2015 (6) TMI 97 - HC - Income Tax

Release of reward money of the petitioner - petitioner, who is an alleged informer of the search proceedings in the matter of Jai Singh Thakur & Sons, Poanta Sahib, District Sirmour, Himachal Pradesh - Held that - It is a fit case whereby the petitioner is entitled for the said relief, as per Clause 13.1 of the guidelines titled as Guidance for Grant Of Rewards To Informants, 1993 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes. The said clause provides that the authority competent to grant reward may grant the same to the extent of 10% of the extra income tax, wealth tax, gift tax and estate duty, levied and actually realised. A ceiling of ₹ 5 lacs has been fixed with the proviso that the same would go upto 10% of the extra tax actually realised, which was liable to be waived in suitable cases, after getting approval of the Full Board. The respondents cannot be permitted to take a summersault and now, submit that on the basis of lack of specific information, the petitioner was not entitled for the reward money, as has been laid down in the guidelines, as noticed above. The purpose of the guidelines cannot be frustrated by taking such a narrow view. Rather, apart from the sum of ₹ 5 lacs which the petitioner is entitled to after adjusting the sum of ₹ 80,000/- already received, this Court is of the opinion that keeping in view the benefits which have accrued to the Department in view of the information received, as noticed in the communication above, it would be a fit case whereby the competent authority, is liable to consider whether reward money upto the ceiling of 10% of the tax levied, can be granted. Accordingly, the present writ petition is allowed. Respondent No.2 shall ensure that the balance amount of ₹ 5 lacs, after adjusting a sum of ₹ 80,000/- already received, is paid to the petitioner, within a period of 2 months from today. Regarding the balance claim of 10%, as per the proviso, the case will be forwarded to the competent authority and decision would be taken on the said case, within a period of 3 months, thereafter and the same be communicated to the petitioner.

Summary

Issues:
1. Entitlement to reward money for providing information in a tax evasion case.
2. Interpretation of guidelines for grant of rewards to informants.
3. Dispute regarding the finality of income tax assets and reward entitlement.
4. Consideration of specific information provided by the informant.
5. Decision on the amount of reward to be granted.

Issue 1: Entitlement to Reward Money
The petitioner filed a writ petition seeking the release of reward money as an informer in a tax evasion case. The petitioner provided information leading to search proceedings against a firm. The petitioner received an interim reward but claimed the balance amount after a final settlement between the Department and the firm. The respondents argued that the petitioner's information was general and not specific enough, questioning the entitlement to the reward.

Issue 2: Interpretation of Guidelines
The court analyzed Clause 13.1 of the guidelines for granting rewards to informants, which allows a reward up to 10% of the extra tax levied, subject to a ceiling of Rs. 5 lakhs. The court noted that the guidelines provide for waiver of the ceiling amount in suitable cases with Full Board approval. The court emphasized that the purpose of the guidelines should not be frustrated by a narrow interpretation.

Issue 3: Finality of Income Tax Assets
The respondents contended that the judgment and decree regarding the income tax assets had attained finality, making the writ petition not maintainable. However, the court found that over a decade had passed since the initial reward was granted, and the petitioner had been unjustly denied the balance amount without justification.

Issue 4: Specific Information Provided
The court considered the specific information provided by the petitioner, which led to a search in a remote area where tax collections were previously minimal. The court acknowledged the benefits accrued to the Department due to the information received, despite initial lack of specific details like bank accounts and lockers.

Issue 5: Decision on Reward Amount
After reviewing the facts and circumstances, the court held that the petitioner was entitled to the balance amount of Rs. 5 lakhs, adjusting the interim reward already received. The court directed the competent authority to consider granting additional reward money up to the ceiling of 10% of the tax levied. The respondents were ordered to pay the balance amount within two months and decide on the additional reward within three months.

This judgment clarifies the entitlement of informants to reward money in tax evasion cases, emphasizing the importance of specific information and adherence to guidelines for granting rewards. The court's decision reflects a balanced approach, ensuring that informants are fairly compensated for their contributions while upholding the integrity of the reward system.