Cash Deposit more than Rs 250000 and Income Tax Notice u/s 133 for enquiry
Section 133 of Income Tax Act gives power to the assessing officer to call for information.Sub section 6 of this section narrates that,the AO has the power to direct any person, banking company or from any of its officer, to furnish any information in relation to such points or matter as maybe specified in the notice, where the assessing officer is of the opinion that such information will be useful, or relevant to, any “inquire” or proceeding under this act. It is pertinent to note that the word “inquiry or” has been inserted before the words “proceeding” by Finance act 1995, in this section.The word “inquiry”, as per the dictionary meaning is an “act of asking for information”.In order to eliminate the arbitrary nature of this power, second proviso to this section states that this power can only be exercised by the Director or Commissioner of income tax and if the AO is below the rank of Director or Commissioner then this power can only be exercised after their approvals. However read judgment Calling for information u/s 133(6) without prior approval of CIT is curable irregularity .
Q : Can the Assessing Officer Issue Notice u/s 133(6) if Cash deposited exceeds Rs 250000 and no proceedings or enquiry is pending with income Tax department ?
In view of provisions of section 133(6) as amended by Finance Act, 1995, assessing authority is empowered to issue notice calling for general information for purpose of any enquiry even in a case where proceeding is not pending against assessee after obtaining prior approval of Director or Commissioner, as the case may be, before issuance of such notice [SUPREME COURT OF INDIA -Kathiroor Service Cooperative Bank Ltd. v.Commissioner of Income-tax (CIB) CIVIL APPEAL NOS. 7460 OF 2013 & OTHERS Dated 27.08.2013]
“In the instant case, by the impugned notice the assessing authority sought for information in respect of its customers which have cash transactions or deposits of Rs. 1,00,000/- or above for a period of three years, without reference to any proceeding or enquiry pending before any authority under the Act. Admittedly, in the present case notice was issued only after obtaining approval of the Commissioner of Income Tax, Cochin. In light of the aforesaid, we are of the considered opinion that the Assessing Authority has not erred in issuing the notice to the assessee-financial institution requiring it to furnish information regarding the account holder with cash transactions or deposits of more than Rs. 1,00,000/-.
Therefore, we hold that the Division Bench of the High Court was justified in its conclusion that for such enquiry under Section 133(6) the notice could be validly issued by the Assessing Authority. “
Read Complete Judgment Section 133(6) notice could be validly issued even if no proceeding or enquiry pending
The scope and effect of amendment in Sedtion 133(6) brought about in 1995 was explained by the CBDT in its Circular No. 717, dated 14-8-1995.
” Finance Act, 1995
Power to call for information when no proceeding is pending
41.1 The Income-tax Department has taken steps to improve information-gathering and its processing to be in line with its plans of computerisation. Allotment of permanent account numbers is being done with the help of computers. Quoting of such numbers in high value transactions may be made a statutory requirement.
41.2 At present the provisions of sub-section (6) of section 133 empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. This acts as a limitation or a restraint on the capability of the Department to tackle evasion effectively. It is, therefore, thought necessary to have the power to gather information which after proper enquiry, will result in initiation of proceedings under the Act.
41.3 With a view to having a clear legal sanction, the existing provisions to call for information have been amended. Now the income-tax authorities have been empowered to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income-tax Act in the case of any person. The Assessing Officer would, however, continue to have power to requisition information in specific cases in respect of which any proceeding is pending as at present. However, an income-tax authority below the rank of Director or Commissioner can exercise this power in respect of an inquiry in a case where no proceeding is pending, only with the prior approval of the Director or the Commissioner.
41.4 The proposed amendment takes effect from 1-7-1995.[Section 37]”
Q: Can the Assessing Officer Issue Notice u/s 133 (6) if Cash deposited exceeds Rs 250000 for general information in regard to any matter he consider necessary ?
Kerala High Court in the case of M.V. Rajendran v. ITO  260 ITR 442 (Ker.), categorically stated that —
“. . . . . The Department is free to ask for information about any particular person or to call for general information in regard to any matter they consider necessary. Section 133(6) does not refer to any enquiry about any particular person or assessee, but pertains to the information of a general nature can be called for and names and addresses of the depositors who hold deposits above a particular sum is certainly permissible. In fact as the section presently stands section 133(6) is a power of general survey and is not related to any person and no claim any immunity from furnishing such information. . . . . . In the circumstances, I hold that the notices are within the powers of the officers who issued the same and the co-operative societies and co-operative 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.”
Read Complete Judgment Notice to Cooperative Societies /Banks can be issued u/s 133 (6)
Q: Can it be said that the privacy of person is violated if the information of Cash deposited exceeding Rs 250000 is provided by Banks / Cooperative Society to the Assessing Officer in response to Notice u/s 133 (6) ?
No , Kerala High Court in case of Pattambi Service Co-operative Bank Ltd. v.Union of India held :
“…A Constitution Bench of the Apex Court has held in Vivian Joseph Ferreira v. Municipal Corp. of Greater Bombay  1 SCC 70 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.  4 SCC 675, that the laws relating to economic 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. CIT 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”
Thus it was held that Amendment to section 133(6) adding words ‘enquiry or’ and also ‘second proviso’ is constitutionally valid.
Read Complete Judgment Enquiry by Assessing Officer u/s 133 of Income Tax, does not violate right to privacy
Q : Can the Assessing Officer Issue Notice u/s 133(6) if Cash deposited exceeds Rs 250000 to cooperative society ?
Yes , Kerala High Court in case of Mattul Service Co-operative Bank Ltd. v.Income-tax Officer (CIB), Kozhikode held :
Going by sub-clause (v) of section 2(31), which defines term ‘person’, and also in view of nature and construction of a co-operative society, it can be said that a co-operative society is a ‘ body corporate ‘ given shape by members of such society, whose functioning is controlled under relevant provisions of Co-operative Societies Act/Rules and that being position, contention raised by petitioners that notice under section 133(6) was not attracted in case of a co-operative society, was wrong and misconceived
Q Can the appeal be filed if Assessing Officer Issue Notice u/s 133(6) calling for information about Cash deposited exceeds Rs 250000 ?
No appeal lies against section 133(6) of the Income Tax Act. Thus Tribunal cannot adjudicate upon validity of action of the Assessing Officer under section 133(6) of the Income-tax Act. Read judgment
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