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Karnataka Bank Ltd. v. Secretary, Govt. Of India And Others
Factual and Procedural Background
The matter arose from a notice dated 7-7-2000 issued under Section 133(6) of the Income Tax Act, seeking information (including regarding repayment of loans) in relation to the bank’s customers for specified periods. The petitioner challenged the validity/scope of this notice, contending that it could not be issued in the absence of a pending inquiry.
The Single Judge and the Division Bench of the Karnataka High Court construed Section 133(6) against the petitioner’s position. The petitioner then filed special leave petitions, which were considered in this order.
Legal Issues Presented
- Whether Section 133(6) of the Income Tax Act permits issuance of a notice seeking information from a banking company even when no inquiry or proceeding is pending.
- Whether the notice dated 7-7-2000 (seeking information including repayment of loans for the periods mentioned) was beyond the scope of Section 133(6) as an “omnibus” notice regarding the bank’s customers.
Arguments of the Parties
Petitioner’s Arguments
- The High Court wrongly construed Section 133(6) of the Income Tax Act.
- The notice dated 7-7-2000 under Section 133(6) could not have been issued to seek information regarding repayment of loans for the periods referred to in the notice.
- No inquiry was pending; therefore, Section 133(6) could not be invoked.
- An omnibus notice requiring furnishing of information in respect of the bank’s customers is not envisaged by Section 133(6).
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court disagreed with the petitioner’s submission that a pending inquiry is a prerequisite for invoking Section 133(6). After reproducing Section 133(6) (including the second proviso), the court held that a “mere reading” of the provision shows that the power to require information is intended for collecting information that may be useful for, or relevant to, any enquiry or proceeding under the Act, and that it is not necessary that any inquiry must have commenced (by issuance of notice or otherwise) before Section 133(6) can be invoked.
The court emphasized that the second proviso expressly contemplates exercise of this power even where no proceeding is pending, subject to a safeguard: if no proceeding is pending, an Income Tax Authority below the rank of Director or Commissioner cannot exercise the power without prior approval of the Director or Commissioner, as applicable.
Applying this to the facts, the court noted that the notice dated 7-7-2000 indicated that the information was sought “at the instance of the Director of Income Tax (Investigation),” which aligned with the statutory safeguard described in the second proviso. On this basis, the court accepted the interpretation adopted by the Single Judge and the Division Bench of the Karnataka High Court.
Holding and Implications
DISMISSED: The special leave petitions were dismissed, and the court affirmed the construction of Section 133(6) adopted by the Single Judge and the Division Bench of the Karnataka High Court.
The direct effect is that the notice dated 7-7-2000 seeking information under Section 133(6) was not held invalid merely because no inquiry or proceeding was pending. The decision, as presented in the opinion, applies the statutory text (including the second proviso’s approval safeguard) to uphold the information-gathering power in the circumstances described; no broader implications or new precedent are discussed in the provided text.
Order
1. It is contended by the learned Senior Counsel for the petitioner that the High Court has wrongly construed the provisions of Section 133(6) of the Income Tax Act and the notice dated 7-7-2000 under that sub-section could not have been issued asking for information regarding repayment of loans for the periods referred to in the said notice. Learned Senior Counsel submits that there was no inquiry which was pending and that the omnibus notice requiring the furnishing of information in respect of the bank's customers is not envisaged by the said sub-section.
2. We are unable to agree with the learned counsel. Section 133(6), after introduction of the second proviso, reads as follows:
“133. The Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals) may, for the purposes of this Act,—
(1)-(5)***
(6) 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), the Joint Commissioner or the 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 this Act:
Provided that the powers referred to in clause (6), may also be exercised by the Director-General, the Chief Commissioner, the Director and the Commissioner:
Provided further that the power in respect of an inquiry, in a case where no proceeding is pending, 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.”
3. It is clear from the mere reading of the said provision 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 a 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. In the instant case, the notice dated 7-7-2000 indicates that it was at the instance of the Director of Income Tax (Investigation) that the information was sought for.
4. We agree with the construction of the section as placed by the Single Judge and the Division Bench of the Karnataka High Court. These special leave petitions are, accordingly, dismissed.
Court Master
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