. In the present case now prior approval has been taken. The argument of the learned Counsel that enquiry must be pending is also not tenable on this ground also that as per the proviso to the amendment, prior permission of the Commissioner is necessary. Then once he gives permission it should be for collecting information before initiating proceedings, if necessary.

From the aforesaid it is clear that the impugned notices were issued by the Respondents in exercise of their power u/s 133(6) of the Act. As no proceedings were pending against the assessee to whom the notice is issued they have taken the prior approval as required in second proviso to Section 133(6) of the Act.

In view of the above discussion, we do not want to take a different view from the view taken earlier by this Court referred to above. We find no error or illegality in the order of the learned Single Judge so as to call for any interference. Accordingly the writ appeals are dismissed.