2018 (12) TMI 1640 - HC - Income Tax

Receivables appropriated by the Income Tax Department - Misrepresentation and furnishing incorrect information regard the quantum of receivables before the authorities - Interim direction issued standing - apprehension of the assessee and their group concern is that this amount is sought to be appropriated by the Department even prior to conclusion of the assessment proceedings - HELD THAT - Observations contained in paragraph 6 of the order in T.S. KUMARASWAMY 2018 (12) TMI 1639 - MADRAS HIGH COURT are, in fact, the submissions made by the learned counsel and the scope of the directions issued, etc., and the same cannot be construed as an order passed by us. Interim direction issued in this appeal cannot travel beyond the final order passed and the interim order should and shall stand terminated with this judgment, which is the final judgment in this appeal. However, it is well open to the PDIT or any other Authority to proceed in accordance with law. Now, we are concerned with the amount of ₹ 213.30 Crores, which are receivables. In our considered view, this amount cannot be appropriated by the Income Tax Department at this juncture since the assessment proceedings are yet to be over and what are the subject matters of challenge in the writ petitions are the orders of attachment and search. Therefore, the parties should be left to agitate their respective rights and contentions in the pending writ petitions. We are of the firm view that nothing would survive for adjudication in this appeal. However, we are conscious of the fact that interests of the Revenue require to be protected. Writ appeal disposed with directions i. A sum of ₹ 213.30 Crores (Rupees two hundred and thirteen crores and thirty lakhs only), which is stated to be receivables of the appellant - writ petitioner from the TNCSC and the ICDS shall be kept in an interest bearing account in the Indian Bank, High Court Branch to the credit filed by the appellant and the same shall remain in deposit subject to further orders to be passed by the Writ Court in the said writ petition as well as other connected writ petitions filed by the appellant writ petitioner. ii. The amount shall be deposited within a period of two weeks from the date of receipt of a copy of this judgment.

Summary

Issues Involved:
1. Maintainability of the petition filed by the revenue.
2. Legality of the search and seizure/attachment procedures.
3. Discrepancy in the receivables reported by the assessee.
4. Appropriation of receivables by the Income Tax Department before the conclusion of assessment proceedings.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition Filed by the Revenue:
The court addressed the maintainability of the petition filed by the revenue, which sought to revoke an earlier order. The learned senior counsel for the petitioners argued that the application should be dismissed as not maintainable, citing the Supreme Court decision in Priyadarshini Dental College and Hospital vs. Union of India. However, the court concluded that the petition was maintainable, stating that it was not an attempt to pass on the responsibility to the judiciary for protective cover against departmental actions. The court emphasized that the revenue was justified in seeking leave to revoke the order due to the pending writ petitions and the directions issued in the writ appeal.

2. Legality of the Search and Seizure/Attachment Procedures:
The appellant challenged the search and seizure operations and the orders of attachment, claiming procedural illegality. The Division Bench had earlier permitted the appellant to approach the Commissioner to address the alleged procedural illegality. The Commissioner was directed to reconsider the issue on merits and in accordance with law. The court noted that the appellant had accepted the order dated 02.11.2018 and approached the Commissioner, who passed an order on 07.11.2018. The court found that the Department's actions were justified and not an attempt to disadvantage the assessee.

3. Discrepancy in the Receivables Reported by the Assessee:
The Department received information from the Tamil Nadu Civil Supplies Corporation (TNCSC) indicating that the receivables were significantly lower than what the assessee had reported. The Department issued a notice to the assessee, alleging misrepresentation and furnishing of incorrect information regarding the quantum of receivables. The court acknowledged the discrepancy and emphasized the need for a re-evaluation of the matter. The court directed that the TNCSC and Integrated Child Development Services (ICDS) be heard by the authority, and an Officer not below the rank of Managing Director should be present with all relevant records.

4. Appropriation of Receivables by the Income Tax Department:
The court addressed the issue of the Department's intent to appropriate the receivables before the conclusion of assessment proceedings. The court held that the amount of ?213.30 Crores, which were receivables from the TNCSC and ICDS, could not be appropriated by the Department at that juncture since the assessment proceedings were still pending. The court directed that this amount be kept in an interest-bearing account in the Indian Bank, High Court Branch, to the credit of the pending writ petition. The court also directed the release of ?248.31 Crores to the appellant to meet expenses, pay suppliers, and procure raw materials.

Final Directions:
The court disposed of the writ appeal with specific directions:
- ?213.30 Crores to be kept in an interest-bearing account in the Indian Bank, High Court Branch.
- The amount to be deposited within two weeks from the date of receipt of the judgment.
- ?248.31 Crores to be released to the appellant within one week from the date of receipt of the judgment.
- No costs, and the connected CMPs were closed.