Rajasthan High Court - Jaipur
Birla Cotton Spinning And Weaving ... vs Income-Tax Officer. on 25 September, 1992
Equivalent citations: (1994)122CTR(RAJ)339, [1994]209ITR434(RAJ)
JUDGMENT
JAIPUR BENCH K. C. AGARWAL C. J. - This writ petition, under article 226 of the Constitution, has been filed by Birla Cotton Spinning and Weaving Mills Ltd. for a direction commanding the respondents to withdraw, cancel and/or rescind the order dated March 2, 1965, passed under section 23A of the Indian Income-tax Act, 1922, for the assessment year 1960-61 against Messrs. Merchandise and Stores Ltd. and to refund the sum of Rs. 40,135 paid by the petitioner.
By and order dated April 22, 1960, the Rajasthan High Court sanctioned a scheme of arrangements for the amalgamation of Messrs. Rajputana General Dealers Ltd. and Messrs. Merchandise and Stores Ltd. incorporated under the Companies Act, 1956. On May 20, 1960, the High Court of Punjab at Delhi also passed an order under the provisions of the Companies Act, 1956, for the amalgamation of the said Rajputana General Dealers Ltd. and the Merchandise and Stores Ltd. with the petitioner - Birla Cotton Spinning and Weaving Mills Ltd. having its registered office at P. O. Birla Lines, Delhi.
After amalgamations, Messrs. Rajputana General Dealers Ltd. land Messrs. Merchandise and Stores Ltd. stood dissolved as from May 20, 1960, when the certified copy of the order of the Punjab High Court was duly filed with the Register of Companies, Rajasthan at Jaipur. As a result of amalgamation, the undertakings of the said two companies including all debts, liabilities and obligations stood transferred to and vested in the petitioner-company and the petitioner was to pay, satisfy, discharge, perform and fulfil all the debts, liabilities, contracts, arrangements and obligations of the said two companies.
Notices under section 23A of the Indian Income-tax Act, 1922, were issued by the Income-tax Officer, Company Circle, Jaipur, against Messrs. Merchandise and Stores Ltd. and Messrs. Rajputana General Dealers Ltd. These notices were delivered at the office of the petitioner-company at Delhi.
The petitioners representative appeared before the Income-tax Officer and objected to the validity of these notices, but orders were passed assessing additional super-tax of Rs. 40,135 on Messrs. Merchandise and Stores Ltd. and Rs 31,465 on Messrs. Rajputana General Dealers Ltd. The taxes imposed were realized from the petitioner-company.
Against the judgment of the Income-tax Officer, two appeals were preferred before the Appellate Assistant Commissioner, but both of them were dismissed by the Appellate Assistant Commissioner finding that the notices issued in the names of the companies had been duly responded to and that no objection had been taken before the Income-tax Officer to the initiation of the proceedings. Moreover, the companies had been in existence throughout the previous year relevant to the assessment year 1960-61. On the merits, the Appellate Assistant Commissioner confirmed the levy of additional super-tax and dismissed the two appeals.
Against the order of the Appellate Assistant Commissioner, appeals were preferred by the petitioner-company before the Income-tax Appellate Tribunal. The Tribunal repelled the contention of the petitioner-company that as the petitioner was not an assessee, no tax could be imposed on it under section 23A of the Income-tax Act. The Tribunal held that in fact the proceedings had been initiated and continued against the Birla company and, therefore, the proceedings were valid in view of clause 6 of the scheme of amalgamation. The Tribunal disposed of this contention by observing that action under section 23A had not been taken on the basis that the Birla company was a successor to the transferor companies within the meaning of section 26(2). The Birla company was the legal representative of the transferor companies and the orders passed by the Income-tax Officer were valid.
A reference to the High Court of Delhi (see [1980] 123 ITR 354) was sought under section 66(1) of the Indian Income-tax Act, 1922. The reference applications were filed by the Birla company.
By two separate judgments, the two learned judges before whom reference applications were laid held that the same were not maintainable in Delhi. The relevant portion of the judgment of Honble Mr. Justice S. Ranganathan is quoted below (see [1980] 123 ITR 354, 362, 363) :
"We agree with Shri Verma that this decision fully covers the present case. In this case the assessment orders were passed by the Income-tax Officer at Jaipur and the appeals were also disposed of by the Appellate Assistant Commissioner at Jaipur. The mere accident that when the matters came before the Tribunal the appeals had to be heard by the Delhi Bench of the Income-tax Appellate Tribunal because at that time there was no Bench of the Tribunal at Jaipur, cannot vest this court with jurisdiction to hear references in the matters coming from the State of Rajasthan."
Although, Honble Mr. Justice S. Ranganathan held that the reference applications were not maintainable, he made the following observations (see [1980] 123 ITR 354, 367, 368) :
"If the Income-tax Officer had demanded the tax on the basis of the orders passed from the Birla company without any jurisdiction, the Birla company could have got the demands quashed by filing a writ petition and seeking a writ a certiorari or prohibition. But when the Birla company was not the assessee and so long as there is no provision under which it could be held responsible for the liabilities of the erstwhile companies, it had no standing to prefer any appeals against the orders passed against the defunct companies."
However, Mr. Justice D. R. Khanna expressed a contrary opinion on the desirability of making observations with regard to the right of the petitioner of file the writ for refund. He said (see [1980] 123 ITR 354, 371, 372) :
"However, having once come to this conclusion, I am firmly of the view that there should be no justification to express any opinion on the merits or otherwise of the orders made by the Income-tax Officer under section 23A of the Act. Propriety would demand that on a matter over which this court has no jurisdiction, it should not venture to incidentally adjudicate or express any opinion even as a passing reference. That would be entirely within the domain of the court or the authority before which the matter may ultimately go for adjudication. To express any opinion as to the validity of the orders, would tantamount to in a roundabout and a veiled manner allowing the reference by accepting the pleas raised on the merits."
The petitioner, Messrs. Birla Cotton Spinning and Weaving Mills Limited, thereafter the present writ petition in this court on March 14, 1980, for the reliefs mentioned in the earlier portion of this order.
Counsel for the respondent urged that as the Income-tax Act provides a specific remedy of filing a reference against the order of the Appellate Assistant Commissioner, the present writ petition challenging the same is not maintainable. The contentions is well founded.
The petitioner did file a reference under section 66(1) of the Indian Income-tax Act, 1922, but the same was rejected as being not maintainable. The judgment in the reference became final and the questions raised were returned unanswered. The necessary effect is that the judgments of the Income-tax Officer and the Appellate Assistant Commissioner became final by which the petitioner had been held liable to pay super-tax under section 23A of the Income-tax Act. The assessment order of the Income-tax Officer went unassailed. The rights of the parties could be governed by the orders of the Income-tax Officer subsequently upheld by the Appellate Assistant Commissioner. Those judgments and orders could not be challenged by means of the present writ petition.
Counsel for the petitioner urged that as one of the learned judges remarked in his decision that the petitioner could file a writ and challenge the validity of the assessment order made under section 23A of the Income-tax Act, therefore, the petitioner was entitled to file the present writ. I am unable to uphold this argument. The observations of the learned judge were casual and that the same could not govern the rights of the parties. The effect of the judgment of the High Court returning the questions unanswered was to uphold the judgment of the Appellate Assistant Commissioner. That judgment was not reversed and thus the rights of the parties would be governed by the same. The observations of one of the learned judges as submitted earlier was determinative of the controversy before him. What operated as res judicata was the decision given in the reference by the two judges concurring with the conclusion arrived at by them. The observation of Mr. Justice D. R. Khanna which has been quoted above concludes the controversy against the petitioner. Neither before the the Income-tax Officer nor in appeal had the question of jurisdiction of the authorities to impose tax under section 23A of the Income-tax Act been raised.
Counsel for the petitioner urged that as in the instant case notice had not been issued to the petitioner-company, imposition of super-tax under section 23A of the Indian Income-tax Act, 1922, was without any authority of law and thus the Union of India was liable to refund the same. For the proposition submitted, counsel relied on a decision of the Bombay High Court in Chandabai Daga v. ITAT [1992] 194 ITR 422 and that of the Supreme Court in Salonah Tea Co. Ltd. v. Superintendent of Taxes [1988] 173 ITR 42. The Supreme Court held at page 46 of 173 ITR (at page 427 of 194 ITR) :
"The Supreme Court held that where the assessment had been made without jurisdiction, it was manifest that the respondents had no authority to retain the money that had been collected and it was liable to be refunded. The question was whether, under article 226, the court should direct the refund. The court said (at page 46), Normally speaking, in a society governed by rule of law, taxes should be paid by citizens as soon as they are due in accordance with law. Equally, as corollary of the said statement of law, it follows that taxes collected without the authority of law, as in the case, from a citizens should be refunded, because no State has the right to receive or to retain taxes or monies received from citizens without the authority of law. After a review of earlier judgments, the Supreme Court held that normally, in a case where monies had been realised without the authority of law, the same has to be refunded and in an application under article 226, the court had the power to direct the refund unless there had been avoidable laches on the part of the petitioner."
The proposition of law submitted by the petitioners counsel is that where monies had been realized without the authority of law, the court had the power for ordering its refund.
In the instant case, there are two hurdles before the petitioner. The first is that the present writ petition was filed in 1980 whereas the amount of tax was realized from the petitioner in 1965. The other truth of the matter is that the petitioner appeared in the assessment proceedings in pursuance of the notice issued by the Income-tax Officer under section 23A of the Indian Income-tax Act, 1922, to the two companies named above. Having appeared in the assessment proceedings, the petitioner cannot complain that the assessment proceedings, the petitioner cannot complain that the assessment was illegal because of want of notice to it. It is wrong to argue that the court has unlimited powers for directing refund when the realization of money had been made unlawfully.
For the reasons given above, the writ petition fails and is dismissed. No costs.