The judgment of the court was delivered by
DR. MANJULA CHELLUR C. J.-All these appeals are directed against the common judgment of the learned single judge dated December 17, 2013. Therefore, they are taken up for final disposal by consent. The appellants before us are different co-operative societies. In brief, the case of appellants is as under:
The appellant-societies are established in accordance with the Kerala Co-operative Societies Act and Rules. These societies are credit co-operative societies functioning with an object of providing financial assistance to its members for the purpose of agriculture and other allied activities. According to the appellants, exhibit PI notice issued by the second respondent is not only illegal but arbitrary.
The appellant-societies approached the learned single judge questioning the legality of exhibit P1 notice and also competency of the second respondent to issue the same. As per exhibit P1 notice, societies were required to furnish the details of entire cash deposits in savings bank accounts where the aggregate cash deposit is rupees five lakhs and above in an year for the last three previous years. Identifying such cases from thousands of depositors is not only a laborious task but encroaching on the affairs and business activities of co-operative societies. Exhibit P1 notice lacks details as to for what purpose such notice was issued and it is issued by the authority which is not included in section 133(6) of the Income-tax Act.
According to appellants, the State Legislatures have been given exclusive power to make laws in respect of matters enumerated in List II of the Seventh Schedule of the Constitution of India. Entry No. 43 of List I of the Seventh Schedule refers to incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but does not include co-operative societies. Entry No. 32 of List II specifically relates to societies, co-operative societies, etc., other than those specified in List I. Therefore, according to the appellants, as co-operative societies are established pursuant to the promulgation of the Kerala Cooperative Societies Act and Rules, only State Government has control over the affairs and management of co-operative societies, hence, they have no obligation to furnish the details sought at exhibit Pl. They further contend that in order to comply with the obligation and Directive Principles of State Policy, the Kerala Co-operative Societies Act and Rules were framed with the sole object of promoting the needs of its members who are connected with agricultural activities. Hence, the respondent-authorities have no power to interfere with the affairs of the appellant-societies.
They further contended that under section 133(6) of the Income-tax Act the word "enquiry" was incorporated before the word "proceedings" to make it clear that unless there exists a proceeding or enquiry section 133(6) of the Income-tax Act cannot be invoked. It is also contended that reading of section 133(6) along with the second proviso makes the position abundantly clear, though information could be sought in the absence of proceedings by virtue of the second proviso but enquiry is a must. In the absence of stating in what respect and what connection such details are required, there is no obligation to furnish the information sought at exhibit P1. In support of their contention that the Income-tax Officer has no power or authority to initiate proceedings, they rely upon Kathiroor Bank's case Kathiroor Service Co-operative Bank Ltd. v. CIT (CIB) [2014] 360 ITR 243 (SC). So far as the factual situation, they complain that in the event of furnishing such details, there will be mass withdrawal of amounts which would definitely curtail flow of funds to the societies. This would ruin the co-operative sector and functioning of societies, therefore, they had to approach this court. According to the appellants, the learned single judge has not considered the abovesaid Kathiroor Bank's case in the right perspective, therefore, appeals deserve to be allowed.
As against this, learned standing counsel for the Department brought to our notice the case in Dr. N. S. D. Raju v. Director-General of Income-tax (Investigation) [2006] 283 ITR 154 (Ker) so far as the powers exercised by the Assessing Officer as per section 2(7 A) of Income-tax Act. He also brought to our notice notification dated August 19, 2011. By virtue of the powers conferred by section 120 of the Income-tax Act, Directors of Income-tax specified in column (2) of schedule 2 shall issue orders in writing to the income-tax authorities subordinate to them for exercise of such powers under the Income-tax Act by them, which includes details or territorial areas coming under their jurisdiction. As per this notification, according to the learned standing counsel, the Director of Income-tax (Intelligence), Kochi, has powers to issue such directions to all co-operative societies within the State of Kerala so far as all powers conferred under the Income-tax Act in relation to collection, collation, verification and dissemination of information in respect of territorial area. Order dated November 1, 2011, is issued by the Office of the Director of Income-tax (Intelligence), Kochi, giving details of income-tax authorities who could function as against the posts referred to in column (3) of the table given in the said letter. Letter dated September 2, 2013, clearly indicates such power being vested on the Income-tax Officer (Intelligence), Kochi, Thrissur, Alappuzh~ Kozhikode and Thiruvananthapuram. According to the learned standing counsel, Kathiroor Service Co-operative Bank's case (supra) is clear enough in indicating the powers to call for information in the absence of any proceedings. With these submissions, prays for dismissal of the appeals.
Coming to the first issue whether the authority which signed exhibit Pi had power to issue such notice to various co-operative societies, we have orders and notification referred to above issued by the Director of Incometax indicating who are the authorities who could discharge various functions. The authority who issued exhibit Pi under section 120(2) of the Inc.ome-tax Act by notification dated August 19, 2011, at S1. No. 18 is the Director of Income-tax, having head quarters at Kochi, Kerala, who has jurisdiction over the area within the State of Kerala, Union Territory of Lakshadweep and Minicoy. He has all powers envisaged under the Income-tax Act related to and in connection with collection, collation, verification and dissemination of information in respect of the area over which he has jurisdiction. By office order dated November 1, 2011, the Incometax Officer, Thiruvananthapuram, Alappuzha, Kochi and Thrlssur were authorised to function as Income-tax Officer (Intelligence) of the above three places. Letter dated September 2, 2013, is issued by the Director of Income-tax (Intelligence) to the above Income-tax Officers (Intelligence) authorising them to issue notices to co-operative banks/urban co-operative banks/credit co-operative societies coming under the respective jurisdiction calling for information as contemplated under section 133(6) of the Income-tax Act. By virtue of these documents, the Income-tax Officer (Intelligence) is the authorised person who could issue exhibit Pi, therefore, the allegation that the officer who issued exhibit Pi had no authority has to be rejected.
Then coming to section 133(6) of the Income-tax Act, in Kathiroor Service co-operative Bank's case (supra), various co-operative societies registered under the Kerala Co-operative Societies Act engaged in banking business were before this court when notices were issued to the societies under section 133(6) of the Act calling for particulars of cash transaction above rupees one lakh with details of account holders/deposit holders in the format prepared by the authority issuing the notices. The societies challenged the validity of the notices. After referring to section 133(6) of the Act, prior to the introduction of the second proviso and its effect and after the introduction of the second proviso to section 133(6), their Lordships opined that there was no scope fot interfering with validity of notices.
Then coming to the crucial issue whether general notice calling for cash particulars including deposits above a particular amount issued by the concerned officer with the prior approval of the officer concerned, as the case may be, their Lordships opined that all the notices were issued by the same authority which obviously'mean that there was prior approval from the Commissioner or Director, as the case may be.
Section 133(6) and provisos read as under:
"133. Power to call for information.- The Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals) may, for the purposes of this Act,- ...
(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 proceedings 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 :
Provided also that for the purposes of an agreement referred to in section 90 or section 90A, an income-tax authority notified under sub-section (2) of section 131 may exercise all the powers conferred under this section, notwithstanding that no proceedings are pending before it or any other income-tax authority."
While referring to the effect of amendments made by the Finance Act, 1995, at paragraph 12, their Lordships reproduced the explanation of the Central Board of Direct Taxes in Grcular No. 717, dated August 14, 1995, which read as under (see [1995] 215 TIR (St.) 70, 100) :
"Power to call for information when no proceeding is pending.- ...
41.2 At present the provisions of clause (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 incometax 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. (emphasis1 supplied) The Assessing Officer would. however, continue to have the 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 the 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."
They also referred to Karnataka Bank Ltd. v. Secretary, Government of India [2002] 255 ITR 508 (sq at paragraph 13 of the judgment, which reads as under (page 253 of 360 ITR) :
"Keeping in view the aforesaid, we would now refer to the contentions of the learned counsel for the parties. It is the case of the assessee that though this court in Karnataka Bank's case (supra) has considered the powers of the respondent-authorities to issue notice under section 133(6) but has not considered as to whether the said provision clothes the respondent-authorities with any power for conducting a roving or fishing enquiry into the affairs of the assessee or regarding the deposits made by its customers. Further, that this court has considered only 'case specific' or 'area specific' information sought under section 133(6). Learned counsel for the assessee would, therefore, submit that the High Court has erred by not appreciating the decision of this court in Karnataka Bank's case (supra) and erroneously dismissed the case of similarly placed banks."
The argument before the apex court in Kathiroor Co-operative Bank's case (supra) was the honourable apex court in Karnataka Bank's case though considered the powers of the authorities to issue notice under section 133(6), they did not consider as to whether the said section permits the authorities with any power for conducting a detailed enquiry into the details of the assessee or regarding the deposits made by its customers. As a matter of fact, in Karnaf;aka Bank's case, consideration was with reference to the cases specified in which information was sought under section 133(6). The argument was, emphasis ought to have been placed on the decision in the Karnataka Bank's case by the High Court in Kathiroor Cooperative Bank's case. Their Lordships then proceeded to explain at paragraphs 15 and 16 what exactly enquiry would mean in various Dictionaries which reads as under (page 253 of 360 ITR) :
"Having noticed the aforesaid, in order to appreciate the contentions canvassed by the parties to the lis, we must examine the 'import of the term 'enquiry' under section 133(6) of the Act. In common parlance, 'to enquire' would mean to seek information and 'enquiry' would refer to the process of gathering such information.
The Longman Dictionary of Contemporary English defines 'enquiry' as '1 [countable] a question you ask in order to get information; 2 [uncountable] the act or process of asking questions in order to get information; 3 [countable] an official process to find out about something.
The Merriam-Webster Unabridged Dictionary states that the words 'inquiry or enquiry' connote:
'1 : examination into facts or principles.
2 : a request for information.
3 : a systematic investigation often of a matter of public interest.'
The Cambridge Advanced Leamer's Dictionary and Thesaurus defines inquiry or enquiry as 'question' or 'the process of asking a question.' The Oxford Advanced Leamer's Dictionary defines enquire as :
'an official process to find out the cause of something or to find out information about something ; a request for information about somebody/something; a question about somebody/something; the act of asking questions or collecting information about somebody/ something.'
The Black's Law Dictionary, 9th Ed., 2009, page 864, defines 'enquiry' as 'a request for information, either procedural or substantive'. The expression inquiry under Encyclopedia Law Lexicon, Vol. 4, Ashoka Law House, 2008/09, page 2356 and K. J. Aiyar's Judicial Dictionary, Vol. 1, Lexis Nexis Butterworths Wadhwa, 15th Edition, 2011, page 838 follows the explanation hereunder :
'According to the New Standards Dictionary, the word "inquiry" includes investigation into facts, causes effects and relations generally; "to inquire", according to the same dictionarytneans to "exert oneself to discover something'. Chambers 20th' Century Dictionary lays down that the meaning of the term "to inquire" is "to ask, to seek" and the meaning of the term "inquiry" is to give as : 'in search for knowledge; investigation; a question' (Also Real Value Appliances Ltd. v. Canara Bank [1998] 5 SCC 554 ; [1998] 93 Comp Cas 26 (SC»).'"
Ultimately, their Lordships at concluding paragraphs 17, 18 and 19 opined that powers under section 133(6) are in the nature of survey and a general E!Flquiry to identify persons who are ·likely to have taxable income and whether they are in compliance with the provisions of the Act, which read as 'under (page 254 of 360 ITR) :
"Since the language of section 133(6) is wholly unambiguous and clear, reliance on interpretation of statutes would not be necessary. Before the introduction of amendment to section 133(6) in 1995, the Act only provided for issuance of notice in case of pending proceedings. As a consequence of the said amendment, the scope of section 133(6) was expanded to include issuance of notice for the purposes of enquiry. The object" of the amendment of section 133(6) by the Finance Act, 1995 (Act 22 of 1995), as explained by the Central Board of Direct Taxes in its circular shows that the legislative intention was to give wide powers to the officers, of course with the permission of the Commissioner of Income-tax or the Director of Investigation to gather general particulars in the nature of survey and store those details in the computer so that the data so collected can be made use of for checking evasion of tax effectively. The assessing authorities are now empowered to issue such notice calling for general information for the purposes of any enquiry in both cases: (a) where a proceeding is pending, and (b) where proceeding is not pending against the assessee. However, in the latter case, the assessing authority must obtain the prior approval of the Director or the Commissioner, as the case may be, before issuance of such notice. The word 'enquiry' would thus connote a request for information or questions to gather information either before the initiation of proceedings or during the pendency of proceedings; such information being useful for or relevant to the proceeding under the Act.
This court in Karnataka Bank Ltd. v. Secretary, Government of India [2002] 9 SCC 106 ; [2002] 255 TIR 508, 510 (SC), has examined the proposition whether a notice under section 133(6) could be issued to seek information in cases where the proceedings are not pending and construed secti<m 133(6) of the Act. The petitioner therein was a financial institution which had impugned the notice issued under section 133(6) on grounds that the notice requiring furnishing of information in respect of its customers regarding payment of loans when no enquiry was pending was not envisaged by the said sub-section. This court has observed as follows :
'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 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 view of the aforesaid, we are of the view that the 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. It would not fall under the restricted domains of being 'area specific' or 'case specific'. 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. 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."
In the light of the above dictum laid down by the apex court, there is no much scope for considering the arguments of the learned counsel appear,ing for the appellants, according to whom, Kathiroor Co-operative Bank's case has no application. On the other hand, the above paragraphs in the said judgment clearly indicate what exactly section 133(6) subsequent to the introduction of the second proviso would mean. In the light of the above discussion, we are of the view that notices issued under section 133(6) are justified.
Then coming to the other argument that all the appellant-assessees fall under entry No. 32 of List IT of the Seventh Schedule and the authorities concerned have no jurisdiction to meddle with the affairs of the society without prior approval of the State of Kerala, the appellants rely upon entry No. 42 of List IT of the Seventh Schedule which specifically excludes cooperative societies. Therefore, the income-tax authorities cannot extend their jurisdiction to enquire into the affairs of the society by virtue of the powers under entry No. 43. For this, appellants rely upon article 245 of the Constitution of India.
One has to understand what exactly is the nature of enquiry or information sought by the income-tax authorities. It is general information without reference to any particular depositor or account holder. The information sought relate to account holders or depositors who had cash deposit of rupees five lakhs and above in an year for the last three previous years. Therefore, it is in the nature of general enquiry by the authorities in order to ascertain whether any person who has taxable income has failed to comply with the provisions of the Act. Definitely, it is not with reference to constiWtion of appellant-societies and its functioning or any disputes between the society and its members. If the subject matter of information attracts any of the matters which has to be considered under the Co-operative Societies Act, then alone the argument of the appellants is meaningful, otherwise the said argument has no legs to stand. The information sought is under section 133(6) and has nothing to do with any of the provisions of the Co-operative Societies Act.
In the light of above'observations, we are of the opinion that every challenge raised by the appellants is unsustainable. Accordingly, the appeals are dismissed.