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TMI Blog1972 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 46(5A) of the Indian Income-tax Act of 1922 and attached the immovable properties of the plaintiffs situated at Lucknow. The plaintiffs borrowed the amount from the Central Bank of India, Lucknow, and paid a sum of Rs. 2,57,583.87 to the income-tax department on March 22, 1957. The plaintiffs allege that they paid interest to the Central Bank of India on this loan ranging between 6 per cent. and 9 1/2 per cent. Dissatisfied with the order of the Income-tax Tribunal (Delhi Bench), the plaintiffs under section 66 of the Act of 1922 made a reference to the High Court of Allahabad in 1965 and this income-tax reference was registered as I.T.R. No. 81 of 1960. The reference was decided by the High Court of Allahabad on the 7th of April, 1966. The reference was answered in favour of the plaintiffs and the department was directed to refund the excess income-tax wrongfully realised by the income-tax department from the plaintiffs. On the 16th of September, 1966, the Income-tax Appellate Tribunal, Delhi, made a consequential order under section 66(5) of the Indian Income-tax Act of 1922. On the 9th of December, 1967, a sum of Rs. 19,126.16 was refunded to the plaintiffs on account of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the present Act the refund in respect of such assessment fell due only on the 16th of September, 1966, upon the passing of the order by the Income-tax Appellate Tribunal (Delhi Bench) under section 66(5) of the old Act. As the refund was paid to the plaintiffs within six months from the order of the Income-tax Tribunal dated the 16th of September, 1966, the defendants submitted that they were not liable to pay any interest to the plaintiffs as claimed. It was also submitted that the plaintiffs cannot claim interest in the present suit under section 66(7) of the Act of 1922, inasmuch as interest under the said section can be allowed only by a statutory authority, namely, the Commissioner of Income-tax and the Commissioner of Income-tax has rejected the plaintiffs' claim to interest. In the replication filed by the plaintiffs it was submitted that section 297(2)(i) of the Income-tax Act of 1961 has no application to the present case inasmuch as the assessment was not completed before the commencement of the present Act and that in view of the provisions contained in section 297(2)(a) and (c) of the Act of 1961 and those of paragraph 2 of the Income-tax (Removal of Difficulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (7) of section 66 provided as under : " (7) Notwithstanding that a reference has been made under this section to the High Court, income-tax shall be payable in accordance with the assessment made in the case : Provided that, if the amount of an assessment is reduced as a result of such reference, the amount overpaid shall be refunded with such interest as the Commissioner may allow unless the High Court, on intimation given by the Commissioner within thirty days of the receipt of the result of such reference that he intends to ask for leave to appeal to the Supreme Court, makes an order authorising the Commissioner to postpone payment of such refund until the disposal of the appeal to the Supreme Court." The sub-section, therefore, lays down that on the reduction of the amount of assessment as a result of reference, the amount overpaid shall be refunded to the assessee " with such interest as the Commissioner may allow." In the present Act the relevant sections are sections 240 and 244 which read as under : " 240. Refund on appeal, etc.-Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on April 7, 1966. Reliance was also placed on the Income-tax (Removal of Difficulties) Order, 1962, and in particular on paragraph 2 of the said order which runs as follows : " 2. Registration and refund proceedings to be regarded as part of assessment proceedings.-For the purpose of clauses (a) and (b) of sub-section (2) of section 297 of the Income-tax Act, 1961 (XLIII of 1961) (hereinafter referred to as the repealing Act), proceedings relating to registration of a firm or a claim for refund of tax shall be regarded as a part of the proceedings for the assessment of the person concerned for the relevant assessment year." Basing himself on the Removal of Difficulties Order it was contended by the plaintiffs' counsel that the claim for refund is a part of the proceedings and that section 297(2)(a) of the present Act read with the Income-tax (Removal of Difficulties) Order applies to the facts of the present case. Section 297, in so far as it is relevant, reads as under : " 297. Repeals and savings.-(1) The Indian Income-tax Act, 1922 (XI of 1922), is hereby repealed. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the provisions of the new Act of 1961 relating to interest payable on refund, and as the refund was granted to the assessee within six months of the order directing refund, there was no liability on the part of the department to pay interest. Similarly, in the case of Hira Lal Jagarnath Prasad, a Division Bench of the Allahabad High Court held that the petitioner became entitled to refund by virtue of the answer given by the High Court and by virtue of the consequential order of the Tribunal and as the dates, on which these orders were made, were after the 1961 Act came into force, the refund fell due after the commencement of the new Act and the provisions of the new Act relating to refund would apply in supersession to the provisions of the old Act. In this case what had happened was that the assessment to which the Income-tax Act of 1922 applied was carried to the High Court under section 66(1) and the High Court answered the reference in favour of the assessee. Both when the High Court delivered its opinion and the Tribunal passed its consequential order the present Act had come into force. It will be seen that this Division Bench ruling was noticed in the case of Raja Jagd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pratap Narain Singh v. Income-tax Officer, Faizabad. In the cases of Pandyan Insurance Co. Ltd. and Hira Lal Jagarnath Prasad it will be noticed that the Removal of Difficulties Order was not brought to the notice of the court in those two cases. Sub-section (2)(c) of section 297 provides that if any proceeding is pending on the commencement of the present Act before the income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference or revision, the same shall be continued and disposed of as if this Act had not been passed. In the present case the reference was pending when the present Act came into force. The rights of the parties will, therefore, be governed by the provisions of the old Act and it cannot be said that the assessment had been completed. As observed by the Supreme Court in Kalawati Devi Harlalka v. Commissioner of Income-tax, the word " assessment " can bear a very comprehensive meaning ; it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer. It was further observed that section 6 of the General Clauses Act would not apply because section 297(2) evidences an intention to the contrary. In this connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute will not fall within the purview of clause (2). This position is made further clear by clause (5)(b)(i). The article applicable to taxation power of the State is article 265. Under that article no tax shall be levied or collected except by an authority of law. As pointed out in Ramjilal v. Income-tax officer, Mohindergarh, there was no provision corresponding to article 265 in the Government of India Act of 1935. If collection of tax amounts to deprivation of property within the meaning of article 31(1) then there was no point in making a separate provision again, as has been made, in article 265. It, therefore, follows that clause (1) of article 31 must be regarded as concerned with deprivation of property otherwise than by the imposition or collection of tax. The levying of tax is not deprivation of property and the Indian Constitution gives protection against taxation save by authority of law. In this case, the tax was imposed by authority of law. Tax imposed by a lawful authority is not taking away a man's property. If there is a wrong assessment it has to be corrected, set aside or modified in accordance with the provisions of law. If there is a reduction in the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o jurisdiction. Section 67 of the old Act provides that no suit shall be brought in any civil court to set aside or modify any assessment made under that Act. Section 67 reads as under : " 67. Bar of suits in civil court.-No suit shall be brought in any civil court to set aside or modify any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer of the Government for anything in good faith done or intended to be done under this Act." In the present Act a similar provision is contained in section 293 which lays down that : " 293. Bar of suits in civil courts.-No suit shall be brought in any civil court to set aside or modify any assessment order made under this Act, and no prosecution, suit or other proceeding 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." The learned counsel for the Union cited a number of authorities in support of the proposition that where a right is created by the Act and a remedy is provided by the Act for the enforcement of that right then in that case it is not open to a litigant to file a civil suit in supersessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h actions in civil courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies. (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is relevant enquiry. (7) An exclusion of the jurisdiction of the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on the amount of tax paid in excess. The High Court accepted the contention of the assessee. The Division Bench (Ramaswami C.J. and Raj Kishore Prasad J.) observed as follows : " On behalf of the assessee the contention was put forward that the true interpretation of the section is that the Commissioner is under a duty to pay the amount of tax over-paid together with some amount of interest. It was conceded that a discretion was vested in the Commissioner to fix the rate of interest, but it was contended that the Commissioner cannot say that no interest at all would be paid. In our opinion, the argument addressed by the learned counsel for the petitioners is correct. As a matter of construction we think that section 66(7) contemplates that in a case where there is an excess payment of tax the assessee is entitled to refund of the amount of tax over-paid together with some amount of interest. It is not open to the Commissioner to say that no interest at all would be paid. It is of course a matter of discretion with the Commissioner of Income-tax to determine what should be the rate of interest. It is also clear that the discretion of the Commissioner to fix the rate of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equate remedy and, therefore, the jurisdiction of the civil court has not been taken away. For this submission the learned counsel relied on Pabbojan Tea Co. Ltd. v. Deputy Commissioner, Lakhimpur. In that case the employer's claim was that he had been called upon to pay wages and compensation to persons who are governee by the Notification under the Minimum Wages Act. The employer instituted a suit challenging the correctness of the decision given by the Authority under section 20 of the Minimum Wages Act as to the applicability of the Notification under that Act to certain class of workers without following the provision as to hearing and enquiry contained in that Act. It was held that the civil court had jurisdiction to entertain such a suit. This ruling, to my mind, has no application to the facts of the present case and from the scheme of the old Act and the present Act and from the hierarchy of authorities created by those Acts and the express provision as contained in section 67 of the old Act and section 293 of the present Act it is sufficiently clear that the legislature wanted to oust the jurisdiction of the civil courts in a case such as the present one. The learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions regarding the grant of interest on refund contained in the old Act as well as the present Act and where the statute contains specific provisions equitable considerations have no place in the decision of the controversy. The learned counsel for the Union argued that the plaint did not disclose the ground on which claim to interest was made and it was, therefore, submitted that the plaint was defective as it did not disclose a cause of action. The plaint does not contain any averment as to the ground on which interest has been claimed, namely, whether interest has been claimed by reason of a contract, compensation or in equity or by reason of a statutory provision or usage or trade. There is no doubt that the plaint is deficient in this respect. What can at best be gathered from the plaint is that the plaintiffs seem to be aggrieved by the original order of imposition of tax. This order was subsequently modified on reference and it is on this ground that the plaintiffs consider themselves to be entitled to interest. It is nowhere stated in the plaint that the orders passed by the income-tax authorities were illegal or wrong or that the imposition of tax was wrongful. It is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1957. An order of assessment will be held to be binding on the assessee until set aside, or modified in appeal or reference. It is the order passed on reference which entitled the plaintiffs to ask for refund. For any date anterior to the order of reference, there can be no claim as to interest as there is no provision in the statute for award of interest. The legislature has made it plain in section 67 that tax shall be payable in accordance with the assessment notwithstanding that a reference has been made. If on reference the amount of tax is reduced the assessee shall be entitled to interest. From the legislative scheme, it appears that interest shall be paid from the date of the order of the Tribunal till refund is made. It was also argued, under issue No. 4, that the High Court of Delhi has no jurisdiction to try the suit as the reference was heard by the Allahabad High Court and no part of the cause of action had arisen at Delhi and that the suit should have been filed at Lucknow. On the other hand, the learned counsel for the plaintiffs argued that as the order of the Central Government dated the 13th December, 1967, was passed at New Delhi, the civil courts at Delhi have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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