JUDGMENT
Mrs. Sujata Manohar, J.
1. The petitioner is a private limited company engaged in the business of operating and conducting an organised credit card business by issuing credit cards to its members. The petitioner has a list of various establishments engaged in providing goods and services which accept the credit cards of the petitioner. These establishments are also members of the petitioner. The petitioner has about 61,000 card members and about 7,000 establishment members. The petitioner has set out at length the procedure for collecting charges from its card members in respect of goods and services availed of by such members on the basis of credit cards supplied to them by the petitioner. Basically, the establishment members submit their bills to the petitioner along with the charge slips singed by the cardholders. On the basis of such charge slips, the petitioner prepared a statement of account every month in respect of each of the cardholders and forwards the same to the cardholders. If the payment is received, it is credited to the account of the cardholders. Otherwise, the amount is carried forward to the next month. The entire operation of the collection system has been computerised. The petitioner collects its commission from the establishment members.
2. The ledgers which are maintained in respect of cardholders are termed as “open item ledgers”. A new ledger is prepared at the end of every month in respect of the account of a cardholder, e.g. after the debit of purchases made by a cardholder is squared off by payment in the next month, this amount will not appear in the ledger of the following month. In case the petitioner wants to collect details of the amounts paid to it by individual cardholders during the year, it will have to collect the information from general ledgers used during the year for that cardholder. The total number of accounts handled every month varies from 40,000 to 50,000.
3. In January, 1984, an inspector from the Income-tax Department visited the petitioner’s office at Madras and demanded the addresses of all cardholders whose accounts show an annual expenditure of over Rs. 5,000. The petitioner subsequently received notice dated March 13, 1985, from the Commissioner of Income-tax (Investigation), Madras, asking for the same information under section 133(6) of the Income-tax Act, 1961. The notice stated that the information was required for the financial years 1982-83 and 1983-84 immediately and the data for 1984-85 could be sent in due course. A further notice to the same effect was sent by the Commissioner of Income-tax (Investigation). Madras, on April 17, 1985.
4. The petitioner also received similar notices from the Income-tax Officer, Survey Circle, C. B. I. II, Bombay. The Income-tax Officer also initially asked for names of members who have an annual expenditure of over Rs. 5,000. This was subsequently changed to the names of those members who had made payments in excess of Rs. 20,000 in a year to the petitioner. Thus, by notice dated April 18, 1985, the first respondent called upon the petitioner to furnish the names and addresses of various parties who had made payments to the petitioner in excess of Rs. 20,000 in a year for the period April 1, 1982, onwards periodically and threatened penalty proceedings under section 272A of the Income-tax Act, 1961, if the petitioner failed to furnish this information. The petitioners expressed their willingness to give inspection of their accounts, but expressed their inability to furnish the information asked for. According to the petitioners, it is very difficult for them to gather such information in view of the manner in which they maintain the accounts of their members. An extensive re-examination and recalculation of these accounts is necessary for this purpose. This will cause undue hardship to them.
5. In the present petition, the petitioners have challenged the validity of these notices and have asked for setting aside letters dated March 15, 1985, and April 18, 1985 issued by respondent No. 1 and letters dated March 13, 1985, and April 17, 1985, issued by respondent No. 2. The petitioners contend that respondents Nos. 1 and 2 do not have any power under section 133(6) of the Income-tax Act to issue such notices and ask for blanket information.
6. In this connection, it is necessary to examine the scheme of Chapter XIII of the Income-tax Act, 1961. Chapter XIII deals with income-tax authorities. Part A of Chapter XIII deals with appointment and control of income-tax authorities. Part B deals with their jurisdiction and Part C deal with their powers. We are concerned with Part C. It starts with section 131 and ends at section 136. Section 131 provides that officers mentioned therein shall, for the purpose of the Income-tax Act, have the same powers regarding discovery, production of evidence, etc., as are vested in a court under the Code of Civil Procedure when trying a suit in respect of matters set out in that section. These powers can be exercised in respect of a pending proceeding before the income-tax authorities. Sub-section (1A) of section 131 permits the officers mentioned therein to exercise the powers conferred under section 131(1) notwithstanding that no proceedings with respect to such person or class of persons are pending before them or any other income-tax authority. Section 132 deals with search and seizure. Section 132A deals with requisition of books of account, etc. Section 132B deals with application of retained assets. Section 133 deals with power to call for information. Section 133A deals with power of survey. Section 133B deals with power to collect certain information. Section 134 deals with power to inspect registers of companies.
7. The power to call for information is contained in section 133. The relevant provisions of section 133 at the material time were as follows :
“The Income-tax Officer, the Appellate Assistant Commissioner, or the Inspecting Assistant Commissioner may, for the purpose 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 Income-tax Officer… giving information in relation to such points or matters as, in the opinion of the Income-tax Officer…. will be useful for, or relevant to, any proceeding under this Act”.
8. Therefore, the information which can be asked for, under section 133(6), should be such as in the opinion of the concerned officer will be useful for a relevant to any proceeding under the Act. In the absence of any such proceeding, the officer cannot ask for any information. The power to seek information is dependent on its being useful for or relevant to a proceeding. Therefore, the reference to “any proceeding under this Act” is clearly a reference to a proceeding which is in existence at the material time. It is with reference to such an existing proceeding that the concerned officer must require information which will be useful or relevant.
9. The respondents, however, contend that the words “any proceeding under this Act” do not necessarily refer only to an existing proceeding. These words must also be interpreted as including a proceeding which may commence in future. Looking, however, to the language of section 133(6), it is difficult to include within the meaning of the phrase “any proceeding under this Act” any contemplated or uncontemplated future proceeding. Under section 133(6), the officer who are mentioned therein as having the power to call for information are all officers who are invested with the power of assessment or with the power of appeal. These officers or any of them have to be satisfied that the information which is called for by them is on points or matters which have a bearing on the proceeding before them under the Act. This kind of an opinion would not be possible in the case of any hypothetical proceedings in future which may or may not take place. In the present case, for instance, the respondents accept the position that after obtaining the information which they have sought from the petitioner, they will decide whether a proceeding should or should not be instituted in respect of any one or more of such persons whose names and addresses are furnished by the petitioners. Therefore, in the present case, against several thousand members of the petitioners whose names and addresses are so required to be furnished, the respondents are not even contemplating any proceedings. The decision whether to initiate proceedings or not is yet to be taken and that too on the basis of information which will be supplied by the petitioner. This kind of a power to seek “fishing” information which is unrelated to any proceedings or which may enable the respondents to decide whether to institute proceedings or not, is not contemplated under section 133(6). A proceeding under the Act, by its very nature, must be specified and it must relate to a specific individual or entity or a class of individuals under the Income-tax Act. It is also necessary to note that under Chapter XIII-C, whenever a power is required to be exercised in connection with a future proceeding, it is expressly so provided, e.g. Explanation 2 to section 132 defines a “proceeding” for the purposes of section 132 to means not merely a pending proceeding but also a completed proceeding or a future proceeding. Similarly, under section 131(1A), the power conferred thereon can be exercised even if no proceedings are pending. These are express provisions made to enable the income-tax authorities to exercise certain powers even when there are no pending proceedings. In the absence of such a provision in section 133(6), the term “proceeding” used there must be confined to its normal ambit of a pending or existing proceeding.
10. In this connection Mr. Dastur, learned counsel for the petitioner, drew our attention to a decision of this court in the case of Jamnadas Madhavji and Co. v. J. B. Panchal, ITO [1986] 162 ITR 331. In that case, the assessment proceedings for the assessment years 1972-73 and 1973-74 had been completed and had become final. The assessment proceedings for the assessment year 1974-75 had become time-barred in March, 1977. Subsequently, the assessee received from the Income-tax Officer summons under section 131 of the Income-tax Act calling upon the assessee to furnish information and produce documents and books of account on various points specified therein in respect of the previous years relevant to the assessment years 1972-73 and 1974-75. The court held that the summons was liable to be quashed because no proceeding was pending in respect of these assessment years when the Income-tax Officer issued the impugned summons. The court held that under section 131(1) of the Income-tax Act, the Income-tax Officer had no power to issue such a summons when there was no pending proceeding. It was so held although in section 131(1) there is no reference to any pending proceeding. The learned judge so interpreted this section since the Income-tax Officers concerned are invested under section 131 with the same powers as a court under the Code of Civil Procedure when trying a suit. The powers so conferred, therefore, have to be exercised only if there is a pending proceeding and not otherwise.
11. Though the decision turns on the nature of the powers conferred under section 131(1), the learned judge has quoted the observations of the Calcutta High Court in the case of Dwijendra Lal Brahmachari v. New Central Jute Mills Co. Ltd. [1978] 112 ITR 568, in support of his conclusion, which are relevant. These are to the effect that all statutory bodies must act for the purposes of the stature. Secondly, a statutory power cannot be exercised without application of mind to the question of relevancy of the documents to the lis involved in the matter before the Income-tax Officer. The power can be exercised provided the officer is satisfied that the order made is relevant for the purpose of deciding the case pending before him. That power cannot be exercised in a naked or arbitrary manner. Therefore, information under section 131(1) cannot be asked for in order to decide whether any proceeding should be initiated in future.
12. The same reasoning would apply with greater force to the present case also. In fact, under section 133(6) which is before us, unlike section 131(1), there is an express reference to the relevance of the information sought to a proceeding under this Act. The power under section 133(6) has, therefore, to be exercised with reference to a proceeding which is in existence. This power cannot be exercised to gather information on the basis of which the officer concerned may decide whether or not to institute a proceeding.
13. Mr. Jetley, who appears for the respondents, has however, relied upon a Full Bench judgment of the Punjab and Haryana High Court in the case of Jindal Strips Ltd. v. ITO [1979] 116 ITR 825, in support of his contention that under section 133(6) information may be asked for even with reference to a future proceeding. This judgment, in our view, does not assist the respondents. It is necessary to examine the facts of the that case. In the case before the Punjab and Haryana High Court, in June, 1972, a search was conducted of the business and residential premises of the petitioner from which it appeared that large amounts of unaccounted money had been spent on the construction of a mill. A further probe was considered necessary to find out the exact of construction of the mill by making a reference to the valuation cell of the Department. The Income-tax Officer in his letter under section 55A asked the Valuation Officer to ascertain the value of the mill. The dispute before the Full Bench was with regard to the power of the Income-tax Officer under section 55A to ask the Valuation Officer to value the mill. The Full Bench held that section 55A would not apply to the facts and circumstances of the case.
14. The Full Bench, however, said that the Income-tax Officer had power under section 133(6) of the Income-tax Act to ask the Valuation Officer to value the mill as the Income-tax Officer was entirely seized of the matter. Before the Full Bench, it was not disputed by anybody that the Income-tax Officer could direct the petitioners to furnish the information sought for the Valuation Officer. It was taken as an accepted position that the Income-tax Officer was within his powers in doing so under section 133(6). The ambit of section 133(6), therefore, did not come up for consideration. The court stated that whatever an Income-tax Officer can do directly, can be got done by him with the assistance of Valuation Officer. The question whether under section 133(6) of the Act the power can be exercised in respect of a proceeding which may or may not be commenced in future, was not directly considered. The Full Bench in this connection merely referred to section 133A and the express definition of a “proceeding” in section 133A under which, for the purposes of section 133A, a future proceeding is included in the term “proceeding”. The question whether this definition can at all apply to section 133(6) was not raised and hence not considered by the Full Bench. Hence, the decision of the Punjab and Haryana High Court is not of any assistance to us.
15. It is pointed out by Mr. Dastur, learned counsel for the petitioners, that the observations of the Full Bench to the effect that the Income-tax Officer had been quite fair in not launching proceedings under section 147 of the Act straightaway and had decided to first ascertain the value of the mill with the assistance of the company in order to decide whether, on the basis of the information supplied by the company, there was any need for reopening the assessment, run counter to the observations of our High Court in the case of Jamnadas Madhavji and Co. [1986] 162 ITR 331, where the court has stated that information cannot be sought for in order to decide whether an assessment should be reopened or not. The Income-tax Officer must arrive at his own satisfaction as to whether the assessment requires to be reopened or not on the basis of information in his possession. Be that as it may, we are not concerned with this aspect here.
16. The respondents have also relied upon a decision of the Calcutta High Court in the case of Grindlays Bank Ltd. v. ITO [1990] 183 ITR 62. This was a writ petition by the petitioners for cancellation of a notice issued by the Department asking for information under section 133(6) of the Income-tax Act in respect of the payments made by the petitioner-bank to its expatriate staff on furlough, for certain financial years. Although interpretation of section 133(6) was argued before the court, the short judgment of the court by which the writ petition has been dismissed, does not deal with this argument at all. The court has merely proceeded on the basis that he provisions of sections 192(1) and 200 of the Income-tax Act read with the relevant rules were attracted to the case before it and that the steps taken by the Department were not contrary to or inconsistent with the provisions of law. This judgment, therefore, does not throw any light on the controversy before us.
17. Two other judgment were also cited before us by the respondents. One was a judgment in the case of Goodlass Nerolac Paints Ltd. v. CIT [1982] 137 ITR 58 (Bom). In this case, the Assessing Officer asked the assessee under section 133(4) to disclose the names and addresses of persons to whom secret commission was said to have been paid by the assessee. As the assessee refused to furnish those names and addresses, the Tribunal did not accept that the assessee had in fact paid these amounts. The court held that the disallowance of such commission by the Tribunal could not be considered a perverse and hence it refused to intervene. In the case of the same assessee, for a subsequent assessment year, the matter camp up once again for consideration before this High Court in the case of CIT v. Goodlass Nerolac Paints Ltd. [1991] 188 ITR 1. For the assessment years in question, the assessee had claimed certain amounts by way of secret commission but had not disclosed the names and addresses though called upon to do so under section 133(4). The Tribunal found that the payments of commission had been made under the instructions of top executives of the company and were approved by the board of directors at the end of every month. The Tribunal, on the facts before it, accepted that these commissions had been paid and allowed these amounts. On a reference by the Department, the court held that if the assessee did not comply with the requirements of the notice section 133(4), they could be penalised. Non-supply of information cannot be a ground for not granting them a deduction if the facts otherwise showed that such amounts had in fact, been paid. Once again the court refused to interfere with the findings of the Tribunal. In both cases the information was asked for in pending assessment proceedings. We do not see how these judgments can help the respondents.
18. In the premises, in our view, in the present case, the requirements of section 133(6) are not satisfied as the respondents have asked the petitioners to furnish general information unrelated to any existing proceeding.
19. It is also submitted by the respondents that the persons who have paid Rs. 5,000 or Rs. 20,000 or more to the petitioners constitute a class of persons in respect of whom information can be asked for under section 133(6). But whether these persons constitute a class of persons has to be determined with reference to the Income-tax Act. Clearly, each of these persons is or would be an assessee by himself. Simply because each of them holds a credit card of the petitioners, such persons do not constitute a class of persons for the purpose of income-tax assessment. They will have to be assessed individually. Hence, this contention of the respondents must be rejected.
20. In the premises, the petition is allowed and the rule is made absolute in terms of prayers (a) and (b). The respondents to pay to the petitioners costs of the petition.