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TMI Blog2006 (1) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... can be considered. Accordingly, on 23.11.2005, arguments were heard on the preliminary issues 1 and 2. This order shall dispose of the said issues. What is the plaintiff's case? 3. Before the issues are considered, it would be necessary to point out that the plaintiff has filed this suit for damages to the tune of Rs.36 lakhs on account of alleged losses suffered by the plaintiff by reason of the alleged abuse and misuse of the power and authority by the defendants and their subordinates. This suit was originally filed in the High Court of Madras but the plaint was ordered to be returned for presentation before the appropriate court by an order of the High Court at Madras dated 20.01.1998. It is thereafter that the present suit came to be filed before this court on 17.03.1998. 4.From the averments contained in the plaint, it appears that theplaintiff and his brother, Shri H.L. Goel were earlier conducting business together but that had fallen out. There are several averments contained in theplaint alleging misdeeds on the part of the said Shri H.L. Goel. Paragraph 3 of the plaint refers to the allegation that the said Shri H.L. Goel, out of ill will and ulterior motive, inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs. However, the bus and cars have registration documents which could be assets and not 'stocks' Both the items would not be worth more than Rs.3 lakhs as they are assets and are duly recorded in the account books of M/s Cannon Stells Pvt. Ltd.; (ix) The seized documents and files at No.15/2, D 'Okhla, when produced, the seals were broken; (x) The goods in the godowns were seized and sealed by the department by inflating the value. Neither the seized goods were given to prospective buyers as alleged prices nor the goods were being released since the goods were likely to deteriorate due to dampness in the godown, the Plaintiff-requested number of times to sell the goods and keep the whole sale proceeds as advance tax; but no action was taken till date; so the whole value to the tune of Rs.37,80,000 seized have not been taken as an advance tax inspite of the Plaintiff's request right from 26.10.1993; (xi) The list of seized goods/inventories were not provided to the Plaintiff and also the copies of Statement taken from the Plaintiff under Sec.132 (4) supplied were illegible. Inspite of repeated requests to furnish legible copies of the statements, the concerned authority neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The proceedings of the show cause notice culminated in the order-in-original being passed by the Commissioner of Customs, Customs House, Madras on 06.11.1995, whereby the subject goods recovered under the three bills of entry Nos. 1636 dated 10.01.1995, No. 3388 dated 23.01.1995 and 3556 dated 23.01.1995 were directed to be assessed on the basis of ?invoice price? declared by the importer which was accepted as the transaction value under rule 4 of the Valuation Rules, 1988 read with Section 14 (1) of the Customs Act, 1962. It is also noted that the subject goods were in the custody of the departments and had been incurring considerable demurrage charges, container charges, etc., since long time. 8.Before coming to the aforesaid conclusion, the Commissioner of Customs observed as under:- "They ,further, added that the value of the fibre for tow, cannot be applied to "synthetic soft waster" and there is no any documentary evidence to indicate that the synthetic waste or a polyester waste has been sold at 1.18 US $ per kg. The alleged impugned faxed copies supplied by the Income-tax Department referred only to fibre/tow/thread and not to the waste. On perusal of the so called f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial jurisdictionto entertain the present suit. Mr Jolly, who appeared for the defendant Nos. 1 and 5, submitted that the warrant of authorisation for the search and seizure was issued by the Director, Income-tax (Investigations), Chandigarh and the jurisdiction of the case for assessment purposes under the Income-Tax Act, 1961 was with the Collectorate at Ludhiana, therefore, the present suit which essentially pertains to the conduct of the Income-tax officials cannot be filed in this court. The defendants 1 and 2 are also situate at Chandigarh. The learned counsel for the plaintiff, however, pointed out that the objection on the ground of territorial jurisdiction raised by Mr Jolly is clearly untenable because the search that was conducted included the premises at Delhi. The seizure was also partly from Delhi and, therefore, it is clear that part of the cause of action for the filing of the present suit arose in Delhi. According to the learned counsel for the plaintiff, this court would have territorial jurisdiction to entertain the present suit. 12. I am in agreement with the submissions made by the learned counsel for the plaintiff. Merely because the warrant of authorisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act, the plaintiff had the remedies available to it under Section 132 (B) (3) and (4) and Section 264 (1) of the said Act. 14. He, accordingly, pressed for a decision on this issue in his favour. He also relied upon the following three decisions:- 1) Commissioner of Income-Tax and Another v. Parmeshwari Devi Sultania and Others: 230 ITR 745; 2) Union of India v. Natwerlal M. Badiani: 250 ITR 641; 3) M/s Prem Kumar and Sons (HUF) v. Union of India: RFA No.41/2005 decided on 18.05.2005. 15.On the other hand, the learned counsel for the plaintiff submitted that the bar of Section 293 would only be applicable if the Income-tax officials had acted in "good faith". He contended, with reference to the averments made in the plaint, that the plaintiff's brother [Shri H.L. Goel] had colluded with the Income-tax Department officials and instigated them to conduct searches in the plaintiff's business and residential premises as well as make seizures of the assets belonging to the plaintiff. The letter written by the defendant No.2 on 19/20.04.1994 to the Customs authorities was also written with a view to cause hardship and harassment to the plaintiff. According to the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit or other proceedings shall lie against [the Government or] any officer of the Government for anything in good faith done or intended to be done under this Act." 18.Upon a close reading of the said Section, it becomes clear that it sets up a bar to two kinds of proceedings. In the first place, no suit can be brought in any civil court to set aside or modify any proceeding taken or order made under the Act. In the second place, no prosecution, suit or other proceeding would lie against the Government or any officer of the Government for anything done in good faith or intended to be done in good faith under the Income-tax Act, 1961. In the present case, the bar that is being set up is with respect to the second kind of proceeding. In order to constitute a bar for such a proceeding, it is essential that the act complained of must have been done in good faith under the Income-tax Act, 1961. In other words, the immunity granted to the Government or any officer of the Government from prosecution, suit or other proceeding is based upon the Government or the officer concerned having acted in good faith. 19.I now come to the decisions referred to by Mr Jolly. In CIT v. Parmeshwari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this decision was with regard to the first limb of Section 293 of the said Act which pertains to suits which have the effect of setting aside or modifying any proceeding taken or order made under the said Act. The decision was not rendered in the context of the second type of proceedings which is what is required to be considered in the present case. 21. The next decision referred to by Mr Jolly was the case of Union of India v. Natwerlal M. Badiani (supra) which was a Full Bench decision of the Gujarat High Court. In the context of the submission that there was a total ban of suits in the civil courts under Section 293 of the Income-tax Act, 1961, the Full Bench of the Gujarat High Court, referring to the facts of the case, held as under:- "In the case at hand, the civil suits have been filed and entertained against the public officers while they were acting under the warrant of authorisation under section 132 of the Income-tax Act, 1961, read with rule 112(1) of the Income-tax Rules and ex parte ad interim order was passed. Section 293 of the Income-tax Act in terms creates a bar of suits in civil courts in such matters against action of the public officer under warrant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid plaintiff filed the application but as the assets were still not released, the plaintiff was constrained to file another writ petition, but before the same could be disposed of, the Income-tax Department released the said UTI Units and NSCs in favour of the plaintiff. The writ petition was thereafter disposed of as having become infructuous. Thereafter, the plaintiff filed the suit for recovery of an amount of Rs.5,62,000/- stated to be a part of the financial loss which the plaintiff had allegedly suffered as loss of interest on the maturity value of the NSCs and UTI Units. Upon the preliminary objection having been taken with regard to maintainability of the suit, the issue of whether the suit was barred under the provisions of Section 293 of the Income-tax Act was framed and was heard as a preliminary issue. The trial court held that in the facts of the case, the suit was not maintainable as the same was barred under the provisions of Section 293 of the Income-tax Act, 1961 and the suit was accordingly dismissed. An appeal therefrom was filed and the same was the subject matter of consideration before the said Division Bench of this court. Referring to the provisions of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falls under the second kind of proceedings which are directed against the Government or any officer of the Government. The immunity from suits or proceedings is conditional upon the actions of the Government or its officers having been taken in 'good faith' under the Act. Therefore, what has to be examined in the present case is the question of ?good faith". 25 .In Black's Law Dictionary , Sixth Edition, good faith is defined as under :-"Good faith . Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage, and an individual's personal good faith is concept of his own mind and inner spirit and, therefore, may not conclusively be determined by his protestations alone. Doyle v. Gordon, 158 N.Y. S.2d 248, 259, 260. Honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. An honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erlining added) 27.The said Section 67 of the 1922 Act was also the subject matter of consideration by a learned Single Judge of the Allahabad High Court in the case of Jwala Prasad v. S.N. Verma, Formerly Additional District Magistrate (Rural), Kanpur, and Another: 78 ITR 352. The court in that case held that the bar enacted by Section 67 cannot apply in respect of proceedings which were incompetent and which, therefore, cannot be considered as proceedings under the Act. The learned Single Judge referred to the dictum of Lord Thankerton in Secretary of State v. Mask and Co.: AIR 1940 P.C. 105 and I reproduce the same as it would be instructive:- "It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the civil courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure." 28.It was noted in the said Allahabad High decision that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 293 of the Income-tax Act, 1961. The court did not agree with this submission and observed that it is a question of fact whether the action taken by the Department was not in good faith and no evidence had been led on this point by any of the parties. The court also observed that in case the officers of the Department, on the basis of the material before them, decided to pass an order of restraint, the same could not be said to be an act of bad faith nor could the act be said to be mala fide. It observed as under: "The action of the Department at times may be erroneous but all erroneous actions cannot be said to be mala fide. While passing the orders, an error can be committed by the officers of the Department, but such an error cannot always be said to be in bad faith." 33.The learned Single Judge concluded that the Department had the power under Section 132 to pass an order of restraint and the officers, therefore, on the basis of the material had chosen to pass such an order which cannot be said to be without jurisdiction nor could the same be said to be in bad faith. On the basis of this finding, the court held that the suit was not maintainable in view of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iori conclusions. 'Good faith' and 'public good' are, as we said, questions of fact and matters for evidence. So, the trial must go on." 38. Considering all the aforesaid decisions, it becomes clear that ?good faith? entails honest intent free from taint of fraud or fraudulent design. It is also clear that an erroneous decision and/or erroneous assumption of jurisdiction, if done bona fide, cannot be labelled as an act not done in good faith. However, the erroneousness of the decision must not extend to such an extent that it would amount to an absurd view opposed to clear judicial pronouncements. The parameters are well-settled for judging whether an action is in good faith or not even in the context of Section 293 of the Income-tax Act, 1961. However, at what stage are these to be considered is the question. Can the issue of a bar under Section 293 be decided as a preliminary issue at the threshold, particularly when we are concerned with the second kind of proceedings contemplated under Section 293 whereunder the immunity from prosecution, suit or other proceeding is conditional upon the Government or any officer of the Government having acted in good faith under the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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