1974 (1) TMI 10 - HC - Income Tax

(1) Whether the plaintiff paid the suit amount under a bona fide mistake that the notice of demand related to her own assessment as alleged by her ? (2) Whether the payment had been made by the plaintiff voluntarily as a legal representative of her husband to discharge her legal liability as alleged by the defence or whether the plaintiff paid the suit amount on account of coercion as alleged ? (3) Whether section 72 of the Contract Act can be invoked by the plaintiff in this case to get a refund of the suit amount ? (4) Whether the suit is barred by limitation as alleged by the defendant ? (5) Whether the suit is barred under the provisions of the Indian Income-tax Act, 1922 ?

Issues Involved:
1. Whether the plaintiff paid the suit amount under a bona fide mistake that the notice of demand dated December 10, 1959, related to her own assessment as alleged by her.
2. Whether the payment had been made by the plaintiff voluntarily as a legal representative of her husband to discharge her legal liability or whether the plaintiff paid the suit amount on account of coercion as alleged.
3. Whether section 72 of the Contract Act can be invoked by the plaintiff in this case to get a refund of the suit amount.
4. Whether the suit is barred by limitation as alleged by the defendant.
5. Whether the suit is barred under the provisions of the Indian Income-tax Act, 1922.

Detailed Analysis:

Issue 1: Bona Fide Mistake
The court found that the plaintiff and her husband were income-tax assessees long before 1959, and her husband died on November 30, 1959. The plaintiff received a demand notice dated December 10, 1959, issued by the Income-tax Officer based on a provisional assessment under section 23B of the Income-tax Act on the return filed by her husband. The notice did not clearly indicate whether the provisional assessment related to her own return or her husband's. The plaintiff, in her distressed state following her husband's death, mistakenly believed the demand related to her own assessment and paid the amount from her own funds. The court accepted the plaintiff's evidence and found that her payment was indeed made under a bona fide mistake.

Issue 2: Voluntary Payment vs. Coercion
The plaintiff alleged that she paid the amount under coercion due to the penal consequences mentioned in the demand notice. However, the court found that the mere issuance of a statutory demand notice, which includes a warning about penalties for non-payment, does not amount to coercion. The court held that the plaintiff's payment was not made under coercion but rather under a mistaken belief. The plea of coercion was inconsistent with the original plea of mistaken payment.

Issue 3: Invocation of Section 72 of the Contract Act
The court held that section 72 of the Contract Act applies to payments made under a mistake, whether of law or fact. Since the plaintiff paid the amount under a mistaken belief that it was due for her own assessment, she was entitled to recover the amount under section 72. The court rejected the defendant's argument that section 72 could not be invoked because the payment was made in discharge of a legal liability under section 24B of the Income-tax Act. The court clarified that the liability of the legal representative is limited to the estate of the deceased in their hands, and since the plaintiff was not in possession of any such assets, there was no legal liability on her to make the payment.

Issue 4: Limitation
The court found that if the suit is treated as one for recovery of money paid under a mistake, it would be governed by article 96 of the Limitation Act, which prescribes a three-year limitation period. Since the plaintiff became aware of the mistake on January 28, 1960, and filed the suit on June 29, 1963, the suit was barred by limitation. The court rejected the plaintiff's attempt to invoke the principle of section 14 of the Limitation Act to exclude the time taken in seeking a refund from the Income-tax authorities, as these proceedings were not against the defendant and did not suffer from any defect of jurisdiction.

Issue 5: Bar under the Income-tax Act
The court held that the suit was not barred by the provisions of the Income-tax Act. Section 67 of the Act, which bars suits to set aside or modify assessments, did not apply as the plaintiff was not seeking to set aside or modify any assessment but was merely seeking a refund of an amount paid under a mistake. The court found no provision in the Income-tax Act that conferred exclusive jurisdiction on any statutory authority to decide the plaintiff's claim for a refund.

Conclusion:
The appeal was allowed, and the suit was dismissed on the ground of limitation. The court, however, noted that if any amount is realized from the sale of the deceased's assets, the defendant must pay back the sum to the plaintiff to avoid double payment for the same liability.

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