Punjab-Haryana High Court
Gem Granites vs Commissioner Of Income-Tax And Ors. on 26 September, 2003
Equivalent citations: (2004)192CTR(P&H)26, [2004]267ITR640(P&H)
Author: K.S. Garewal
Bench: K.S. Garewal
JUDGMENT G.S. Singhvi, J.
1. In this petition, the petitioner has prayed for issuance of a direction to the authorities of the Income-tax Department to pay Rs. 3,65,17,800 along with interest out of the assets of respondent No. 7 seized/ attached by them. It has further prayed for issuance of a direction to them to remit the amount of Rs. 38,03,511.50 recovered from account No. 1030-142816-100 of respondent No. 7 in Times Bank, Faridabad.
2. The petitioner is a registered partnership firm having its office at 78, Cathedral Road, Chennai. It is mainly engaged in granite quarrying, processing and marketing of the same in India and abroad. It is also engaged in the business of textiles, construction, hotel, sugar, software, etc. The chairman of the petitioner-firm, Shri R. Veeramani, is said to have been induced by respondents Nos. 6 and 7 to agree to setting up a residential colony at Gurgaon and persuaded him to remit money in the name of respondent No. 7 and one Dharam Pal for the purpose of obtaining the requisite permission from the office of the Director, Town and Country Planning, Haryana. According to the petitioner, a total sum of Rs. 5,20,04,800 was paid at the instance of respondents Nos. 6 and 7. Out of this, a sum of Rs. 3,65,17,800 was sent in the name of respondent No. 7 and a sum of Rs. 1,54,87,000 was sent in the name of Dharam Pal through bank drafts.
3. The house of respondents Nos. 6 and 7 situated at Faridabad was searched by the authorities of the Income-tax Department on May 15, 1999, under Section 132 of the Income-tax Act, 1961 (for short, "the Act"). In the course of search, a number of papers and documents concerning movable and immovable assets including various bank accounts were seized. It was also revealed that respondent No. 7 was holding bank account No. 1030-142816-100 with Times Bank, Faridabad Branch, which she did not disclose to the authorities of the Income-tax Department. On coming to know about the search conducted at the premises of respondents Nos. 6 and 7, the petitioner filed a complaint against respondent No. 7 and Dharam Pal on the basis of which FIR No. 382 dated May 22, 1999, was registered at the Police Station, Central Faridabad, under Sections 420/467/468/471/406/120B of the Indian Penal Code. Respondents Nos. 6 and 7 were prosecuted in the court of Additional Chief Judicial Magistrate, Faridabad, who, vide judgment dated November 2, 2001, convicted and sentenced them to undergo rigorous imprisonment for various offences and imposed a fine of Rs. 35 lakhs, in all, with a direction that 50 per cent, of the fine be paid to the claimant as compensation and 50 per cent, be deposited in the State exchequer. In default of payment of fine, respondents Nos. 6 and 7 were directed to undergo further rigorous imprisonment for six months under each heading.
4. After the registration of the criminal case against respondents Nos. 6 and 7, the general manager of the petitioner sent a letter dated July 19, 1999 (annexure P 8), to the Deputy Director (Investigation), Income-tax Department, Faridabad (respondent No. 3), that the money sent to respondent No. 7 and Dharam Pal did not belong to them and the same should not be treated as their assets and be returned to the Gem group of companies. This was repeated in a communication dated May 27, 1999 (annexure P 9), sent by R. Veeramani, the chairman of the Gem group of companies to respondent No. 3 and letter dated February 10, 2000 (annexure P 10), sent by the general manager of the Gem group of companies to respondent No. 3. In October, 2001, the chairman of the Gem group of companies was served with summon (annexure P 11 dated October 5, 2001) under Section 131 of the Act to appear as a witness in connection with the proceedings initiated against respondents Nos. 6 and 7 and to produce all books of account from which the amounts were transferred to them. On October 18, 2001, the general manager of the petitioner sent a letter annexure P 12 to the Deputy Commissioner of Income-tax (Range-I), Faridabad (respondent No. 5), that the money recovered from respondents Nos. 6 and 7 be returned to the Gem group of companies.
5. The grievance of the petitioner is that notwithstanding the representations made from time to time, the authorities of the Income-tax Department have attached the movable and immovable assets in the hands of respondent No. 7 including Rs. 38,23,500 and the appeals filed by it under Section 246A of the Act in relation to the assessment years 1997-98, 1998-99 and 1999-2000 were summarily dismissed by the Commissioner of Income-tax (Appeals), Faridabad (respondent No. 4), without giving opportunity of hearing to its representative.
6. The petitioner has challenged the order of assessment as well as order dated February 1, 2002, vide which respondent No. 4 dismissed the appeals filed by it by contending that respondents Nos. 1 to 5 committed a grave illegality by treating the money lying in the account of respondent No. 7 as her income despite the fact that in the criminal case, the same has been proved to be belonging to it. It has challenged the appellate order passed by respondent No. 4 on the ground of violation of the rules of natural justice.
7. In the written statement filed by respondent No. 5 on behalf of himself and respondents Nos. 1 and 2, it has been averred that the petitioner is not entitled to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India because it has already filed a civil suit in the High Court of Judicature at Chennai for recovery of Rs. 9,31,73,287 including the amount of Rs. 5,20,04,800. It has been further averred that the writ petition is liable to be dismissed because the petitioner has failed to avail of the remedy of appeal before the Income-tax Appellate Tribunal in so far as order annexure P13 passed by respondent No. 4 is concerned. On the merits of the petitioner's assertion that the amount remitted by respondent No. 7 has been treated as her income for the purpose of assessment, respondents Nos. 1, 2 and 5 have made the following averments in paras. 25, 26, 29 and 30 :
"25. It is correct that an assessment order was passed by respondent No. 5 on October 31, 2001, under Section 158BC(c) read with Section 144 of the Income-tax Act, 1961, in respect of Smt. Sabita Behl (respondent No. 7) for the block period April 1, 1989, to May 15, 1999, but no part of the moneys (Rs. 3,65,17,800 received by M/s. BAS Consultants and Rs. 1,54,87,000 received by Sh. Dharam Pal) sent by M/s. Gem Granites, Chennai, was assessed as income in the hands of respondent No. 7. In fact the Assessing Officer after examination of the books of account of the petitioner produced under Section 131 during the course of assessment proceedings held that the sources of these remittances have been taken as explained and therefore no addition was made of this amount. (Copy of assessment order passed in the case of respondent No. 7 is annexed as annexure R 1). As regards the amount of Rs. 38,03,511 allegedly lying in bank account No. 1030-142816-100 in the Times Bank, Faridabad, no specific addition of this amount has been made (para. 21 of the assessment order). In fact an addition of Rs. 30 lakhs made in the assessment order was on account of thousands of entries made in various bank accounts whereafter the deposit of drafts/cheques, same amount was withdrawn and these entries appearing in the various bank accounts are not discernible to any particular depositor and hence to be fair to the assessee, the Assessing Officer made an addition of Rs. 30 lakhs only and not the aggregate of various amounts deposited in different bank accounts. From the various bank accounts maintained by respondent No. 7, it was clear that she had received huge amounts from not only M/s. Gem Granites but also from others. Amongst the parties who had also sent the money to respondent No. 7 were M/s. Tatav Darshi Bandhu Pvt. Ltd.-Rs. 38.16 lakhs ; M/s. dolphin International Ltd.-Rs. 76.48 lakhs ; M/s. Palm Pharmaceuticals Ltd.-Rs. 34.00 lakhs ; M/s. Mac Agro Industries Ltd.--Rs. 18.88 lakhs ; M/s. Suncity Projects Ltd.--Rs. 18.76 lakhs ; etc. Further an addition of Rs. 120 lakhs was made out of total addition of Rs. 1,34,40,000 on account of unexplained investment in FDRs (para. 16 of the assessment order). This addition was made on the basis of papers seized during search at the residence of respondent No. 7 and in the absence of any explanation coming forth from the assessee, i.e., respondent No. 7.
26. It is not correct that the amount of Rs. 5,20,04,800 has been treated as income of Sabita Behl as discussed above in para. 25. Further in respect of Rs. 38,03,511.50 lying in the bank account of respondent No. 7, no specific addition has been made in respect of this amount but only an addition of Rs. 30 lakhs on estimate basis has been made (para. 21 of assessment order) as peak credit of thousands of entries could not be ascertained out of various bank accounts. Further an addition of Rs. 120 lakhs has been made in respect of unexplained investments in FDRs on the basis of seized documents (para. 16 of the assessment order).
29. and 30. As stated above, against paras. 25 and 26, the specific amount of Rs. 38,03,511.50 has not been treated as income of Smt. Sabita Behl (respondent No. 7) in the assessments for the assessment year 1997-98 or 1998-99 or 1999-2000. In fact no return for the block period April 1, 1989, to May 15, 1999, has been filed by Smt. Sabita Behl. The assessment has been made ex parte under Section 158BC(c) read with Section 144 of the Income-tax Act, 1961, on the basis of seized documents and records for earlier years. As regards filing of appeals by the petitioner before the Commissioner of Income-tax (Appeals), Faridabad (respondent No. 4), who rightly dismissed the appeal as being invalid and non est in the eyes of law as is clear from the order annexure P 13. The appeal filed by the petitioner before respondent No. 4 was incompetent on further ground that the assessment order annexure R 1 is not against the petitioner but against respondent No. 7 and the petitioner cannot be said to be aggrieved against the said order and even the demand notice has not been served on the petitioner. In response to a notice under Section 131 the petitioner's representatives appeared with books of account and balance-sheet in which it was found debited in the account of respondent No. 7 as amount paid. The same also stood reflected in the balance-sheet of the petitioner whereas respondents Nos. 6 and 7 did not produce any books of account nor did they file any return for the block period. Therefore, the petitioner has absolutely no legal claim against the Department in respect of this amount. It is further clarified that the amount in question has not been treated as income of respondent No. 7." Respondents Nos. 1, 2 and 5 have controverted the petitioner's plea that it falls within the scope of the expression "any person aggrieved" appearing in Section 246A of the Act. Along with the written statement, they have placed on record copy of the assessment order (annexure R1) passed by respondent No. 5. In his separate written statement, respondent No. 3 has averred that an order under Section 132(3) of the Act was made to safeguard the interests of the Revenue.
8. In the replication filed on behalf of the petitioner, it has been averred that the civil suit filed in the High Court of Judicature at Chennai has nothing to do with the proceedings drawn by the Income-tax Department. It has been further averred that respondent No. 4 committed a grave illegality by dismissing the appeal filed by it against the order of assessment.
9. Shri H.L. Sibal, learned senior counsel appearing for the petitioner, vehemently argued that in view of the categorical finding recorded by the Additional Chief Judicial Magistrate in his judgment dated November 2, 2001, the movable and immovable properties recovered during the course of search under Section 132 of the Act cannot be treated as assets of respondent No. 7 and respondent No. 5 committed a grave illegality by treating the same as income of respondent No. 7 for the purpose of assessment under Section 158BC(c) read with Section 144 of the Act. Shri Sibal further argued that order annexure P 13 is liable to be declared as nullity because respondent No. 4 did not give opportunity of hearing to the petitioner's representative before dismissing the appeal filed against the order of assessment.
10. Shri A.S. Tewatia, learned counsel for respondents Nos. 1 to 5 laid emphasis on the fact that the petitioner has already filed a civil suit against respondents Nos. 6 and 7 and others for recovery of the amount allegedly paid to them and, therefore, the writ petition is liable to be dismissed. He referred to the averments contained in the plaint (annexure P 12/A) to show that Rs. 5,20,04,800 which the petitioner is said to have paid to respondent No. 7 and Dharam Pal is a part of the claim made by the petitioner against respondents Nos. 6 and 7 and others who have been impleaded as defendants and argued that in the face of the said claim, the petitioner cannot seek a mandamus for directing respondents Nos. 1 to 5 to pay the said amount. Learned counsel submitted that the findings recorded by the Additional Chief Judicial Magistrate cannot be made basis for nullifying the order of assessment passed by the competent authority under Section 158BC(c) read with Section 144 of the Act.
11. We have thoughtfully considered the respective arguments. A careful reading of the plaint (annexure P 12/A) shows that after the decision of the criminal case and finalisation of the assessment proceedings initiated by respondent No. 5 against respondent No. 7, the petitioner joined other sister companies and filed suit on April 12, 2002, against respondents Nos. 6 and 7, M/s. AVB Project, of which respondent No. 6 is shown to be the proprietor, and Dharam Pal with the following prayers :
"(a) directing the defendants Nos. 1 to 4 herein to pay jointly and severely a sum of Rs. 9,31,73,287 (rupees nine crores thirty one lakhs seventy-three thousand two hundred and eighty seven only) to the first plaintiff herein together with further interest at the rate of 24 per cent, per annum, for the principal amount of Rs. 6,90,17,250 from the date of plaint till realisation ;
(b) directing the defendants Nos. 1 to 4 herein to pay jointly and severally a sum of Rs. 68,04,675 (rupees sixty eight lakhs four thousand six hundred and seventy five only) to the second plaintiff herein together with further interest at the rate of 24 per cent, per annum for the principal amount of Rs. 50,40,500 from the date of plaint till realisation ;
(c) directing the defendants Nos. 1 to 4 herein to pay jointly and severally a sum of Rs. 13,47,300 (rupees thirteen lakhs forty seven thousand three hundred only) to the third plaintiff herein together with further interest at the rate of 24 per cent, per annum for the principal amount of Rs. 9,98,000 from the date of plaint till realisation ;
(d) directing the defendants Nos. 1 to 4 herein to pay jointly and severally a sum of Rs. 21,44,475 (rupees twenty one lakhs forty four thousand four hundred and seventy five only) to the fourth plaintiff herein together with further interest at the rate of 24 per cent, per annum for the principal amount of Rs. 15,88/500 from the date of plaint till realisation ;
(e) to pay the cost of the suit to all the plaintiffs ;
(f) to pass such further or other orders as this hon'ble court may deem fit and proper and thus render justice."
12. In paragraphs 7, 8 and 9 of the plaint, reference has been made to the events which led to the payment of Rs. 5,20,04,800 to respondent No. 7 and Dharam Pal for the purpose of development of a housing colony. It is, thus, evident that the petitioner has already availed of the remedy of civil suit for recovery of the amount paid to respondent No. 7 and Dharam Pal. It is, therefore, not possible to entertain its plea for issuance of a writ in the nature of mandamus to respondents Nos. 1 to 5 to release the sums of Rs. 3,65,17,800 and Rs. 38,03,511.50 which are said to be the subject-matter of assessment.
13. We are also not inclined to entertain the petitioner's prayer for quashing of order annexure P 11 because the appeals filed by it were not accompanied by the order of assessment. Moreover, the reason assigned by respondent No. 4 for declining to entertain the appeals is consistent with the language of Section 246A of the Act.
14. For the reasons mentioned above, the writ petition is dismissed leaving the petitioner free to pursue the civil suit which it has filed along with sister companies in the High Court of Chennai.