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TMI Blog2003 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... on borrowed capital and then directed addition of the amount under section 68A of the Income-tax Act. The Commissioner (Appeals) had affirmed the order of the Assessing Officer and had held that the explanation was not satisfactory and despite opportunity being given, the petitioners did not avail of the same to satisfactorily prove their contention. On the other hand, VCVL had obtained a decree, though ex parte, under Chapter 13 of the Original Side Rules from this court in respect of the selfsame transaction as against the petitioners in December, 1997. Admittedly, till the writ petition was dismissed by the learned single judge out of which the present appeal arises, the decree obtained by VCVL was never challenged. On the other hand, the Tax Recovery Officer sought to recover the income-tax dues payable by VCVL through a recovery proceeding. In the process, the notice under section 226(3) of the Act came to be issued on the petitioners seeking recovery from the decree obtained by VCVL against the petitioners. Mr. Sudipto Sarkar, learned senior counsel for the appellants, raised three points. First that the income-tax authority at Calcutta had found in a judicial decision that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h clean hands. The petitioners had suppressed material facts, as was apparent on the face of the record. Therefore, they were not entitled to invoke the writ jurisdiction. In reply on behalf of the appellants, it is contended that there was certain proceedings under the Companies Act, 1956, for winding up of the petitioner-company for which a scheme was formulated, which was approved but ultimately on being challenged, the said scheme was revoked. This order of revocation was affirmed by the apex court. Thereafter, a subsequent scheme was formulated during the pendency of this proceeding, which was representative in character, and was a proceeding in rem. There was an interim order by which the decree remained inexecutable. This decree was obtained two days before the proceedings for winding up had commenced. Therefore, it was not necessary for the petitioners to challenge the decree in appeal since it was subject to the scheme. It was further contended on behalf of the appellants that under the scheme, the rate of interest was reduced from 21 per cent. (twenty one per cent.) to 12 per cent. (twelve per cent.) and that some other amounts, which were paid by the petitioner to VCVL, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct. Therefore, he had discovered the claim raised by the petitioners to be false and proceeded to recover the same. But the question remains that one of his counterparts had held the transaction to be non-genuine, which is pending determination in appeal before the learned Tribunal at Calcutta. Therefore, it would mean that the subject matter of a judicial proceeding had not reached its finality. But till then, such order was staring on its face. The Tax Recovery Officer ("the TRO") cannot blow hot and cold in order to exercise jurisdiction under the provision of section 226(3) of the Act when he had some other device or mode of recovery available to him for recovering tax due from VCVL. It is only when the amount is found due and payable, section 226(3) can be resorted to. But when the income-tax authority itself had held that the transaction was not genuine, it cannot harbour a concept that the amount was due even though a decree was obtained by the VCVL. In the facts and circumstances of the case whether the decree had been put to execution by VCVL or not is immaterial. If the decree is offered, the Tax Recovery Officer is free to proceed upon it under section 226(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings and it was also subject to a proceeding before the company forum which is a judgment in rem and is binding on VCVL and, therefore, no amount, except as is permissible under the scheme, can be claimed by VCVL and as such the dues available under the decree are yet to be determined so as to attract the provision of section 226(3) of the Act. We must also remember that the petitioners had taken one stand before the income-tax authority, viz., that the transaction was genuine whereas it had denied its liability under the decree by raising an objection. However, all learned counsel representing the appellants before us, namely, Mr. Sarkar, Mr. J.P. Khaitan and Mr. S. Mukherjee, in their usual fairness, had contended that the petitioners ought to have taken a clear stand making its position clear as to the extent of its liability under the decree. No appeal was preferred until the order appealed against was passed. Therefore, we cannot take note of the subsequent filing of the appeal with regard to the question of finality of the decree. But then the objection being unqualified, the petitioners do not seem to have come with clean hands. They ought to have clarified their st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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