2015 (9) TMI 1122 - HC - Income Tax

Whether the suit for recovery for the losses caused by the inaction of the respondents in not disposing of the perishable items taken in possession vide deemed seizure order dated 17.10.1995 is maintainable? Whether the appellant is entitled for the damages for the loss suffered by it due to non-disposal of the seized items and kept in deemed possession of the respondents without any rhyme or reason? Whether once it has been found that the items seized by the respondents were perishable and they did not dispose of the same and kept sitting tight over the matter, the appellant is entitled for the damages caused to it due to the inaction of the respondents? - Held that - The plaintiff has filed suit for recovery of damages caused by the act of income tax authorities. Both the Courts below have given a categorical finding that the appellant has exhausted all the remedies under the Income Tax Act, 1961. The Income Tax Act is a complete Code and no separate suit is maintainable. So, that finding of fact cannot be interfered in regular second appeal. The plaintiff has failed to prove that any illegal raid was conducted by the Income Tax Authorities and he has also failed to prove the damages suffered by him. So, no hesitation in holding that no substantial question of law has arisen in the present regular second appeal. Consequently, the appeal is without any merit and the same stands dismissed.

Issues Involved:
1) Recovery of damages caused by the inaction of income tax authorities in not disposing of perishable items under deemed seizure order.
2) Entitlement for damages due to loss suffered from non-disposal of seized items.
3) Entitlement for damages due to inaction of income tax authorities over perishable seized items.

Analysis:

Issue 1: Recovery of Damages
The plaintiff, a registered partnership firm, filed a suit seeking recovery for losses incurred due to the inaction of income tax authorities in not disposing of perishable items taken under a deemed seizure order. The appellant-plaintiff alleged that the deemed seizure order dated 17.10.1995 was unjustified and resulted in the suspension of their business, causing financial losses. Despite representations and legal notices, the authorities did not act, leading to decay and waste of the seized items. The plaintiff sought damages for various losses incurred, including maintenance costs and interest. The defendant-respondents contested the suit, denying the allegations and asserting that the seizure and subsequent sale of stock were legal and in compliance with court orders. They argued that the plaintiff had concealed facts and removed stock without permission, leading to discrepancies in inventory. The lower courts dismissed the suit, emphasizing that the Income Tax Act provides a comprehensive framework, and no separate suit is maintainable once remedies under the Act are exhausted.

Issue 2: Entitlement for Damages
The plaintiff contended that the failure of income tax authorities to dispose of seized items caused them financial harm, and they sought damages for losses suffered. The defendant-respondents refuted these claims, asserting that the seizure and subsequent sale of stock were lawful and aimed at recovering outstanding tax demands. They argued that the plaintiff had removed stock without authorization, leading to discrepancies in inventory during inspections. The courts below found in favor of the defendants, emphasizing that the Income Tax Act provides a complete legal framework, and no separate suit for damages is maintainable once remedies under the Act are exhausted. The appellate court upheld this decision, stating that the plaintiff failed to establish illegal conduct by the authorities or quantify the damages suffered.

Issue 3: Damages Due to Inaction
The plaintiff sought damages for losses resulting from the inaction of income tax authorities over perishable seized items. They alleged that the authorities failed to dispose of the items promptly, causing financial harm to the plaintiff. The defendant-respondents contested these claims, asserting that the seizure and subsequent sale of stock were lawful and aimed at recovering tax demands. They argued that the plaintiff had removed stock without permission, leading to discrepancies during inspections. The courts below ruled in favor of the defendants, highlighting that the Income Tax Act provides a comprehensive legal framework, and no separate suit for damages is maintainable after exhausting remedies under the Act. The appellate court affirmed this decision, stating that the plaintiff did not prove illegal conduct by the authorities or quantify the damages suffered.

In conclusion, the regular second appeal filed by the plaintiff seeking recovery for damages caused by the inaction of income tax authorities was dismissed by the court. The judgment emphasized that the Income Tax Act provides a complete legal framework, and once remedies under the Act are exhausted, no separate suit for damages is maintainable. The court found no substantial question of law in the appeal and upheld the decisions of the lower courts, concluding that the appeal lacked merit.

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