Enanalloor Service Co-Operative Bank Limited Vs ITO (Kerala High Court)
Kerala High Court has dismissed a batch of 34 appeals filed by various co-operative banks challenging the authority of the Income Tax Officer (Intelligence) to demand information under Section 133(6) of the Income Tax Act for the financial years 2010-11, 2011-12, and 2012-13. The banks had previously been unsuccessful in their appeals before the Commissioner of Appeals and the Income Tax Appellate Tribunal. The central legal question revolved around whether the Income Tax Officer (Intelligence) possessed the jurisdiction to issue such notices before a specific notification by the Central Board of Direct Taxes (CBDT) in December 2014.
The co-operative banks argued that prior to the 2014 notification, the Income Tax Officer (Intelligence) lacked the explicit power under Section 133(6) to seek information. They contended that the power to conduct an ‘enquiry’ under this section was vested only with the Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, or Commissioner (Appeals). Furthermore, they argued that the term ‘enquiry’ (request for information) differed from ‘inquiry’ (investigation), and the Income Tax Officer (Intelligence), not being an Assessing Officer, could not initiate such an inquiry. Reliance was placed on a Supreme Court judgment, Kathiroor Service Co-operative Bank Ltd. v. Commissioner of Income-Tax (CIB) and Others, which they interpreted as limiting the power of enquiry to the ‘Assessing authority’.
However, the Revenue countered these arguments by highlighting a notification dated August 19, 2011, which empowered the Director or Director General of Income-tax (Intelligence and Criminal Investigation) to issue orders and directions to subordinate income-tax authorities under Section 120 of the Act. They asserted that the term ‘Income-tax Authority’ had a broad scope, encompassing the Assessing Officer. The Revenue further argued that the 2014 notification merely specified the Income Tax Officer (Intelligence) for verification purposes and did not imply a prior lack of jurisdiction. They cited a Division Bench judgment of the Kerala High Court in Kodur Service Co-operative Bank Ltd. And Others v. Director of Income Tax (Intelligence) and Another, which had upheld the validity of similar notices issued by the Income Tax Officer (Intelligence) based on the 2011 notification.
The High Court, after considering the arguments and relevant provisions of the Income Tax Act, including Sections 120 and 133, sided with the Revenue. The court held that a combined reading of these sections, particularly Section 120(2), indicated that senior Income-tax authorities had the power to issue written directions or orders for tasks under the Act. The court found that the 2011 notification authorized the Director of Income-tax to issue such orders to subordinate authorities, including the Income Tax Officer (Intelligence), for the purpose of collecting, collating, verifying, and disseminating information. The court distinguished the Kathiroor Service Bank case, stating that it did not establish a distinction between ‘Assessing Officer’ and ‘Income-tax Authorities’ in the context of Section 133(6) powers, which are akin to a survey for identifying potential taxable income. The court concluded that the Income Tax Officer (Intelligence) had the necessary authorization to issue the impugned notices, and thus, the appeals were dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
