Tax Evasion Investigation By I.T. Department Is Public Information!

Just Read It!

The Right to Information is a fundamental right under our constitution. The RTI took birth to fulfill this fundamental demand .Therefore, in my opinion , the law makers made explicit the overriding effect of this law on all other laws of the country, by introducing Chapter VI which contains Section 22 . The Said section states”

• “The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in the Official Secrets Act, 1923, and any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.“

Sri T.N Pandey, Former chairman of CBDT wrote an article in Financial Express on the subject with headline”RTI: Not applicable to I-T proceedings?“. It is very nice article and the subject is made clear in lucid manner. The excerpt of the article is given below for blog readers as a fodder for thoughts on the subject.

“Section 8 of the RTI Act mentions matters in respect of which information can be denied. This section has number of sub-clauses but the clauses, where there shall be no obligation to give information, as is relevant in the context of the issue under examination, are:

“(d) information, including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information.

(e) information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information”.

Can information concerning I-T department be asked under the RTI Act?

This issue can be examined from the following angles:

(a) Applicability of section 8(1)(d) & 8(1)(e) (supra)

In the context of income-tax proceedings, considerable information is furnished by the taxpayers to the Income Tax department’s officers. These give a picture of the taxpayers regarding the nature and scale of activities, financial position, details about the persons having dealings with them, bank accounts, creditors, debtors, competitors, nature of material and processes used for the products made, the sources of supplies and rates thereof, expansion activities and host of other information. All these are given in great confidence and in trust in the context of discharge of income-tax obligations. The I-T department receives it in a fiduciary capacity. Making these public would be ruinous to the persons furnishing such particulars.

Disclosure of secrets relating to processes employed, manufacturing activities, sources of procurement of raw material and other supplies, rates, discounts given, etc, would certainly harm competitive position of the persons concerned and third parties dealing with them.

Further, no public interest – what to talk of larger public interest – would be served by disclosure of such information. Rather, doing so, may affect the public interest adversely, inhibiting the taxpayers to make true, full and voluntary disclosures of income and wealth and other particulars in compliance to tax laws. Hence, exemption provided by sections 8(1)(d) & 8(1)(e) (supra) would apply in the matter of disclosure of information relating to income-tax proceedings.

(b) Applicability of non-obstante clause [section 22 of the RTI Act]

Section 138 of the I-T Act relates to furnishing of the information under the I-T Act received or obtained by Income-tax authorities in the performance of their duties. The section mentions about the situations, where information can be furnished relating to Income-tax proceedings namely:

(i) To officers/authorities, performing functions under any other law, imposing tax, duty or cess or dealing in foreign exchange or as may be specified by the central government in public interest.

(ii) The chief commissioner or commissioner may furnish or cause to be furnished any information asked for (relating to any assessee in respect of any assessment under the Act) provided (a) an application is made in the prescribed form, and (b) the chief commissioner or commissioner is satisfied that it is in public interest so to do [section 138(1)(b)].

(iii) The central government can direct, by notification in the official gazette, that no information or document shall be furnished or produced (a) in respect of such matters relating to any specific class of assesses, and (b) except to the authorities specified in the notification, having regard to practices and usages customary or any other relevant factors [section 138(2)].

A non-obstante clause is a legislative device, which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or in some other enactment. The non-obstante clause in the RTI Act [section 22 (supra)] is worded on similar lines and covers situations, which are contrary or inconsistent with the provisions of the Act and will not cover provisions in other enactments, which are analogous to the RTI Act.

If the I-T Act also has a clause, which provides for giving information regarding taxpayers, like the RTI Act, providing for information in regard to various matters, then non-obstante clause of Act will not apply to I-T Act, whose provisions are not inconsistent with the provisions in the I-T Act. Hence, if the information in regard to taxpayers is required, recourse will have to be taken to section 138 of the I-T Act and not the RTI Act.

Specific vs general provision

Section 138 in the I-T Act, 1961 is a special provision while the RTI Act is a general enactment, giving right to obtain information “under the control of public authorities”. The rule is ‘specilibus non-derogant‘. This general maxim provides that general things will not derogate from special things.

The hypothesis is that whenever there is a particular enactment and a general enactment and the latter taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative. In Girdhari Lal Nannelal v CIT (1984) 147 ITR 529 (MP-FB), the view expressed is that any matter, for which a provision is made in the I-T Act, is to be governed by it notwithstanding anything different or to the contrary contained in the general law relating to that matter. Hence, for this reason also, the RTI Act is not applicable to the income-tax proceedings in the matter of getting information.

Summing up

The RTI Act will have no application in respect of Income-tax proceedings for the reasons mentioned hereinbefore.”