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TMI Blog1974 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court and is now a retired judge of the Supreme Court on the following facts: The petitioner took a loan of Rs. 65,000 from his provident fund as a non-refundable advance in 1958-59 and spent it along with his own Rs. 13,000 in buying and reconstructing a house at Allahabad. He sold the said house in 1967 for Rs. 1,25,000 without obtaining the prior permission of the Government. As the petitioner parted with the possession of the house contrary to rule 7-E(1) of the Indian Civil Service Provident Fund Rules (hereafter called "the Rules" in short), the sum withdrawn by him became payable together with interest thereon amounting to Rs. 27,932 by him as the subscriber to the fund under rule 7-E(2). The petitioner paid the amount with interest to his fund accordingly. In calculating income-tax payable on "capital gains" under section 48 of the Act, the petitioner deducted from the sale proceeds of the house the interest of Rs. 27,932, as expenditure incurred wholly and exclusively in connection with the transfer of the house in addition to the cost of acquisition of the said house. In doing so, the petitioner stated that on the sale of the house "it became necessary to refund th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty of the Government. It was, therefore, expenditure incurred wholly and exclusively in connection. with the transfer of the house within the meaning of section 48(1). (2) Even if the interest was paid into the petitioner's own account in the provident fund and thus continued to belong to the petitioner without becoming the property of the Government, this information was known to the Income-tax Officer at the time of the assessment. It did not become known to him subsequently. The said officer thus had no jurisdiction to make the reassessment under section 147(b) of the Act. Both these contentions were repelled in the defence. It was pointed out that: "(1) The interest paid by the petitioner did not become the property of the Government and did not become a part of the Consolidated Fund of India. It was paid to his own account in the provident fund and remained his own property. It did not, therefore, amount to any expenditure by him much less expenditure incurred in connection with the transfer of the house; and (2) On the return and the representation made by the petitioner, "it was not apparent that the interest which had been paid by the petitioner was in fact cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, that this vital information was not apparent to the Income-tax Officer at the time of the assessment. The affidavit of the Income-tax Officer further states that subsequently "the true and correct interpretation of rule 7-E was brought to the notice of the Income-tax Officer by the Revenue Audit authorities as well as by the Ministry of Law". This would mean that these two authorities pointed out to the Income-tax Officer that on a true meaning of rule 7-E the interest went to the fund and continued to belong to the petitioner. It was not, therefore, an expenditure by the petitioner. It is a mixed question of law and fact whether the interest paid by the petitioner was expenditure. The question of law is whether the payment of the interest to the fund meant a payment to the petitioner himself or to the Government. In considering the second question, we shall show that it amounted to the payment to the petitioner himself inasmuch as the account in the provident fund belonged to the petitioner and that the interest remained the property of the petitioner even after the payment to the fund. The question of fact is whether the petitioner had made the payment to the fund o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the source of the income in the following words at page 193 of the report: "It must be, as already stated by us, a statement or expression of the correct state of the law by a person, body or authority competent and authorised to pronounce upon the law, so that it is invested with some definiteness and authority." With respect, we think that this test, unless narrowly construed, is not materially different from the test of power and/or duty suggested by us above. It is in the light of this test that we have to decide whether the information coming from the audit department and/or the Ministry of Law could amount to "information" within the meaning of section 147(b). The question was answered in the negative by the Division Bench of the Gujarat High Court in the following words at page 194 of the report: "The audit department is not an authority competent and authorised to declare the correct state of the law or to pronounce upon it." If, by the words "declare the correct state of the law or to pronounce upon it" is meant the authoritative decision of law which is binding on parties, courts and other authorities, then such authority is possessed only by the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, committed by them and lay down instructions for their correct working. The report of the Comptroller and Auditor-General of India on the functioning of the departments of the Government is submitted to the President under article 151 and is laid before each House of Parliament. The Public Accounts Committee of Parliament sees to it that this report is complied with by the Government as far as possible. The revenue audit is a part of this audit department. The officers of the revenue audit must be experts who can examine and check upon the work of Income-tax Officers. They are presumed to know the work of the Income-tax Officers including the law of income-tax. The Income-tax Officer has, therefore, to pay due regard to the notes of such auditors. As the revenue audit and the Ministry of Law have the power and duty to guide the functioning of the Income-tax Officers in this respect, advice and instructions given by them have to be regarded as "information" within the meaning of section 147(b) as being external to the Income-tax Officer but at the same time not coming from a mere interloper not connected with the work of the Income-tax Officer. In regard to the audit notes being " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or received by the Government of India or the Government of the State, as the case may be, or (b) any court within the territory of India to the credit of any cause, matter, account or persons, shall be paid into the public account of India or the public account of the State, as the case may be. It is to be noted that as contrasted with the Consolidated Fund of India, the public account of India contains moneys which are received by the Government officers or courts but which continue to belong to persons to whom such moneys are payable. They do not belong to the Government. The contrast between the Consolidated Fund of India and the public account of India is brought out by the following features, namely: (1) Under article 266(2) all other public moneys received by or on behalf of the Government of India shall be credited to the public account of India. That is to say, all moneys other than the revenues, loans and repayments of loans are credited to the public account and not to the Consolidated Fund. (2) Under article 266(3) no moneys out of the Consolidated Fund of India shall be appropriated except in accordance with law and for the purposes and the manner provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Civil Service Provident Fund Rules shows that the money continued to belong to the subscriber and does not vest in the Government. The Provident Funds Act, 1925, is applicable to this as well as other provident funds. It defines "compulsory deposit" in section 2(a) as one which is not "repayable on demand". But for this provision, the money would have been repayable on the demand of the subscriber which means that it belongs to the subscriber. The repayment is deferred only because the money is held in the fund to provide for the eventualities of death and retirement. (9) Under section 3 of the said Act as also under section 60 of the Code of Civil Procedure, the money in the account of the subscribers to the provident fund is exempt from attachment. The necessity to provide for such exemption arose because the moneys belong to the depositors and not to the Government and would have been liable to attachment by their creditors as the judgment-debtors' property in execution of a decree or order against him. (10) Under certain circumstances the moneys in the provident fund account can be assigned by the subscribers and can be made payable to nominees by them. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. This court has the discretion to abstain from interference if: (a) the conduct of the petitioner is such as to disentitle him to the relief, (b) he has not suffered any injustice, or (c) that the grant of the relief to him would result in injustice. All these three reasons are present in this case. The deduction was allowed to the petitioner without further inquiry because of his statement that the interest was paid to the Government while in fact it was paid to his account in the fund. The petitioner has been unjustly enriched at the cost of the public interest. To allow the petitioner to retain the undeserved advantage would mean that the burden of taxation which he should have legally borne is being misplaced. (The dicta of Lord Greene in Howard de Walden v. Inland Revenue Commissioners and of the Lord Chancellor Viscount Simon in Latilla v. Inland Revenue Commissioners are instructive in this respect). In A. M. Allison v. B. L. Sen, the order of the Deputy Commissioner, Sibsagar, purporting to fix minimum wages was challenged as being without jurisdiction. On the facts stated there was a prima facie case to show that the said order might not be supported by section 20 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed, the High Court would refuse to grant any relief in its writ jurisdiction. No hard and fast rule can be laid down as to when the High Court should refuse to exercise its jurisdiction in favour of a party who moves it after considerable delay and is otherwise guily of laches. That is a matter left to the discretion of the court; in this matter too discretion must be exercised Judiciously and reasonably." These observations were followed by S. M. Sikri and K. S. Hegde JJ., in Durga Prasad v. Chief Controller of Imports Exports, to make the point that the relief under article 226 is discretionary. High Courts have refused to interfere in their writ jurisdiction when not called upon to do so in the interest of justice. The reason is that the remedy sought by the petitioners under article 226 is not as of right but is in the discretion of this court (State of U.P. v. Dr. Vijay Anand Maharaj). The discretion is to be exercised to further the interests of justice and not to do injustice (Vide Veerappa v. Raman D. N. Banerji v. P. R. Mukher and Sangram Singh v. Election Tribunal) A learned commentator (Basu's Commentary on the Constitution of India, 5th edition, volume 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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