The Delhi High Court has ruled that Income Tax Returns and other information provided to Income Tax Authorities during the course of assessment is exempt from disclosure under Right to Information Act, 2005

The Court delivered the said judgment on 24-11-2014 while hearing several writ petitions which were filed impugning a common order dated 14.12.2009 passed by the Central Information Commission (CIC) who directed the Public Information Officers (PIOs), Commissioner of Incometax  to provide inspection of the records and also other information sought for by the respondent namely, Rakesh Kumar Gupta.

Earlier, in January 2009, the respondent Rakesh Kumar Gupta filed an application under the Right to Information Act, 2005 with the PIO of Income Tax Department asking for information and all the records available with the Income tax department from Assessment Year 1998-99 to 2005-06 in respect of nine assessees.

Since the information sought by the respondent was third party information, the Deputy Commissioner of Income-tax sought permission of the assessees concerned as per Section 11(2) of the RTI Act 2005 which requires that in case of a third party information, an opportunity shall be given to third party to make representation against the proposed disclosure. Subsequently, after considering the representations, PIO rejected the RTI application of the respondent on the ground that the respondent had failed to substantiate the public interest involved in disclosing the information relating to third parties.

The grounds given by the respondents against allowing inspection of their Income Tax related documents were as under:

(1)      that the information sought for by the respondent such as income tax returns are personal information and are exempt from disclosure under Section 8(1)(j) of the Act.

(2)      that the disclosure of the income tax returns is prohibited under Section 138 of the Income Tax Act, 1961 and can be made only if the Commissioner is satisfied that the disclosure is in public interest, which in the present case was rejected by the Commissioner.

(3)      that the disclosure of information is also exempted under Section 8(1)(e) of the Act as the income tax department is holding the information of the assessees in fiduciary capacity

(4)      that the respondent has failed to disclose the public interest which is a mandatory requirement under Section 11 of the Act

(5)      that the disclosure of the information sought for would be violative of the right to privacy, which has been read into Article 21 of the Constitution of India

(6)      that the disclosure of income tax returns is expressly forbidden to be published by a tribunal, in the present case and the CIC therefore, exempted under Section 8(1)(b) of the Act

The Court addressed each contention one by one. The relevant excerpts of the judgment are as under:

“The income tax returns filed by an assessee and further information that is provided during the assessment proceedings may also include confidential information relating to the business or the affairs of an assessee. An assessee is expected to truly and fairly disclose particulars relevant for the purposes of assessment of income tax. The nature of the disclosure required is not limited only to information that has been placed by an assessee in public domain but would also include information which an assessee may consider confidential. As a matter of illustration, one may consider a case of a manufacturer who manufactures and deals in multiple products for supplies to different agencies. In the normal course, an Assessing Officer would require an assessee to disclose profit margins on sales of such products. Such information would clearly disclose the pricing policy of the assessee and public disclosure of this information may clearly jeopardise the bargaining power available to the assessee since the data as to costs would be available to all agencies dealing with the assessee. It is, thus, essential that information relating to business affairs, which is considered to be confidential by an assessee must remain so, unless it is necessary in larger public interest to disclose the same. If the nature of  information is such that disclosure of which may have the propensity of harming one’s competitive interests, it would not be necessary to specifically show as to how disclosure of such information would, in fact, harm the competitive interest of a third party. In order to test the applicability of Section 8(1)(d) of the Act it is necessary to first and foremost determine the nature of information and if the nature of information is confidential information relating to the affairs of a private entity that is not obliged to be placed in public domain, then it is necessary to consider whether its disclosure can possibly have an adverse effect on third parties.”

“The information provided by an assessee in its income tax return is in compliance of the provisions of the Income Tax Act, 1961 and thus, could not be stated to be information provided in course of a fiduciary relationship.”

“The act of filing returns with the department cannot be construed as public activity. The expression “public activity” would mean activities of a public nature and not necessarily act done in compliance of a statute. The expression “public activity” would denote activity done for the public and/or in some manner available for participation by public or some section of public. There is no public activity involved in filing a return or an individual pursuing his assessment with the income tax authorities. In this view, the information relating to individual assesse could not be disclosed.”

“It is apparent that information submitted by an assessee in the course of assessment, may also include information relating to other persons. The exclusions available under Section 8(1) of the Act, would also be available in respect of that information.”

“Undoubtedly, the income tax returns and information provided to Income Tax Authorities by assessees is confidential and not required to be placed in public domain. Given the nature of the income tax returns and the information necessary to support the same, it would be exempt under Section 8(1)(j) of the Act in respect of individual and unincorporated assessees. The information as disclosed in the income tax returns would qualify as personal information with regard to several private companies which are, essentially, alter egos of their promoters. However, in cases of widely held companies most information relating to their income and expenditure would be in public domain and the confidential information would be exempt from disclosure under Section 8(1)(d) of the Act.”

“The assessment proceedings are not public proceedings where all and sundry are allowed to participate and add their opinion to the proceedings. Merely because a spirited citizen wishes to assist in assessment proceedings, the same cannot be stated to be in larger public interest. On the contrary, larger public interest would require that assessment proceedings are completed expeditiously and by the authorities who are statutorily empowered to do so.”

“The CIC had proceeded on the basis that the income tax authorities should disclose information to informers of income tax departments to enable them to bring instances of tax evasion to the notice of income tax authorities. In my view, this reasoning is flawed as it would tend to subvert the assessment process rather than aid it. If this idea is carried to its logical end, it would enable several busy bodies to interfere in assessment proceedings and throw up their interpretation of law and facts as to how an assessment ought to be carried out.”

“It is a matter where a constitutional protection is available to a person with regard to the right to privacy. Thus, the public interest has to be construed while keeping in mind the balance factor between right to privacy and right to information with the purpose sought to be achieved and the purpose that would be served in the larger public interest, particularly when both these rights emerge from the constitutional values under the Constitution of India.”

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