High Court Of Kerala
Thaliparamba Municipal Vanitha Service Sahakaraha Sangham Ltd. vs. Income Tax Officer & Anr.
Section 2(31), 133(6), 201(1A), 271C
P.R. Ramachandra Menon, J.
Writ Petn. (Case) No. 4605, 4606, 4615 to 4618, 4648 to 4651, 4666 to 4668, 4682, 4702, 4722, 4732, 4734, 4782, 4814, 4866, 4875 to 4877, 4880 to 4882, 4892, 5264, 5265, 5273, 5291, 5315 of 2010
25th February, 2010
Counsel Appeared :
V.T. Madhavanunni, V.A. Satheesh & J. Abhilash, for the Petitioner : P.K.R. Menon & Jose Joseph, for the Respondents
JUDGMENT
P.R. RAMACHANDRA MENON, J. :
Sustainability of Ext. P1 notice issued by the 1st respondent seeking for certain details from the petitioners societies forms the subject-matter of challenge in all these cases.
2. For convenience of reference, the particulars on which details have been sought for, as given in Ext. P1, are extracted hereunder : Details of quarterly returns filed for the financial years 2006-07, 2007-08 and 2008-09. Details of payment made towards interest (above Rs. 5,000) for the financial years 2006-07, 2007-08 and 2008- 09. Copy of P&L a/c and balance sheet for the financial years 2006-07, 2007-08 and 2008-09. It is further stated in Ext. P1 that, if the addressee has failed to deduct/collect the tax at source and remit the tax to the Central Government Account, the addressee is also required to show cause in writing as to : Why the assessee should not be treated as in default under s. 201(1) in respect of non deduction/short deduction of tax. Why interest under s. 201(1A) should not be charged and Why penal action under s. 271(C) should not be initiated.
3. The petitioners have been asked to appear before the authority concerned, with liberty to file a written reply and also to intimate whether any ‘personal hearing’ is required for the above purpose. As mentioned above, sustainability of Ext. P1 notice is under challenge, on different grounds; Firstly that the issuing authority/1st respondent does not have any jurisdiction or competence to issue Ext. P1. Secondly, that the notice is in violation of the dictum laid down by the apex Court in AIR 2003 SC 2096. Thirdly, that the petitioner will not come within the purview of the definition of ‘Banking Company’ as made clear by the apex Court in 2007 (6) SCC 236. Fourthly, that the petitioner is not a ‘person’ as defined under the IT Act and Fifthly, that s. 2(31) of the IT Act in ultra vires to the Constitution of India and is liable to be struck down. Heard the learned counsel appearing for the petitioners and also the learned standing counsel for the Department at length. At the very outset, the learned counsel for the petitioners conceded that the challenge raised in all these writ petitions referring to s. 2(31) of the IT Act defining the term ‘person’ stands covered against the petitioners and hence that the same is not pressed. Thus the remaining contentions are confined mainly as to the sustainability of the notice, particularly referring to the mandate under the ‘second proviso’ to s. 133(6) of the IT Act (‘Act’ in short) i.e., whether the said notices have been issued after obtaining the ‘prior permission’ of the director or the CIT, as the case may be. Ext. P1 notices do not mention anything as to the ‘prior permission’ as above and hence all the learned counsel for the petitioners submit that the basic requirement under s. 133(6) has not been satisfied; which however is chosen to be rebutted from the part of the respondents, stating that Ext. P1 notice is not issued under s. 133 and that, it has been issued with specific reference to the circumstances relating to s. 201(1), 201(1A) and s. 271(C); which stands entirely on a different footing. This being the position, the learned standing counsel for the Department submits that the issuing authority is not bound to obtain any ‘prior permission’ from the CIT or director, as the case may be. Scope of s. 133(6) had come up for consideration before this Court earlier and a decision was rendered in favour of the Revenue; sustaining the notices issued. Later, the matter was taken up in appeal, whereby the Department was permitted to proceed with further steps, in respect of the cases where no reference is made in the notice as to the ‘prior permission’, after verifying the records and if there was no permission, then to proceed further only after obtaining such permission from the concerned authority; vide common judgment dt. 24th Nov., 2009 in Writ Appeal No. 2654 of 2009 and connected cases. It is stated during the course of hearing, that the above verdict has been subjected to challenge by filing SLP before the Hon’ble Supreme Court and as per the order dt. 15th Feb., 2010 in SLP (Civil) No. 3976 of 2010, the apex Court has admitted the matter, issuing notice to the respondents, also granting interim stay of the impugned verdict until further orders. Obviously, the pleadings in the above batch of writ petitions have been moulded in such a manner, as if Ext. P1 notice had been issued by the concerned authority under s. 133(6) of the IT Act, seeking for intervention insofar as no ‘prior approval’ of the director/CIT was obtained before issuance of such notices. The learned counsel for the petitioners submits that this is the only provision under which any information could have been gathered from persons like the petitioners and this being the position, satisfaction of the requirement as contemplated under the ‘second proviso’ to sub-s. (6) of s. 133 is very much mandatory. This being the position, there is absolutely no rationale on the part of the respondents in proceeding with further steps pursuant to Ext. P1 notice, submits the learned counsel for the petitioners. Sri. Jose Joseph, the learned standing counsel appearing for the respondents, submits that the idea and understanding of the petitioners, that Ext. P1 notice has been issued under s. 133(6) of the Act, is quite wrong and misconceived. As evident from Ext. P1, reference has been made only to ss. 201(1), 201(1A) and 271(C) of the Act. The scope and applicability of the above provisions stand entirely on a different pedestal and is totally unconnected with the scope and applicability of s. 133, submits the learned standing counsel.
9. In support of Ext. P1 notice, the learned standing counsel submits that the power and procedure under s. 201 is an in-built one and that the Departmental authority will be justified in passing an order under s. 201 only after getting necessary clarification from the party concerned. In other words, before passing any order, the Departmental authority has to comply with the principles of natural justice, which is an in built mechanism of almost all similar provisions. Even though no separate notice is contemplated or mentioned under s. 201, the provision envisages passing an ‘order’, which is very much discernible from the fact that a specific remedy by way of ‘appeal’ is provided under s. 246(1)(i), which refers to an ‘order’ to be passed by the authority concerned under s. 201. As it stands so the action pursued by the respondent in having issued Ext. P1 notice, calling for the requisite information and materials to be supplied by persons like the petitioners is perfectly within the four walls of the law; submits the learned standing counsel. Further, reliance is also placed on the power vested on the ‘authority’ under s. 131 of the IT Act, for giving effect to the provisions of the Act, which is equivalent to the powers of the Civil Court, as referred to therein. The learned standing counsel further submits that the mandate under s. 133(6) will be attracted, only if it is “not in the course of” any ‘enquiry’ or any ‘proceeding’ is pending; whereas in the instant case, even going by the undisputed facts, a ‘proceeding’ is pending and enquiry is going on, as borne by Ext. P1 notice itself, with regard to the scope of adjudication under s. 201 and this being the position, the bar under the ‘second proviso’ to sub-s. (6) of s. 133 is not attracted to the case in hand.
The learned counsel for the petitioner submits that the hurdle placed by virtue of the ‘second proviso’ cannot be restricted to sub-s. (6) alone and the same has to be applied to the entire provision. It is contended that the authority, if at all desirous of collecting any materials, with regard to ‘interest’ and such other particulars as specifically mentioned under sub-s. (4) of s. 133, necessary permission ought to have been obtained from the director or the CIT, as the case may be, and in view of the conspicuous non-mentioning of the sanction as above in Ext. P1 notice, the proceeding is not liable to be pursued any further, more so, in view of the interim stay granted by the apex Court with regard to the course and procedure prescribed by the Division Bench of this Court as stated hereinbefore. Absolutely no pleadings are there, raising any challenge against the applicability of the provisions under s. 201, 201(1A) or the consequential steps to be followed in accordance with the mandate under s. 271(C) of the IT Act. On the other hand, the case has been moulded placing more reliance on the pleading that the petitioner does not constitute a “person” as defined under s. 2(31) of the Act; that the said provision is ultra vires to the Constitution of India and hence is liable to be struck down from the IT Act. But in view of the submission made by the learned counsel for the petitioners that the contention raised in the writ petitions in this regard is not intended to be pressed any further, this Court is not required to consider or entertain the same and it is answered against the petitioners. Now, the remaining question is, whether Ext. P1 is a notice issued by the authority concerned under s. 133(6) or under some other circumstances. If it is issued under s. 133(6), obviously the requirement under the ‘second proviso’ has to be satisfied and the decision rendered by the Division Bench cannot be of any help to the Revenue, particularly in view of the interim order of stay granted by the apex Court during the pendency of the appeal. But going by the contents of Ext. P1, it is explicitly clear that no reference has been made to s. 133 and the information has been called for, in connection with the proceedings to be pursued under ss. 201(1), 201(1A) and 271(C). Ext. P1 notice consists of two separate parts; the first part dealing with the requirement made to furnish the details of the quarterly returns filed in the financial years 2006-07, 2007-08 and 2008-09; the details of payments made towards interest (above Rs. 5,000) for the financial years as above; and copy of the P&L a/c and balance sheets for the above financial years. The second part of the said notice refers to a circumstance, when there is any ‘failure’ on the part of the assessees/persons like the petitioners with regard to the deduction/collection of tax at source or remittance of the tax to the Central Government account. Only if the ‘failure’ is admitted, the party is required to show cause in writing as to (1) why appropriate action should not be initiated for the default under s. 201(1) with regard to the deduction; (2) why interest under s. 201(1A) should not be charged; and (3) why penal action under s. 271(C) should not be initiated. It is in the above circumstance, that the petitioner has been required to furnish the relevant materials also making it clear that, if any ‘personal hearing’ was insisted, the party could appear before the issuing authority or through an authorised representative on the specified date, also calling for a written reply as specified.
14. To furnish the particulars as per the ‘first part’ of Ext. P1, it clearly comes within the power of the authority concerned, as vested under s. 131. This is all the more so, since the petitioners do not have a case that the authority who issued Ext. P1 does not come within the purview of any of the authorities named in s. 131. If only the Department/authority is not satisfied with the explanation to be offered by the persons like the petitioners, with regard to the points 1 to 3 under the ‘first limb’ of Ext. P1, it will lead to a situation for further steps with regard to the points 1 to 3 mentioned in the ‘second limb’ of Ext. P1; (unless the ‘failure’ is admitted). This is of course, without prejudice to the right of appeal as clearly provided under s. 246(1)(i) of the IT Act. In short, the requirement to furnish the materials as per item Nos. 1 to 3 of Ext. P1 notice is not liable to be categorised as an instance coming within the purview of s. 133(6) to have any restrictive hurdle as provided under the ‘second proviso’ thereunder, requiring prior sanction by the director/CIT, as the case may be. For the very same reason, the reliance placed on the appeal pending before the apex Court and the interim order granted with regard to the course and procedure prescribed by the Division Bench of this Court, does not come to the rescue of the petitioners. The petitioners are bound to supply the requisite materials and are at liberty to substantiate that they are not liable to be proceeded with as contemplated under s. 201(1), 201 (1A) or 271(C), as the case may be. The petitioners are also at liberty to raise appropriate contentions and substantiate before the concerned authority who issued Ext. P1, if the transaction comes within the purview of ‘exemption’ under any of the provisions of the statute. The opportunity granted by the issuing authority to the petitioners to substantiate the position cannot be regarded as a situation detrimental to the interest of the petitioners in any manner.
In the above facts and circumstances, the challenge raised against the impugned notices fails. No interference is called for. All the writ petitions are dismissed accordingly.
[Citation : 329 ITR 609]
