1967 (3) TMI 23 - SC - Income Tax

Excess profits tax could not be recovered - suit claiming adjustment of tax was not barred by the statute - adjustment of tax was not possible

Issues Involved:
1. Agreement to pay excess profits tax.
2. Estoppel regarding excess profits tax liability.
3. Jurisdiction under Section 111 of the Cochin Income-tax Act.
4. Validity of demand notices.
5. Refund of Rs. 16,650 with interest.

Detailed Analysis:

1. Agreement to Pay Excess Profits Tax:
The primary issue was whether the plaintiffs' father had agreed to pay excess profits tax in addition to income-tax. Both the trial court and the High Court found that there was no such agreement. The judgment states, "No writing is produced in support of this contention." Furthermore, the notification from the Government of India dated May 20, 1951, did not mention excess profits tax or Excess Profits Tax Officers. Consequently, it was held that it is not proved that the plaintiffs' father had agreed to pay excess profits tax.

2. Estoppel Regarding Excess Profits Tax Liability:
The defendant argued that the plaintiffs were estopped from denying their liability to pay excess profits tax. However, the court found no force in this plea. The judgment notes, "Apart from the fact that in the letter dated August 19, 1953, the plaintiff's father did not contest his liability to pay excess profits tax, no fact has been brought to our notice which could sustain the plea of estoppel." Furthermore, in a letter dated August 25, 1953, the plaintiffs' father explicitly stated that no excess profits tax was due.

3. Jurisdiction Under Section 111 of the Cochin Income-tax Act:
The defendant contended that the suit was barred by Section 111 of the Cochin Income-tax Act, which prohibits any suit to set aside or modify any assessment made under the Act. However, the court found this point to be without substance, stating, "No prayer was made in the suit for setting aside any assessment." The suit was to determine whether the plaintiffs' father had agreed to pay excess profits tax and whether the department had jurisdiction to appropriate payments made towards income-tax to excess profits tax. The court concluded that such a suit lies wholly outside the scope of Section 111.

4. Validity of Demand Notices:
The High Court had upheld the trial court's findings but revised the assessment orders indirectly, declaring the demand notices valid for Rs. 21,884.81. The Supreme Court found this erroneous, stating, "We are unable to appreciate how the assessment orders can be revised except under the provisions of the Income-tax Act." The court held that neither the counsel for the defendant nor the High Court has the power to revise any assessment order, thereby setting aside the High Court's finding that the demand notices were valid to the extent of Rs. 21,884.81.

5. Refund of Rs. 16,650 with Interest:
The plaintiffs sought a refund of Rs. 16,650 with interest. The High Court had denied this refund. However, the plaintiffs' counsel stated that applications for refund had been filed and not disposed of yet, and thus did not press for a decree for the refund. The Supreme Court did not find it necessary to address this point further.

Conclusion:
- Civil Appeal No. 100 of 1966 (by the plaintiffs) was allowed in part, setting aside the High Court's validation of the demand notices to the extent of Rs. 21,884.81.
- Civil Appeal No. 101 of 1966 (by the defendant) was dismissed, upholding the trial court's and High Court's findings that there was no agreement to pay excess profits tax, no estoppel, and that the suit was not barred by Section 111 of the Cochin Income-tax Act.
- Costs were awarded to the plaintiffs in the Supreme Court, with one hearing fee for both appeals.

← Previous Next →