Scope of section 133(6) of the Income Tax Act
The Income Tax Act gives the Department wide powers of investigation including the power to seek information about an assessee even from outsiders.
The information which can be asked under section 133(6) of the Act should be such as per the opinion of the officer will be essential for any proceeding under the Act. In case there is no such proceeding, the officer cannot ask for any information under the section.
The power to seek information depends upon whether the same is being useful for a proceeding. As such, there should be proceeding which is in existence at that particular time. It is an essential condition that information should be useful for a present proceeding. The language of section 133(6) does not to include any future proceeding.
As per section 133(6), the officers having the power to call for information are officers having the power of assessment or the power of appeal. These officers should be satisfied that the information which is asked by them have a connection with the proceedings under the Act.
Information under this section cannot be sought for in case of any hypothetical proceedings which may or may not take place. The kind of power to seek information which is not connected with any proceedings is not contemplated under section 133(6).
The proceeding referred under the Act, must be specific. It should relate to a particular individual or entity or a class of people under the Act.
High Court decisions dealing with the power under section 136(6):
The judgment of the Bombay High Court in DBS Financial Services Private Limited, 207 ITR 1077 dealt with the power of the income tax authorities to call for information under section 133(6) of the Income Tax Act.
The Petitioner was engaged in the business of operating credit card business. The petitioner used to issue credit cards to its members. It had many establishments engaged in providing services which accepted the credit cards of the petitioner and were also members of the petitioner. The members submitted their bills to the petitioner together with the charge slips signed by the cardholders based on which the petitioner maintained a statement of account each month for the cardholders. If any payment was received, it was credited to the bank account of the members.
The Commissioner of Income tax, Madras as well the Income tax officer, Bombay asked the petitioner to furnish the names and addresses of card-holders who had made payments to the petitioner amounting to more than Rs.5, 000/- . The petitioner challenged the notices through filing a Writ Petition before the Bombay High Court. The High Court held that in the case the essentials of section 133(6) were not satisfied as there was no related existing proceeding. For the said reason the notices served by the Tax Officer upon the petitioner were quashed. The Department accepted the aforesaid judgment and did not prefer an appeal against the same.
The Calcutta High Court in Dwijendra Lal Brahmachari v. New Central Jute Mills Company Limited, 112 ITR 568) held that a statutory power cannot be exercised without applying mind and the power can be exercised only if an officer is satisfied that the information is relevant for the purpose of adjudicating a proceeding pending before him. The power provided in this section cannot be exercised in an arbitrary manner.
Essential conditions for invoking section 136(6):
1. For issuance of a notice under section 133(6) a proceeding under Act must be pending against the individual regarding whom information is called for.
2. The person cannot be an official of the department. He should be either the assessee or any person related to the assessee and not any person belonging to the income tax department.
3. The information should not be connected with a future proceeding. It should relate to a proceeding which is already in existence
4. It is not required that inquiry should have commenced with issuance of notice as per section 133(6).