Thursday, January 29, 2015

I-T authorities can collect relevant info to check tax evasion; HC upholds constitutional validity of sec. 133(6)

High Court has upheld the constitutional validity of amendment made to section 133(6) by the Finance Act, 1995 which widened the scope of the said section and gave power to AO to call for information not only in case of 'pending proceedings' but also as a part of the enquiry as said amendment was brought in to tackle tax evasion.


a)The income tax authorities had issued notice to petitioner ('Co-Operative Bank'), asking it to furnish details of cash deposit in 'Savings Bank Accounts', aggregating to Rs.5 lakhs and details of payment of interest exceeding Rs.10,000/- to the depositors.

b)Consequently, the petitioner filed the instant writ to challenge the constitutional validity of section 133(6) which empowered the tax authorities to call for information not only in case of 'pending proceedings' but also as a part of the enquiry.

c)The petitioner contended that rights of privacy is an integral part of Article 21 of the constitution of India, which in turn, was violated.

The High Court dismissed the writ by holding as under:

1)Even assuming that the right to privacy is itself a fundamental right, such fundamental right must be subject to restriction, on the basis of compelling 'public interest'.

2)There is no prohibition on the State in gathering information for preventing tax evasion and curbing black money as proceedings can be pursued against wrongdoers only on basis of some information.

3)It is well-settled principle that the 'taxation entry' confers powers upon the Legislature to legislate in matters 'ancillary or incidental', including the provisions for evasion of tax.

4)Thus, no case was made out for striking down section 133(6) or second proviso thereto as unconstitutional, in so far as they apply to inquiries when no proceeding is pending- Pattambi Service Co-operative Bank Ltd. v. Union of India (2015) 53 453 (Kerala)

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