* IN HIGH COURT OF DELHI AT NEW DELHI + CS(OS) No.713/2006 % 20th October, 2015 VISHWANATH KHANNA ..... Plaintiff Through: Mr. C.S. Gupta, Advocate with Ms. Kritika, Advocate versus CHIEF COMMISSIONER OF INCOME TAX- DELHI VIII & ANR. ..... Defendants Through: Mr. Ashok Manchanda, Advocate with Mr. Judy James, Standing Counsels CORAM: HON BLE MR. JUSTICE VALMIKI J.MEHTA To be referred to Reporter or not? VALMIKI J. MEHTA, J (ORAL) 1. This suit is filed by plaintiff for recovery of Rs.29,22,692/- from defendants with interest. defendants are Departments of Income Tax. cause of action which is pleaded in plaint is that search and seizure operation was carried out on 4.2.1995 by defendants in office and business premises of plaintiff, who is proprietor of CS(OS) No.713/2006 Page 1 of 14 his firm M/s Foto Traders. In terms of search and seizure operation, total silver of 7003.859 kgs (222 bars) was seized from plaintiff alongwith cash of Rs.49,86,500/-. seized silver was valued at Rs.4,44,66,395/- at that time and since value of silver which was seized by Income Tax Department would fluctuate during pendency of assessment proceedings to be taken, hence, plaintiff had filed writ petition in this Court being CWP No. 4767/1998 for return of silver bars, and in this writ petition by Order dated 08.10.1998, this Court directed defendants to release seized silver to plaintiff on plaintiff making payment of value of seized silver. Plaintiff further pleads that accordingly he kept on making payments of different amounts in different installments to defendants and consequently plaintiff got released seized silver from defendants. dispute in present suit pertains to payment of interest on amounts of three pay orders of value of Rs.30,50,000/- deposited by plaintiff with defendants on 05.04.2000 but which were not encashed by defendants and hence principal amount of Rs.30,50,000/- remained dormant in suspense accounts of banks without interest accruing thereon. Details of three pay orders in question are stated in para 6 of plaint. CS(OS) No.713/2006 Page 2 of 14 2. Plaintiff states that he remained under impression that these pay orders were encashed by defendants to cover payment of silver but plaintiff was shocked to know when he received letter dated 12.09.2003 from Indian Overseas Bank which had issued one DD of Rs.10 lacs that said pay order is not encashed. Plaintiff pleads that on further enquiries he found that two other pay orders totaling to Rs.20,50,000/- given on 05.04.2000 were also not encashed by defendants and amounts of all three pay orders were lying dormant in suspense accounts with bank. These three pay orders were got enchased by plaintiff in June, 2004/August, 2004, and therefore, this suit is filed claiming interest on this amount of Rs.30,50,000/- from date of deposit of pay orders with defendants on 05.04.2000 till dates of their encashment in June, 2004/August, 2004. 3. defendants appeared and contested suit and following issues were framed in this suit on 14.08.2008:- 1. Whether plaintiff is entitled for interest on amount claimed along with future interest and on what rate and from what date. OPP. 2. Whether plaintiff is entitled for decree of sum as prayed in suit against defendants jointly and severally? 3. Relief. CS(OS) No.713/2006 Page 3 of 14 4. During course of final hearing, legal issue arose which goes to root of matter with respect to whether or not this Court has jurisdiction to try present suit in view of bar contained in Section 293 of Income Tax Act, 1961. Though such issue was not framed because no such defence was taken up in written statement, however, since this issue goes to root of matter as to whether this Court has inherent jurisdiction to try present suit, plaintiff was put to notice of this aspect on 17.8.2015. Attention of plaintiff was also drawn to judgment of Supreme Court in case of Commissioner of Income Tax, Bhubaneswar and Another Vs. Parmeshwari Devi Sultania and Others (1998) 3 SCC 481 which pronounces upon Section 293 of Income Tax Act by observing that no civil suit lies against Income Tax Department with respect to any dues claimed from Income Tax Department if such dues are/can be subject matter of proceedings under Income Tax Act. 5. I have heard counsel for parties yesterday and today also. neat issue in present case is that whether this Court has inherent jurisdiction to try present suit in view of bar contained in CS(OS) No.713/2006 Page 4 of 14 Section 293 of Income Tax Act. Section 293 of Income Tax Act reads as under:- 293. Bar of suits in civil courts. No suit shall be brought in any civil court to set aside or modify any proceeding taken or order made under this Act, and no prosecution, suit or other proceeding shall lie against Government or any officer of Government for anything in good faith done or intended to be done under this Act. 6. In case of Parmeshwari Devi Sultania (supra), considering this very provision, Supreme Court has made relevant observations and laid down following ratio:- 6. In view of proceedings conducted under Section 132 of Act and order having been passed under sub-section (5) of Section 132 thereof and seized assets including gold ornaments, subject matter of suit ordered to be retained, Revenue objected to maintainability of suit and said, that it was clearly barred by Section 293 of Act and civil court had no jurisdiction to try such suit under Section 9 of CPC. Section 9 of Code imparts jurisdiction on civil court to try of suits of civil nature excepting suit of which their cognizance is either expressly or impliedly barred. xxxxx xxxxx 11. In Raleigh Investment Co., Ltd. v. Governor-General in Council: AIR 1947 PC 78, suit was filed by Raleigh Investment Company Ltd. claiming repayment of Rs. 4,35,295, part of larger sum paid by it under assessment of Income-tax made upon it. basis of this claim was that in computation of assessable income, effect had been given to provision of Income-tax Act, 1922 which in submission of plaintiff was ultra vires legislature and that assessment was, therefore, wrong. One of contention raised was that suit was barred by reason of Section 67 of Income Tax Act, 1922. Section 67 contained bar of suits in civil court. Section 67 provided as under: CS(OS) No.713/2006 Page 5 of 14 "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 Government for anything in good faith done or intended to be done under this Act." Court held that though in form relief claimed did not profess to modify or set aside assessment, in substance suit was directed exclusively to modification of assessment and was barred by Section 67 of Indian Income-tax Act. In Kamala Mills Ltd. v. State of Bombay: AIR 1965 SC 1942, plaintiff, appellant filed suit claiming to recover certain amount paid as sales tax on ground that it had been illegally levied against it. One of questions for consideration was if Section 20 of Bombay Sales Tax Act, 1946 contained bar against suit. Section 20 is as under: "Save as is provided in section 23, no assessment made and no order passed under this Act of rules made thereunder by Commissioner or any person appointed under section 3 to assist him shall be called into question in any civil court, and save as is provided in sections 21 and 22, no appeal or application for revision shall lie against any such assessment or order." 12. It was contended by plaintiff that Section 20 had no application because order of assessment which plaintiff sought to challenge had been made by relevant Sales Tax Authorities without jurisdiction. This Court repelled this argument and said that assessment based on erroneous finding about character of transaction was not assessment made without jurisdiction and was not outside purview of Section 20 and that words in that section were wide enough to take within its sweep even erroneous orders of assessment and would be entitled to claim protection against institution of civil suit. court then observed: "The jurisdiction of civil court can be excluded even without express provision. In every case, question about exclusion of jurisdiction of civil courts either expressly or by necessary implication must be considered in light of words used in statutory provision on which plea is rested, scheme of relevant provisions, their object and their purpose." xxxxx CS(OS) No.713/2006 Page 6 of 14 xxxxx 16. Principles of law are, therefore, well settled where civil court will not assume jurisdiction. In Dulhabhai etc. v. State of M.P.: (1968) 3 SCR 662, this Court laid 7 principles for courts to see if suit was barred under Section 9 of Code or not. It is not necessary to set out all 7 principles as we find that present suit would be barred under second principle laid by this Court which we reproduce as under: "(2) Where there is express bar of jurisdiction of court, examination of scheme of particular Act to find adequacy or sufficiency of remedies provided may be relevant but is not decisive to sustain jurisdiction of civil court. Where there is no express exclusion examination of remedies and scheme of particular Act to find out intendment becomes necessary and result of inquiry may be decisive. In latter case, it is necessary to see if statute creates special right or liability and provides for determination of right or liability and further lays down that all questions about said right and liability shall be determined by tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by said statute or not." 17. We have seen above that scope of Section 293 of Act has been widened now even to include any proceeding under Act and it is not merely confined merely to set aside or modify any order. Form of suit is not relevant. It is substance which is to be seen. When statute prescribed certain procedure and proceedings thereunder are held and order passed, it is difficult to accept contention that proceeding and order can be modified or set aside in civil suit filed by third party. Section 293 is specific and does not admit filing of suit which has effect of even indirectly setting aside or modifying any proceeding taken under Act or order made thereunder. In present case, search and seizure were effected as per provisions of Act, assets and documents seized and statement of Babulal recorded under sub-section (4) of Section 132 of Act wherein he admitted that gold was acquired from his and his brother's undisclosed income which he was even prepared to surrender to tax. It was thereafter in course of further enquiry that he came up with version that gold ornaments in question belonged to his step-mother who bequeathed same for benefit of children of CS(OS) No.713/2006 Page 7 of 14 plaintiff and other children that would be born to second wife of his father. This version did not find favour with Income-tax Officer and he was not satisfied that gold ornaments in question did not belong to Babulal. It was, therefore, not necessary for him to issue any notice under sub-section (7) of Section 132 of Act to plaintiff. In any case, plaintiff was well aware of proceedings before Income-tax Officer and she could have also filed objection to order made by Income- tax Officer under Section 132(5) of Act to Chief Commissioner or Commissioner under Section (11) thereof which remedy she did not avail. Considering whole gravamen of plaintiff in suit and law on subject, we are of opinion that Subordinate Judge and High Court were not correct in rejecting contention of Revenue and holding that suit was not barred under Section 293 of Act. (underlining added) 7. In present case, it is seen that there is no dispute that what are dues of plaintiff towards defendants that stood determined in terms of Order dated 7.7.2003 passed by Income Tax Settlement Commission, and which Settlement Commission was approached by plaintiff for settlement of disputes and determination of entitlement of defendants with respect to amounts on account of tax pursuant to search and seizure of plaintiff s premises on 4.2.1995. Pursuant to order of Settlement Commission, computation of income of plaintiff was to be done and this computation of income was done by Income Tax Officer under Section 245(D)(6) of Income Tax Act vide Order dated 20.9.2005. It is this order which crystallized/assessed amount payable by plaintiff to defendants and amounts; including CS(OS) No.713/2006 Page 8 of 14 interest; which were to be refunded by defendants to plaintiff. Since this entire order would be relevant, I reproduce same as under:- CALCULATION OF AMOUNT DUE TO ASSESSEE Name & address of assessee Sh. Vishwa Nath Khanna Prop. Foto Traders, S-105, GK-II, New Delhi, PAN No. AAIPK2689M Income as per Order dated 7.7.03 of Rs.43,69,020.00 Settlement Commission U/s 245 D(4) for Asstt. Year 95-96 (S.A.No.2/9/98/1-IT) Tax on above Rs.17,22,608.00 Less : Tax paid U/s 143(1)(a) Rs. 5,85,506.00 -------------------- Balance Rs.11,37,102.00 Demand U/s 143(1)(a) Rs. 8,60,977.00 -------------------- Demand for Asstt Year 1995-96 Rs.19,98,079.00 Add : Demand Outstanding for Previous Asstt. Years Avs DEMAND Interest u/s 220(2) 1990-91 10,876.00 Rs. 10,876.00 1991-92 1,474.00 Rs. 1,474.00 1999-2000 15,86,347.00 3,70,798.00 Rs.19,57,145.00 2000-2001 22,75,638.00 5,31,927.00 Rs.28,07,565.00 2001-2002 11,54,322.00 57,720.00 Rs.12,12,042.00 u/S 143(3) 2001-2001 8,30,476.00 30,105.00 Rs. 8,60,581.00 u/S 143(a)(a) 2003-04 2,04,197.00 15,310.00 Rs. 2,19,507.00 ----------------- (A) TOTAL OUTSTANDING DEMAND Rs. 90,67,274.00 ----------------- CS(OS) No.713/2006 Page 9 of 14 (B) Amount paid by assessee:- Sl.No. Amount Date of Period of Intt Interest u/s 244A Payment 1. Rs.2,05,86,500 31.03.99 1.8.99 31.5.01 @ 1% Rs.45,29,030.00 p.m. for 22 months 1.6.01 31.5.02 @ Rs.18,52,785.00 0.75% p.m. for 12 months 1.6.02 31.8.04 @ Rs. 36,68,514.00 2/3% p.m. for 27 months 2. Rs.1,44,00,000 18.12.99 18.12.99 31.5.01 @ Rs.25,92,000.00 1% p.m. for 18 months Rs.12,96,000.00 1.6.01 31.5.02 @ 0.75% p.m. for 12 months Rs.25,66,080.00 1.6.02 31.8.04 @ 2/3% p.m. for 27 months 3. Rs. 37,08,667 29.01.2000 29.1.2000 31.5.01 @ Rs.1,85,433.00 1% p.m. for 5 months 1.6.01 31.5.02 @ Rs.3,33,780.00 0.75% p.m. for 12 months 1.6.02 31.8.04 @ Rs.6,66,884.00 0.66% p.m. for 27 months 4. Rs, 52,96,733 05.03.04 5.3.04 31.8.04 @ Rs.2,09,750.00 0.66% p.m. for 6 months TOTAL Rs.4,39,91,900 Rs.1,78,04,256.00 Excess amount paid by Assessee: 4,39,91,900 90,67,264 Rs.3,49,24,636.00 Interest U/s 244-A Rs.1,78,94,256.00 TOTAL REFUND DUE TO ASSESSEE Rs.5,28,18,892.00 above amount is calculated as per information available in records and subject to verification of payment made by assessee. CS(OS) No.713/2006 Page 10 of 14 Sd/- (Sanjay Gosain) Income Tax Officer, Ward 23(2), N. Delhi NAME & ADDRESS OF Sh. Vishwa Nath Khanna ASSESSEE Prop. Foto Traders, S-105, G.K. II, New Delhi. Asstt. Year 1995-96 PAN No. AAIPK2689M Date of Order 27.09.04 ORDER UNDER SECTION 245D(6) OF I.T. ACT In this case, search and seizure operation was carried on premises of assessee on 4.2.95. During search, cash amounting to Rs.49,86,500.00 and silver bars numbering 222 were seized. assessee got silver bars released from department, as per directions of Hon ble High Court, after depositing 4,39,91,900.00 with department. Hon ble Settlement Commission vide its order dated 7.7.03 U/s 245D(4) of Income Tax Act in Settlement Application No.S.A. 2/9/98/1-II assessed income as follows:- Returned Income loss (-) 1,78,430.00 Income Offered in Original SOF 35,47,453.00 Income offered at time of hearing U/s 245D(4) in revised SOF 10,00,000.00 ---------------- TOTAL 43,96,023.00 Assessed at Rs.43,69,023.00. Issue necessary forms. Sd/- (Sanjay Gosain) Income Tax Officer, Ward 23(2), N. Delhi Copy to : Assessee. O/c Sd/- (Sanjay Gosain) Income Tax Officer, Ward 23(2), N. Delhi. CS(OS) No.713/2006 Page 11 of 14 8. It is not disputed before me on behalf of plaintiff that when this Order was passed on 20.9.2005 (or even on 27.9.2004 as argued on behalf of plaintiff), plaintiff was aware of fact that three bank drafts totaling to Rs.30,50,000/- were not encashed by defendants and plaintiff had right to claim interest on these bank drafts in proceedings under Section 245(D)(6) of Income Tax Act, inasmuch as, by June/August 2004, plaintiff had encashed pay orders totaling to amount of Rs.30,50,000/-. I have deliberately reproduced entire Order dated 20.9.2005 (or 27.9.2004) above inasmuch as, computation being done of amounts; payable for and against plaintiff; and for and against defendants, very much had to be and was subject matter of Order dated 20.9.2005 (or 27.9.2004) and all these were aspects with respect to recovery from plaintiff of Income Tax dues payable by plaintiff pursuant to search and seizure operations in premises of plaintiff on 4.2.1995 and refund to plaintiff on account of excess amount lying with defendants. plaintiff thus ought to have raised but did not raise claim of amount which is subject matter of present suit before Income Tax Officer who passed computation vide Order dated 20.9.2005/27.9.2004 or if plaintiff did make claim with respect to interest payable on three drafts, then same stood denied in terms of CS(OS) No.713/2006 Page 12 of 14 aforesaid Order dated 20.9.2005/27.9.2004. I asked counsel for plaintiff specific question, as to whether plaintiff had raised this claim which is subject matter of present suit being interest payable on account of monies of plaintiff lying dormant in suspense accounts with banks as three bank drafts/pay orders were not encashed by defendants, but counsel for plaintiff could not answer this query of Court one way or other in spite of taking instructions from plaintiff. Therefore, looking at matter from any angle, if this issue was raised and claim was denied by ITO or issue was not raised at all, claim of plaintiff definitely stood merged in Order dated 20.9.2005/27.9.2004 being claim of plaintiff with respect to interest on amount of Rs.30,50,000/-. If case of plaintiff is that Order dated 20.9.2005/27.9.2004 wrongly disallows claim, then plaintiff had appropriate remedy to challenge said order in appeal but plaintiff failed to do so. This suit in view of Section 293 of Income Tax Act however is not remedy and only remedy of plaintiff was to challenge Order dated 20.9.2005/27.9.2004 in appropriate forum and which plaintiff failed to do. ratio of judgment of Supreme Court in case of Parmeshwari Devi Sultania (supra) clearly applies that with respect to any claim which is made in civil suit against Income CS(OS) No.713/2006 Page 13 of 14 Tax department which will result in modification of proceedings under Income Tax Act, then cognizance of such civil suit cannot be taken by civil court in view of categorical bar contained in Section 293 of Income Tax Act. In Parmeshwari Devi Sultania s case (supra), Supreme Court has referred to judgment of Privy Council in Raleigh Investment Co. Ltd. Vs. Governor General-in Council, AIR 1947 PC 78 wherein similar issue was decided. It is settled law that under Section 9 of Code of Civil Procedure, 1908 suit is not maintainable once there is express or implied bar to suit. Section 293 of Income Tax Act in my opinion is express bar to present suit in view of judgment of Supreme Court in case of Parmeshwari Devi Sultania (supra). 9. In view of above, since this Court has no inherent jurisdiction to try this suit in view of bar contained in Section 293 of Income Tax Act, suit is therefore dismissed, leaving parties to bear their own costs. OCTOBER 20, 2015 VALMIKI J. MEHTA, J nn/ib CS(OS) No.713/2006 Page 14 of 14 VISHWANATH KHANNA v. CHIEF COMMISSIONER OF INCOME TAXDELHI VIII & ANR