1980 (1) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Representation by the defendant to pay a reward.
2. Plaintiff's entitlement to recovery under Section 70 of the Indian Contract Act.
3. Admission of plaintiff's claim by the defendant's Income-tax Commissioner.
4. Realization of Rs. 8 crores as alleged by the plaintiff.
5. Cause of action against the defendant.
6. Relief entitled to the plaintiff.

Issue-wise Detailed Analysis:

1. Representation by the defendant to pay a reward:
The court found that the defendant made representations through announcements in various newspapers, promising rewards for information on concealed income. The plaintiff acted on these representations, providing valuable information and assisting in raids, leading to the discovery of concealed income. The defendant acknowledged these contributions through various correspondences and interim payments.

2. Plaintiff's entitlement to recovery under Section 70 of the Indian Contract Act:
The court held that the plaintiff is entitled to recovery under Section 70 of the Indian Contract Act. The plaintiff provided information and assistance not intending to do so gratuitously, and the defendant benefited from these actions by realizing extra taxes. The court noted that all the requisites under Section 70 were sufficiently pleaded in the original plaint, and the amendment only clarified the position.

3. Admission of plaintiff's claim by the defendant's Income-tax Commissioner:
The court found that the defendant, through its Income-tax Commissioner, Mr. Krishnamurthy, admitted the plaintiff's claim in writing by affidavit affirmed on February 29, 1972. The affidavit stated that the reward was payable on the determination of extra taxes as a result of the information furnished by the plaintiff, thus acknowledging the defendant's liability.

4. Realization of Rs. 8 crores as alleged by the plaintiff:
The court accepted the plaintiff's claim that the defendant realized Rs. 8 crores in extra taxes based on the information provided. The defendant failed to produce assessment records or oral evidence to refute this claim. The court applied Sections 106 and 114(g) of the Evidence Act, raising an adverse presumption against the defendant for suppressing evidence that would support the plaintiff's case.

5. Cause of action against the defendant:
The court held that the plaintiff has a valid cause of action based on the doctrine of promissory estoppel. The plaintiff acted on the defendant's representations, leading to the discovery of concealed income and realization of extra taxes. The defendant's late-stage claim that the reward was ex gratia and discretionary was rejected.

6. Relief entitled to the plaintiff:
The court decreed that the plaintiff is entitled to a further sum of Rs. 2,00,000, in addition to the Rs. 12,500 already received, with interim interest at 6% per annum from the date of the suit to the date of the decree, and interest on judgment at 6% per annum until realization. The defendant was given three months to pay the decretal dues, failing which the plaintiff would be entitled to execute the decree.

Conclusion:
The court ruled in favor of the plaintiff, establishing that the defendant made representations promising rewards, which the plaintiff acted upon, leading to significant tax recoveries. The plaintiff's entitlement to the reward was upheld under Section 70 of the Indian Contract Act, and the defendant's liability was acknowledged through various correspondences and admissions. The court awarded the plaintiff a further sum of Rs. 2,00,000 with interest and costs.