2021 (7) TMI 330 - HC - Income Tax

Refund the monies lying in the Capital Gains Account Scheme (CGAS) with the bank along with interest at prevailing rates - scheme of investment of capital gain in terms of Section 54/54F - HELD THAT - As regards the taxability of the transaction of sale, there is nothing to be said in so far as, admittedly, the time lines for bringing capital gains, if any, to tax, have long elapsed. The allegation of the revenue to the effect that the petitioners have timed the request for closure well after the expiry of the statutory timelines may well be correct, but the Department has missed the bus in this regard. What remains is the closure of the account and refund of the amounts to the petitioners. The operation of the account in question is a matter of contract qua the petitioners and R2 and the petitioners are at liberty to give such instructions to R2 as they may wish to, in this regard. Form-G which is to be approved by the assessing authority will have no application in this case since the transaction giving rise to capital gains has not been captured by the Department. In any event, today, R1 does not have any claim towards the amounts in the bank accounts. Thus, the petitioners are at liberty to issue suitable instructions to R2 in regard to their bank accounts and such request, including request for closure of and refund of balances, shall be honoured by R2 in accordance with the terms of the contract governing the parties and without insistence upon Form-G of the CGAS Scheme.

Summary

Issues:
1. Mandamus sought against Assessing Authority and Bank for refund of monies in Capital Gains Account Scheme.
2. Failure to file returns or further investments after selling property.
3. Application for refund not entertained by Bank, leading to approach the assessing authority.
4. Taxability of the transaction and missed statutory timelines.
5. Closure of the account and refund to the petitioners.

Analysis:

1. The writ petitions were filed by a mother and her two daughters seeking a mandamus against the Assessing Authority and the Bank to refund the monies in the Capital Gains Account Scheme (CGAS) with the bank along with interest at prevailing rates.

2. The petitioners sold a property in 2007 and deposited part of the sale proceeds in an account under the CGAS Scheme. However, they did not take any further action such as making additional investments or filing income tax returns to offer the gain to tax as required by the Income Tax Act, 1961.

3. The Bank did not entertain the petitioners' request for closure of the accounts and refund of balances, prompting the petitioners to seek approval from the assessing authority. Despite approaching the assessing authority, there was no response, leading the petitioners to file the writ petitions seeking mandamus.

4. The court noted that the statutory timelines for bringing capital gains to tax had elapsed, and while the revenue's allegation of the petitioners timing the request for closure after the expiry of timelines may be correct, the Department had not taken any action in this regard. The focus shifted to the closure of the account and refund of amounts to the petitioners.

5. The court held that the petitioners were entitled to issue instructions to the Bank regarding their accounts without the need for Form-G approval by the assessing authority since the transaction giving rise to capital gains had not been addressed by the Department. The Bank was directed to honor the petitioners' requests for closure and refund in accordance with the contract terms, without insisting on Form-G of the CGAS Scheme.

In conclusion, the court disposed of the writ petitions, allowing the petitioners to instruct the Bank for the closure and refund of balances without the need for assessing authority approval, emphasizing the contractual relationship between the petitioners and the Bank in managing the accounts.