Assessing Officer can collect information from Co-operative Society

Issue

The notice under section 133(6) is not attracted in the case of a Co-operative Society

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

HIGH COURT OF KERALA

Mattul Service Co-operative Bank Ltd.

v.

Income-tax Officer  (CIB), Kozhikode

P.R. RAMACHANDRA MENON, J.

WRIT PETITION (CIVIL) NO. 23511 OF 2009†

AUGUST 18, 2009

V.G. Arun, T.R. Harikumar, R. Surendran and C.P. Peethambharan for the Petitioner. Jose Joseph and P. Parameswaran Nair for the Respondent.

JUDGMENT

1. The common issue involved in all these cases is whether the notice issued by the concerned Income-tax Officer calling for information under section 133(6) of the Income-tax Act, 1961 (‘Act’ in short) from the petitioners Co-operative Banks is correct or sustainable in the light of the following aspects:

(a)When the petitioners Co-operative Banks are not ‘persons’ as defined under section 2(31) of the Income-tax Act and not admittedly a banking company, so as to invoke the power under section 133;

(b)When there is no prior approval of the Commissioner or Director, as the case may be, in view of the specific stipulation under the second proviso to section 133(6) of the Act; and

(c) Whether the Income-tax Officer is having power, competence and jurisdiction to issue such notice, assuming the rights and roles of the assessing authority.

2. M/s. V.G. Arun, R. Surendran and Mr. C.P. Peethambharan, learned counsel for the petitioners, led the arguments in the above cases. Referring to the decision already rendered by this Court in W.P.(C) No. 9926 of 2009 and connected cases [produced as Ext. P2 in W.P.(C) 23563 of 2009], it is stated that the observations made by this Court in the above verdict are not exhaustive and that, in view of the specific points now raised, the said decision requires to be reconsidered.
3. With regard to the first point, the learned Counsel, referring to the mandate under section 133(6) submits that the power or authority conferred therein, to seek information, is only from a ‘person’ including the Banking Company or any officer thereof, which does not take-in a ‘Co-operative Society’. Reference is made to section 2(31) of the Act, which is extracted below :

“(31) ‘person’ includes—

(i)an individual,

(ii)a Hindu undivided family,

(iii)a company,

(iv)a firm,

(v)an association of persons or a body of individuals, whether incorporated or not,

(vi)a local authority, and

(vii)every artificial juridical person, not falling within any of the preceding sub-clauses.

Explanation.—For the purpose of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains;”

4. It is pointed out that the petitioners are registered under the relevant provisions of the Kerala Co-operative Societies Act and are independent entities as defined under section 2(a) of the said Act, which only mentions that it means a ‘Co-operative Society’ registered under the Act. Section 9 of the said Act places some more light on the status, where it is stated that the ‘Co-operative Societies’ will be “bodies corporate”. Learned Counsel submits that, by virtue of the exclusive status being a ‘body corporate’ and since it is not a Banking Company, it will not constitute the term ‘person’ as it appears under section 133(6) of the Income-tax Act; particularly since the term ‘body corporate’ or Co-operative Society or Co-operative Bank is not made a mention anywhere under section 2(31) of the Income-tax Act. More so, when the Legislators were well aware of the status, which made them to make a reference to the term ‘Co-operative Bank’ as it appears under section 269SS of the Income-tax Act, submits the learned Counsel for the petitioners.
5. True, Co-operative Societies are ‘bodies corporate’ as made clear under section 9 of the Co-operative Societies Act. But it is ‘not a creature of the Statute’ (Kerala Co-operative Societies Act) unlike a ‘Company’ constituted under the Indian Companies Act, 1956. The status and identity of the Co-operative Societies had been considered by the Apex Court holding that it is not a statutory body at all, as per the decision in Executive Committee of Vaish Degree College, Shamli v.Lakshmi Narain AIR 1976 SC 888.
6. Sub-clause (v) of section 2(31) of the Income-tax Act defines the term ‘person’, which stipulates that the ‘person’ includes an association of persons or a body of individuals whether incorporated or not, of course taking care of the rest of the category under sub-clause (vii), whereby every artificial judicial person, not falling within any of the preceding sub-clauses, is also included. Going by sub-clause (v) of section 2(31) and also in view of the nature and Constitution of Co-operative Society, as explained hereinbefore, it is not necessary to have any second thought, to arrive at a conclusion that it is a ‘body corporate’ given shape to, by the members of such Society, whose functioning is controlled under the relevant provisions of the Co-operative Societies Act/Rules. This being the position, the contentions raised by the petitioners that the notice under section 133(6) is not attracted in the case of a Co-operative Society, is rather wrong and misconceived.
7. With regard to the second point, that the notice has been issued by the concerned officer without ‘prior approval’ of the Commissioner or Director (as the case may be), it is very much true that section 133(6) contemplates two different situations, i.e.,during the ‘pendency of the proceedings’ and even when, no such proceedings are pending. It is also relevant to note that, by virtue of necessary amendment to the statute, the word ‘enquiry’ has also been added to the statute book in the due course. The ‘second proviso’ takes care of the situation, where no proceeding is pending, making it clear that, for invoking the power when no proceeding is pending, the only requirement to be satisfied is ‘prior approval’ of the Commissioner/Director, as the case may be.
8. The circumstances under which the necessity to have ‘prior approval’ are sought to be explained by the learned counsel appearing for the petitioner in W.P.(C) 23454 of 2009, stating that in the case of Commissioner/Deputy Commissioner/Assistant Commissioner, no such ‘prior approval’ is necessitated and that the same will become relevant, if the proceedings are pursued by the ‘Income-tax Officer’ exercising the functions of the ‘Assessing Authority’, conferred with the power under section 120 of the Act. Going by the notice impugned in the Writ Petitions, the learned counsel submits that the status and designation of the concerned officer has not been shown as the ‘Assessing Officer’, while he has been described only as ‘Income-tax Officer’ and hence that the notice issued is beyond jurisdiction and competence.
9. Mr. Jose Joseph, the learned Standing Counsel appearing for the departmental authorities submits with reference to Ext.P1 notice [produced along with W.P.(C) No. 23563 of 2009], that the concerned Officer has obtained ‘prior approval’ from the Commissioner, as specifically observed in the penultimate paragraph of the said proceedings. It is also brought to the notice of this Court that the notice issued and impugned in all the Writ Petitions have been issued by the very same officer and as such, the contentions raised from the part of the petitioners to the contrary is without any pith or substance. The learned Standing Counsel further submits, with reference to the mandate under section 197 of the Income-tax Act regarding ‘TDS’, that the assessment is being pursued by the ‘Dy. Commissioner (Assessment)’ whereas necessary ‘TDS’ certificates are being issued by the ‘Dy. Commissioner (TDS)’ in the respective name and style. This does not mean that the concerned officer, while functioning as the concerned authority, exercising such functions based on the powers vested on them, is not having the power, competence or jurisdiction. In any view of the matter, Ext. P1 notice in W.P.(C) No. 23563 of 2009 clearly mentions that the concerned officer, (who has issued similar notices in all the cases) has obtained ‘prior approval’ from the concerned authority, though obtaining of such approval has not been specifically incorporated in some of the notices impugned in the Writ Petition. This being the position, the contention raised by the petitioners challenging the sustainability of the said notices for want of necessary approval does not hold any water at all.
10. Equally or more so, is the position with regard to the case built up, referring to the status of the officer concerned, as described in the impugned notices, where his ‘office’ has been shown as only ‘Income-tax Officer’ and not as the ‘Assessing Authority’. The term ‘Assessing Officer’ as defined under section 2(7A) of the Income-tax Act means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction, by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of the ‘Act’ and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section, to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act.
11. The scope of section 133(6) has been analysed and explained by the Apex Court, as per the decision in Karnataka Bank Ltd.v. Secretary, Government of India AIR 2003 SC 2096, paragraph No. 3 of which is extracted below:

“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 the view to collect information that power is given under section 133(6) to issue notice, inter alia, requiring 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 7th July, 2000 indicates that it was at the instance of the Director of Income-tax (Investigation) that the information was sought for.” (p. 2097)

This was considered by a Division Bench of this Court and relied on, in Kechery Service Co-operative Bank Ltd. v. CIT (CIB) 2003 (2) KLT 32. It was following both the above verdicts, that the verdict in W.P. (C) 9737 of 2009 and connected cases was passed [which is produced as Ext. P2 in W.P.(C) 23563 of 2009], declining interference with regard to the notice issued under section 133(6).

In the above facts and circumstances, this Court does not find any tenable ground to re-consider the above verdict passed by this Court. Interference is declined and the Writ Petitions are dismissed accordingly. However, considering the mandate given by this Court in W.P.(C) 9737 of 2009 and connected cases, all the petitioners are given six weeks’ time to comply with the directions contained in the impugned notice.See