2016 (8) TMI 1367 - HC - Income Tax

Refund to petitioner - demand of tax dues against M/s. Girilal Mamchan & Company as rightly been recovered from petitioner - writ of mandamus commanding respondents to refund along with interest - whether liability of tax of Amrish Kumar Jain has rightly been appropriated from the funds seized from petitioner and kept in P.D. A/c by Revenue? - Held that - Recourse to Section 159 is thoroughly misconceived and illegal on the part of Revenue. Neither there existed any liability against deceased nor any liability was finalized after giving notice to the alleged legal heirs nor the amount which was seized in search and seizure operation under Section 132, otherwise could have been appropriated against the alleged dues of deceased Girilal Jain by referring to Section 159 as discussed above. In the present case, it is not the case of respondents that an assessment was made against (Late) Girilal Jain and from the assets of deceased which was received by his legal representatives, the demand has been satisfied. At no point of time any notice or opportunity was given to the petitioner or any of his brothers before finalizing the alleged liability of deceased after his death. In fact highhandedness on the part of respondents is writ large from the fact that they did not keep on informing petitioner or his legal brothers but petitioner has to collect correct information by approaching respondents under RTI Act and not otherwise. This clearly shows a hide and seek approach, patently erroneous and malicious in law, on the part of respondents in appropriating assets of petitioner in respect of certain dues which were not shown to be adjustable there against. It is a clear case of patent illegality, unauthorized appropriation, and unfair and unjust treatment made by the respondents to the petitioner in depriving him his huge amount which in law was refundable to him. The action on the part of respondents also comes within the ambit of patent abuse of process of law. Writ petition is allowed. The entire amount of petitioner which was appropriated by respondent is directed to be refunded with interest at the rate of 12% per annum from the date the amount was seized till repayment to petitioner. The order dated 17.08.2011 passed by CCIT upholding appropriation of ₹ 72,72,524/- is hereby set aside.

Summary

Issues Involved:

1. Legality of the appropriation of funds seized from the petitioner for the tax dues of Amrish Kumar Jain.
2. Whether the petitioner is liable for the tax dues of Amrish Kumar Jain as a legal heir of (Late) Giri Lal Jain.
3. Validity of the actions taken by the Income Tax Department without notice or opportunity to the petitioner.

Issue-wise Detailed Analysis:

1. Legality of the appropriation of funds seized from the petitioner for the tax dues of Amrish Kumar Jain:
The petitioner challenged the order dated 17.08.2011 by the Chief Commissioner of Income Tax (CCIT), Ghaziabad, which rejected the petitioner’s representation and held that the tax dues against “M/s. Girilal Mamchand & Company” were rightly recovered from the petitioner. The petitioner argued that the appropriation of ?72,72,524 from his funds towards the tax dues of Amrish Kumar Jain was illegal, as he had no business or commercial relation with Amrish Kumar Jain, who was merely a distant relative. The court found that the funds seized from the petitioner during a search operation on 04.10.2004 were his personal money and not inherited from (Late) Giri Lal Jain. The court concluded that the appropriation of funds from the petitioner’s account was unauthorized and illegal.

2. Whether the petitioner is liable for the tax dues of Amrish Kumar Jain as a legal heir of (Late) Giri Lal Jain:
The respondents argued that the petitioner, as a legal heir of (Late) Giri Lal Jain, was liable for the tax dues of Amrish Kumar Jain, who was held to be a benamidar of (Late) Giri Lal Jain by the Settlement Commission. However, the court found that the petitioner and his brothers were not parties to the proceedings before the Settlement Commission and were not given any opportunity to be heard. Furthermore, the court noted that the wealth-tax assessments for the years in question were finalized long after the death of (Late) Giri Lal Jain, without any notice to the petitioner or his brothers. The court held that without proving that the petitioner inherited any estate from (Late) Giri Lal Jain, the tax dues of Amrish Kumar Jain could not be imposed on the petitioner.

3. Validity of the actions taken by the Income Tax Department without notice or opportunity to the petitioner:
The court observed that the Income Tax Department did not provide any notice or opportunity to the petitioner before finalizing the tax liability of (Late) Giri Lal Jain and appropriating the funds seized from the petitioner. The court emphasized that under Section 159 of the Income Tax Act, 1961, legal representatives are responsible for the tax liabilities of a deceased only to the extent of the estate inherited. The court held that the actions of the Income Tax Department were patently illegal, as they failed to establish that the petitioner inherited any estate from (Late) Giri Lal Jain and did not provide any notice or opportunity to the petitioner. The court concluded that the appropriation of funds from the petitioner’s account was a clear case of highhandedness and abuse of process of law by the respondents.

Conclusion:
The court allowed the writ petition, set aside the order dated 17.08.2011 passed by the CCIT, and directed the respondents to refund the entire amount of ?72,72,524 appropriated from the petitioner, along with interest at the rate of 12% per annum from the date of seizure till repayment. The court found the actions of the respondents to be unauthorized, illegal, and a patent abuse of process of law.