Assessing Officer’s Power to Call for Information

Swarnim Shrivastava

Supreme Court gives more teeth to the Tax Authority

The Supreme Court in Kathiroor Service Cooperative Bank Ltd. v. Commissioner of Income Tax (([2013] 39 taxmann.com 49 [SC]))has cleared the position of the Assessing Officer with regard to hid power to call for information under Section 133 of the Income Tax Act, 1961.

The Assessing Officer can issue ‘general’ notice under section 133(6) to Financial Institutions to furnish information regarding account holder with cash transactions or deposits of more than Rs. 1,00,000 ((Id.)).

The relevant findings of the Supreme Court are as follows:

        i.            Powers under section 133(6) are in the nature of survey and a general enquiry to identify persons who are likely to have taxable income and whether they are in compliance with the provisions of the Act.

      ii.            It would not fall under the restricted domains of being ‘area specific’ or ‘case specific’.

    iii.            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 the assessing authority issuing notices requires.

    iv.            This clearly illustrates that the information of general nature can be called for and names and addresses of depositors who hold deposits above a particular sum is certainly permissible.

Previously, with reference to the power under Section 133, the Apex Court held in Karnataka Bank Ltd. v. Secretary, Government of India (([2002] 255 ITR 508/123 Taxman 219 [SC]))that it is clear from the mere reading of section 133 that it is not necessary that any inquiry should have commenced with the issuance of notice or otherwise before section 133(6) could have been invoked. It is with the view to collect information that power is given under section 133(6) to issue notice, inter alia, requiring a banking company to furnish information in respect of such points or matters as may be useful or relevant. The second proviso makes it clear that such information can be sought for even when no proceeding under the Act is pending, the only safeguard being that before this power can be invoked, the approval of the Director or the Commissioner, as the case may be, has to be obtained.

Looking to the language of section 133(6), it is difficult to include within the meaning of the phrase ‘any proceeding under this Act’ any contemplated or uncontemplated future proceeding. Hence, the power under section 133(6) has to be exercised with reference to a proceeding which is in existence (([1994] 207 ITR 1077 (Bom.).)).

In Kechery Service Co-operative Bank Ltd. v. CIT (([2004] 134 Taxman 352 (Ker.).)), it was held that it is not right to say that it is a condition for issuance of a notice under section 133(6) that any proceedings under Act must be pending against the person with respect to whom information is called for.

This judgment (([2013] 39 taxmann.com 49 (SC).))has indeed given more teeth to the AO as he can issue notice to financial institutions seeking information of depositors on deposit which is kept confidential by banks. This may be a matter of discussion in the days to come since the Supreme Court in order to strengthen the direct tax law enforcement in the country, may have overlooked the burdensome duties of banks, thereby increasing their compliance.