Judgment:
D.P. Wadhwa, J.
1. The petitioner, a non-resident Indian and a much harassed man, filed this petition under article 226 of the Constitution, seeking a writ in the nature of mandamus or other such writ, direction or order directing the two respondents to forthwith grant the refund or tax aggregating to Rs. 16,17,109.32 along with interest thereon by re depositing the same in his Foreign Currency Non-Resident Account in the Indian Overseas Bank, Tolstoy Marg, New Delhi. The two respondents, respectively, are the Commissioner of Income-tax, Delhi-V, and the Inspecting Assistant Commissioner of Income-tax (Assessment), Range-XI. The petition was filed on August 3, 1987. Then, on October 5, 1987, rule D.B. was issued and it was ordered to be listed as high up on December 7, 1987. Somehow the matter has been pending all this period, though, the petitioner has been moving successive applications for early hearing of the petitioner has been moving successive applications for early hearing of the petition. The Petitioner said that under the Income-tax Act, 1961 (for short, 'the Act'), the refund could be withheld only under the provisions of section 245 and inasmuch as there was no such order he was entitled to refund forthwith. The respondents did not dispute that the petitioner was entitled to the refund on his succeeding in appeal before the Income-tax Appellate Tribunal ('the Appellate Tribunal', for short), but said that a petition under section 256 had been filed before the Appellate Tribunal for referring certain questions of law for the decision of the High Court. This application, they said, was filed on July 28, 1987, and was pending adjudication. They also said that the first respondent had passed orders under section 241 to withhold the refund until April 30, 1988. It is also mentioned that a criminal complaint under sections 276C and 277 of the act had also been filed against the petitioner arising out of the same assessment year (assessment year 1986-87). In the order under section 241 filed with the reply affidavit it was stated that a refund of Rs. 18,98,440 had become due to the petitioner in the case.
2. During the pendency of these proceedings, the petition under section 256 of the Act, as mentioned above of the respondents was dismissed by the Appellate Tribunal, and yet another petition filed under section 256 of the act before this court seeking a statement of case from the Appellate Tribunal was also dismissed. We have been told that the complaint filed under sections 276C and 277 of the Act also met with the same fate and was dismissed.
3. It appears, every six months, orders were being passed by the authority under section 241 of the Act withholding refund due to the petitioner. In their reply affidavit, the respondents also referred to the provisions of section 244 of the Act which entitles an assessed to interest on the refund due which was not paid within a certain period.
4. During the pendency of these proceedings, the Assessing Officer assessed the petitioner for the assessment year 1988-89 on the interest which had become due to him under section 244 of the Act. The Assessing Officer found that a sum of Rs. 6,83,244 had become due to the petitioner as interest on the refund of Rs. 16,17,105. The petitioner was accordingly assessed at Rs. 6,83,224. Penalty proceedings for this year were also initiated under section 271 for delay in filing the return, under section 273 for non-filing of the estimate, as also under section 271 for furnishing inaccurate particulars of income.
5. All these developments led the petitioner to amend his writ petition. He now prayed for (a) restoration of his Non-Resident Indian account in foreign currency with the Indian Overseas Bank which after attachment by the second respondent had been withdrawn on January 11, 1986, and June 12, 1986, and (b) for quashing all orders under section 241 of the Act and the assessment order for the assessment year 1988-89 creating a demand of tax and all other orders levying penalty, etc., for the assessment year 1988-89. The petitioner, thereforee, wanted orders enabling him to have his Non-Resident Indian Account in foreign currency with interest accrued thereon in foreign currency restored ante. On account of the assessment order for the assessment year 1988-89, it is stated that a demand of Rs. 5,75,462 was created as a regular tax demand. A penalty of Rs. 6,41,720 was imposed under section 271 and Rs. 3,60,967 and Rs. 1,15,510 as penalties, respectively, under sections 273 and 271 of the Act were also imposed. All these penalties were imposed on May 1, 1991. The assessment order for the assessment year 1988-89 is dated January 29, 1990.
6. The second respondent on September 9, 1991, filed his counter affidavit to the amended writ petition. The facts have not been disputed. It is now stated that a special leave petition against the order of the High Court dismissing the petition of the Revenue under section 256 of the Act had been filed in the Supreme Court and orders under section 241 of the Act are being validly made by the respondents withholding the refund. Adjustment of tax demands and penalties for the assessment year 1988-89 is, however, not claimed.
7. The petitioner had remitted to India from abroad a certain amount of foreign currency equivalent to Rs. 17,16,928. For the assessment year 1986-87, the Assessing Officer held that out of this amount, a sum of Rs. 10,28,928 represented income of the petitioner from undisclosed sources. He taxed the petitioner on that. A penalty of Rs. 12,28,856 was also levied on February 24, 1986, under section 271 of the Act. The petitioner appealed to the Commissioner of Income-tax (Appeals) who confirmed the order of the Assessing Officer. However, the Appellate Tribunal allowed the appeal of the petitioner deleting the addition of Rs. 10,28,928 and cancelled the penalty. Those order by the Appellate Tribunal was made on May 14, 1987. The Revenue then filed a reference application under section 256 before the Appellate Tribunal which, as noted above, was rejected. The High Court also dismissed the petition of the Revenue under section 256 of the Act. It is stated that the Revenue then filed a special leave petition which is pending in the Supreme Court.
8. In the counter-affidavit, it is also mentioned that for the assessment year 1987-88, the petitioner was assessed on the income of rupee one and no penalty proceedings were initiated, but for the assessment year 1988-89, the assessment was made on the interest income of Rs. 6,83,224 on the ground that he said interest had accrued on the refund of Rs. 16,17,105 due to the petitioner in respect of the assessment year 1986-87. It may be mentioned that the Assessing Officer had addressed a letter dated September 10, 1985, to the Manager, Indian Overseas Bank, attaching the amounts lying in the two accounts of the petitioner which were in foreign currency. These two amounts in the FCNR/SDR Accounts of the petitioner amounted to U. S. dollars 35,000 and U.S. dollars 99,995. In the letter attaching these two amounts, it was mentioned that the equivalent of these amounts in rupees was, respectively, Rs, 4,55,000 and Rs. 12,99,935. Then these two attached amounts were withdrawn by the Assessing Officer from the Indian Overseas Bank by addressing two letters dated September 12, 1985, and September 18, 1985.
9. All through, the plea of the Revenue had been that refund of the amount could not be granted to the petitioner in view of the powers exercised under section 241 of the Act. Section 241, before its amendment, with effect from April 1, 1989, was as under :
'241. Power to withhold refund in certain cases. - Where an order giving rise to a refund is the subject-matter of an appeal or further proceeding or where any other proceeding under this Act is pending, and the Assessing Officer is of the opinion that the grant of the refund is likely to adversely affect the Revenue, the Assessing Officer may, with the previous approval of the Chief Commissioner withhold the refund till such time as the Chief Commissioner or Commissioner may determine.'
10. After April 1, 1989, section 241 as substituted is as under :
'241. Where refund of any amount becomes due to the assessed as a result of an order under this Act or under the provisions of sub-section (1) of section 143 after a return has been made under section 139 or in response to a notice under sub-section (1) of section 142 and the Assessing Officer is of the opinion, having regard to the fact that -
(i) a notice has been issued, or is likely to be issued, under sub-section (2) of section 143 in respect of the said return; or
(ii) the order is the subject-matter of an appeal or further proceeding; or
(iii) any other proceeding under this Act is pending.
that the grant of the refunds likely to adversely affect the Revenue, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissioner, withhold the refund till such time as the Chief Commissioner or Commissioner may determine.'
11. Admittedly, after the success of the petitioner before the Appellate Tribunal whose order was made on May 14, 1987, he became entitled to the refund of the amounts which had been withdrawn by the Assessing Officer from the accounts of the petitioner in the Indian Overseas Bank. The whole stress of the Revenue had been that pendency of the special leave petition in the Supreme Court would mean that there is no finality of the order entitling the petitioner to refund and that heat was the subject-matter of further proceedings. In the counter-affidavit, the Revenue has clearly stated that the last order under section 241 of the Act was passed on March 8, 1991, permitting the withholding of the refund up to October 31, 1991, or till disposal of the special leave petition before the Supreme Court, whichever was earlier. The petitioner does not dispute that such an order has been passed after as well and perhaps in force till this date.
12. The petitioner disputed that any special leave petition had been filed by the Revenue, or if filed, was not listed in the Supreme Court all the period. On May 15, 1990, this court noticed the passing of the order under section 241 of the Act withholding the refund. It directed the respondents to file a detailed affidavit indicating what according to the Income-tax Department was the tax due and payable by the petitioner, or what would be the likely demand of tax against the petitioner. It also directed the respondents to indicate the nature or reason of the demand so as to justify the retention of the money under section 241 and whether the petitioner had been told of any order having been passed under this section and whether the reasons for passing that order had been communicated to the petitioner. It was directed that the reasons for retention of money should be filed along with the affidavit. This affidavit was never filed. Though nothing turns on this, it shows the conduct of the Department. On March 14, 1991, this court again recorded the submission of the respondent as under :
'Counsel for the respondents states that against the order passed by this court under section 256, a special leave petition was filed, probably in the year 1989. The said special leave petition has not been listed, according to the learned counsel. The number of the special leave petition should be communicated to Mr. Bansal by April 1, 1991. Mr. Rajendra states that a request will be made in the Supreme Court on Monday the 8th April, 1991, for the listing of the special leave petition. This is being noted by us so that counsel for the petitioner herein has notice of the case being mentioned so that he can also request the Supreme Court for expeditious hearing of the special leave petition. This is without prejudice to the petitioner's contention that pendency of the special leave petition is no ground for withholding of the refund.'
13. Nothing was done by the respondents in pursuance of this order. Then on December 2, 1991, this court again noticed that the question which arose in the petition was with regard to the refund of the tax which had been realised by the respondents in respect of the assessment year 1986-87 and money realised from the Non-Resident Indian account of the petitioner. It noticed that the Department had filed a special leave petition which had been pending since last two years and had not come up for preliminary hearing and in the meantime the order under section 241 had been passed. The court also noticed that it was evident that if the special leave petition was dismissed, the petitioner would be entitled to refund and the pendency of the petition and continuance of the order under section 241 was causing grave prejudice to the petitioner. A direction was issued to the respondents to make a request or mention in the Supreme Court by an application or otherwise and try to have the special leave petition listed at an early date. It was also directed that mention should be made within two months with advance information to be given to counsel for the petitioner. Nothing happened. Then on March 3, 1992, the court recorded that counsel for the Revenue was unable to give any information as to what had happened after the last order. Counsel stated that he had communicated to the first respondent that such direction had been issued by the court. As no information was available with counsel for the Department a direction was issued to the first respondent to file within two weeks an affidavit indicating as to 'what had transpired to the special leave petition and why our directions of December 2, 1991, have not been complied with, if request has not so far been made to the Supreme Court'. On March 30, 1992, the court recorded the statement of counsel for the Revenue that the hearing in the Supreme Court had been fixed for April 20, 1992. The matter was thereafter adjourned for directions. On September 14, 1992, this court recorded that counsel for the Revenue had shown a letter dated May 1, 1992, from the Central Agency section of the Ministry of Law stating that the special leave petition filed by the Supreme Court could not be listed earlier for some reasons. Counsel requested for some more time and the adjournment was strenuously opposed by the petitioner. Still in the circumstances the matter was adjourned giving the Revenue a last opportunity. Till this date this court has not been informed of the date of the filling of the special leave petition, its number, or as to what happened in the special leave petition. There is, however, a letter dated January 23, 1992, of the first respondent addressed to the Chief Commissioner of Income-tax, Delhi-III, New Delhi, wherein it is mentioned that the Department had filed a special leave petition on October 17, 1989, which was pending, but as informed by standing counsel in the Supreme Court no special leave petition number had been allotted after considering the matter regarding condensation of delay in the case. It was stressed in this letter that the matter being in dispute the refund had been withheld under section 241 to protect the interest of the Revenue because the assessed (petitioner) was a non-resident and if once refund was issued then the Department might not be able to recover the demand if it became due on account of the decision on the special leave petition before the Supreme Court. The first respondent thereforee, requested that necessary steps be taken to have the special leave petition fixed for an early date. A copy of the order of this court dated December 2, 1991, was also sent by the first respondent to the Chief Commissioner of Income-tax with an advance copy of the letter to the Central Board of Direct Taxes. This is all about the special leave petition on the basis of which orders under section 241 of the Act had been issued one after the other.
14. No further proceedings after the decisions in the appeals are pending under the Act. This court has not granted any certificate under section 261 of the act that it is a fit case for appeal to the Supreme Court. After dismissal of the application under section 256 of the Act filed by the Revenue the matter ended at that. No other proceedings under the Act also pending. The Revenue is interpreting the sentence 'the order is the subject-matter of an appeal or further proceeding' in section 241 as applicable to filing of a special leave petition in the Supreme Court under article 136 of the Constitution. This is incorrect. Section 241 of the act refers to the right of appeal provided under the act and further proceedings connected therewith like application under sub-sections (1) and (2) of section 256 of the Act or that under section 261 of the Act. Section 241 can have no reference to proceedings under article 136 of the Constitution. Under this article, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any case or matter passed or made by any court or Tribunal. If the Revenue wants to withhold refund after filing a petition under article 136, it has to obtain stay from the Supreme Court and cannot rely on section 241. In this case, there is nothing to show pendency of a special leave petition, to say nothing of grant of any leave by the Supreme Court. Merely by filing a special leave petition in the registry of the Supreme Court after limitation had expired and not knowing its fate all these years and, thus, thwarting the right of the petitioner to the refund is something which is grossly illegal. In Suri Sons v. CIT , a Bench of the Punjab and Haryana High Court even held that the assessing authority was not justified in withholding the refund, in exercise of its power under section 241 of the Act, which had become due to the assessed merely for the reason that reference proceedings under section 256 of the act initiated by the Revenue questioning the validity of the order under which the refund had become due were pending before the appropriate authority.
15. Mr. Pandey referred to a decision of a learned single judge of the Bombay High Court in Suresh B. Jain v. P. K. P. Nair : [1992]194ITR148(Bom) . This authority is to the effect that there is nothing wrong if interest payable to an assessed under section 244 of the Act is set of and adjusted against the tax liability of an assessed under section 245 as if the said amount was a refund due to an assessed. We do not see how this judgment is relevant to the present case. Then reference has also been made to a decision of the Andhra Pradesh High Court in Andhra Pradesh State Road Transport Corporation v. CIT : [1975]100ITR401(AP) , where the court held that an order under section 241 of the Act could be made withholding the amount refundable to the assessed on the ground that the appeal preferred by the Revenue against the judgment of the High Court was pending before the Supreme Court. From this judgment, it is not clear to us if the appeal in the Supreme Court was pending under section of the Act. If this authority is for the proposition that where a special leave petition is filed in the Supreme Court under article 136 of the Constitution an order under section 241 of the Act can be made, we are in respectful disagreement with the same.
16. When this matter was being adjourned from time to time on the request of the Revenue for giving us the particulars of the special leave petition and the stage in which it was, we have been giving our mind that perhaps section 241 was not applicable. When the arguments were finally heard on May 13, 1993, counsel for the Revenue thrust into the hands of the petitioner a letter dated May 5, 1993, addressed to him by the Assessing Officer as if the Revenue had now come up with some trump car. This letter purportedly contains an order under section 245 of the Act and is as under :
To
Shri Vijay Kr. Bhatti,
601, Rohit House,
Tolstoy Marg,
New Delhi.
Sir,
Sub : Withholding of refund under section 241 of the Income-tax Act
A refund of Rs. 2,04,781 plus interest payable to you under section 244 by the Government has been withheld by the undersigned till 30-6-1993, with the prior permission of the learned C. I.T., Delhi-V, New Delhi. This is for your information.
Total refund due to you for the assessment year 1986-87 was as under :-
Rs.Refund on account of regular tax 7,52,433Refund on account of penalty 11,46,007-------------------Total refund including interest of Rs. 2,81,330 18,98,440-------------------- (Collections of Rs. 6,20,577 on 11-1-1986 and Rs. 9,96,532 on 10-6-1986, were made after attaching the bank account in Indian Overseas Bank). During the course of regular assessment for the assessment for the assessment year 1988-89, regular tax demand or Rs. 5,75,462 for the assessment year 1988-89 was adjusted against refund or Rs. 18,98,440 and penalty demands of Rs. 3,60,967 and Rs. 1,15,510 under section 271, 273 and 271, respectively, for the assessment year 1988-89, aggregating to Rs. 11,15,197 were adjusted against the balance refund or Rs. 13,22,978 (Rs. 18,98,440-5,75,462 demand for the assessment year 1988-89) and now the balance refund or Rs. 2,07,781 (Rs. 13,22,978 - 11,15,197 demand adjusted) was/is due to you which has been withheld up to 30-6-1993, with the prior approval of the learned C.I. T., Delhi-V, New Delhi.
Yours faithfully,
(Sd.) S. R. Bharti,
Assistant Commissioner of Income-tax
Inv. Circle 7(1). New Delhi.'
17. It does appear to us that this order has been issued in order to keep the petitioner deprived of his lawful refund. Section 245 of the Act is as under :
'245. Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set of the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.'
18. There is nothing on the record or even in the letter to suggest that before passing the order, the provisions of section 245 were complied with. For the purpose of any set of an intimation has to be given in writing to the assessed of the action proposed to be taken under this section. Earlier to this order it has never been the case of the Revenue to claim any set of. This order purporting to be under section 245 of the Act is neither fair, nor just, nor reasonable and has to be ignored. This order also shows scant respect by the authorities for the pendency of these proceedings in this court and this does not commend itself to us, to say the least.
19. We have not been told by the Revenue any reason as to why assessments for years subsequent to the assessment year 1988-89 were not taken though interest was accruing all this period on the refund due to the petitioner. We are of the view that the assessment order for the assessment year 1988-89 and penalties imposed on the petitioner have no meaning particularly when we are of the view that withholding of the refund by the respondents was illegal and all orders passed under section 241 of the Act, after dismissal of the application under section 256 of the Act by this court, were without jurisdiction and illegal. Rather it has been contended by the petitioner that the interest accrued on non-resident account maintained in foreign exchange is not liable to tax. There had been no answer to this by the Revenue.
20. This petition is allowed. The amounts of U.S. dollars 35,000 (Rs. 4,55,000) and U.S. dollars 99,995 (Rs. 12,99,935) along with interest accrued thereon be deposited back by the respondents in the FCNR/SDR accounts of the petitioner in the Indian Overseas Bank, Rohit House, 3, Tolstoy Marg, New Delhi, within one month from today. If any permission is required for crediting the amount of interest in the accounts of the petitioner, a non-resident Indian as aforesaid, from the Reserve Bank of India, or any other authority under the provisions of the Foreign Exchange Regulation Act, 1973, or any other law, the same shall be obtained by the Indian Overseas Bank.
21. This case is one glaring example of the indifferent attitude of the assessing authority. When all round efforts are being made by the State to enter into free market economy, and to improve the foreign exchange resources of the country, a non-resident Indian has been denied of his own money due to orders which are patently illegal. We really fail to understand as to how successive orders had been made to deny the non-resident Indian of his lawful dues, first on the basis of orders withholding refund, then on hypothetical assessment on interest, and then claiming adjustment. In opinion, it is a fit case where we should impose exemplary costs on the Revenue which we assess at Rs. 11,000 (including counsel fee of Rs. 5,500). Rule is made absolute.
22. A copy of this order will be sent to the Indian Overseas Bank, Tolstoy Marg, New Delhi, by the registry for compliance.