iqubal Abdul Sattar Ghaniwale Vs. Commissioner of Income Tax (iii) - Court Judgment

Excerpt:
direct taxation - section 132 of income tax act, 1961 - department of income tax directed bank to convert amount of rs. 9 lacs in form of demand draft from petitioner's account in favour of department before order of assessment is passed - respondent bank transferred the amount from petitioner's account in favour of department - hence, present petition - whether under section 132 of act income tax department have power to direct conversion of amount before order of assessment - held, after observation of provision of section 132 of income tax act, department have no power to transfer of amount from account of petitioner before assessment order - appeal partly allowed, and directed respondent to compensate excess amount - section 34: [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on petition under section 34 of the act bombay court fees act (36 of 1959), schedule i, article 3, schedule ii, article 1(f)(iii) held, according to article 3 of schedule i, on any plaint, application or petition or memorandum of appeal for setting aside or modifying an award, same court fee is payable as is payable on a plaint or memorandum of appeal under article 1. thus, when an award is challenged by a plaint, application, petition or memorandum of appeal, court fee is payable on ad valorem basis. but from this requirement of payment of court fee on ad valorem basis, article 3 excludes an application or petition or memorandum of appeal filed in civil or revenue court challenging any award made under the arbitration act, 1940.thus, the provisions of article 3 of schedule 1 do not apply when an application is filed or appeal is filed challenging an award made under the arbitration act, 1940. thus the provisions of article 3 of schedule i do not apply when an application is filed challenging an award made under the arbitration act, 1940. the question, therefore, that arises for consideration is whether reference to the provisions of 1940 act found in article 3 of schedule i of the bombay court fees act can be said to include reference to the 1996 act. perusal of the provisions of section 8 of general clauses act shows that where by a central enactment any provision of a former enactment is repealed and re-enacted with or without modification then reference in any other enactment to the provisions so repealed shall, unless a different intention appears, be construed as references to the provisions so re-enacted. in the present case, it is common ground that the former enactment is the 1940 act, the new enactment is the 1996 act and any other enactment is the bombay court fees act, the only provision of the 1940 act referred to in article 3 of schedule 1 of the bombay court fees act is the provisions of section 33 of the 1940act and bare comparison of that provision with the provisions of sub-section (1) of section 34 of the 1996 act shows that the provision of section 33 of 1940 act is repealed and re-enacted in sub-section (1) of section 34 of the 1996 act with slight modification. therefore, reference to the provisions of section 33 of the 1940 act in article 3 of schedule-i of the bombay court fees act has to be construed, in view of the provisions of section 8 of the general clauses act, as reference to the provisions of section 34 of the 1996 act. so far as an appeal filed under section 37 of the 1996 act is concerned, perusal of section 37 shows that an appeal is provided to the appellate court against an order setting aside an arbitral award or refusing to set aside an arbitral award under section 34. thus, as the provisions of article 3 of schedule-i do not apply to an application or petition filed under section 34 of the 1996 act, they will also not apply to the memorandum of appeal filed to set aside or modify an award made by the arbitrator under the 1996 act. in other words nothing contained in article 3 of schedule-i of the bombay court fees act applies to an application, petition or memorandum of appeal to set aside or modify any award made under the 1996 act as it does not apply to an application or petition or memorandum of appeal to set aside or modify an award made under the arbitration act, 1940. perusal of the provisions of section 8 of the general clauses act shows that references in any other enactment to a provision in a former enactment is to be construed as reference to re-enacted provision in the new enactment unless a different intention appears. the different intention may appear either in the new enactment or in the other enactment. nothing was pointed out either in the 1996 act or in the bombay court fees act which can be construed as a different intention or which will show that it was not the intention of the maharashtra legislature to exclude an application or petition or memorandum of appeal filed in court to set aside or modify an award made under the 1996 act, from the provisions of article 3 of schedule-i of the bombay court fees act. it appears that the intention behind excluding an application made, challenging the award made under the 1940 act, from requirement of payment of ad valorem court fee which is required to be paid if the same litigant filed a suit on the same subject matter, was to encourage a litigant to go for arbitration instead of filing a suit. nothing has been pointed out to show that ther4e is any change in that legislative policy. on the contrary, from the preamble of the 1996 act it is clear that the policy of the legislature is to encourage people to adopt the mode of arbitration for resolving disputes. article 3 of schedule-i of the bombay court fees act does not apply to a petition, application or memorandum of appeal filed for challenging an award made under the 1996 act, and court fee on a petition filed under section 34 of the 1996 act challenging an award in high court is payable according to article 1(f)(iii) of schedule ii. section 37: [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on appeal under section 37 of the arbitration & conciliation act, 1996 - held, court fee is payable according to article 13 of schedule ii of the bombay court fees act. schedule i, article 3 & schedule ii, article 1(f)(iii): [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on petition under section 34 of the arbitration & conciliation act, 1996 - held, when a petition under section 34 is to be filed before a principal civil court of original jurisdiction which is not a high court, the question arises which article of either first schedule or second schedule would apply. in so far as the challenge to an award made under the 1940 act is concerned, an application under section 33 of that act could be made to a civil court and therefore, payment of court fee was governed by article 1(a) of schedule ii. this was so because the application was to be presented to the court of civil judge which was not a principal civil court of original jurisdiction. but now because of change of definition of term court in the 1996 act, a petition has to be presented, challenging an award made under the 1996 act in terms of the provisions of section 34 thereof, before the principal civil court of original jurisdiction. no entry either in the first schedule or in the second schedule was pointed out which applies to an application or petition to be made before the principal civil court of original jurisdiction, and therefore, when a litigant wants to file petition before a principal civil court having original jurisdiction which is not high court, challenging an award made under the 1996 act, no court fee under bombay court fees act is payable because of absence of a general or specific provision. therefore, it can be said that no court fee under the bombay court fees act is payable when a petition under section 34 challenging an award is filed before any principal civil court of original jurisdiction which is not high court. schedule ii, article 13: [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on appeal under section 37 of the arbitration & conciliation act, 1996 - held, court fee is payable according to article 13 of schedule ii of the bombay court fees act. - (supra) on which strong reliance was placed by the counsel for respondents.a.m. khanwilkar, j.1. rule. rule returnable forthwith by consent.mr. a.s. jaiswal, learned counsel waives notice for respondents 1 to 4. mr. dastane waives notice for respondent no. 5. respondent nos. 6 and 7 though served have not chosen to appear. the said respondents have been arraigned as party-respondents in view of the allegations of mala fide qua them. however, during the course of arguments, on instructions, counsel for the petitioner stated that the petitioner will not press the said ground of mala fide - if the petition was to be allowed on other grounds in favour of the petitioner. in fact, the ground of mala fide is required to be given up by the petitioner as respondents 6 and 7 have not been intimated about the order dated 21st february, 2008, on account of which, the matter has been posted today for final disposal. if the said ground was to be pressed by the petitioner, it would have become imperative for the petitioner to serve the respondents 6 and 7, with clear intimation that the matter would proceed for final disposal on the next date of hearing.2. as aforesaid, the petitioner has essentially argued two aspects before us while questioning the validity of the order passed by respondent no. 2 dated 12th february, 2007 purported to be under section 132 of the income tax act, 1961 for carrying out search and seizure; and further direction issued by respondents 6 and 7 to the respondent no. 5 - bank to issue bank draft in favour of the department in the sum of rs. 9 lakhs from the account of the petitioner which was attached in terms of order dated 14th february, 2007. the petitioner has further prayed for consequential relief of directing the respondents 3 and 4 to redeposit the amount of rs. 9 lakhs along with interest @ 18 per cent per annum thereon, as the said conversion was without authority of law.3. according to petitioner, in the first place, the fact-situation of the present case did not warrant action under section 132 of the income tax act, 1961. it is, then, contended that even if such action was justified, the respondents 6 and 7 had no business to issue direction to respondent no. 5-bank to convert the amount of rs. 9 lakhs in the form of demand draft drawn in favour of the department much before the assessment order has been passed by the competent authority. to buttress the later contention, counsel for the petitioner has pressed into service decision of division bench of our high court in the case of jagdish prasad m. joshi v. deputy commissioner of income tax reported in : [2005]273itr296(bom) . reliance is also placed on the decision of the division bench of patna high court in the case of santosh verma v. union of india 1991 (189) itr 149. lastly reliance is placed on the recent decision of the apex court in the case of k.c.c. software limited and ors. v. director of income tax (i and b) and ors. reported in 2008 11 scale 90.4. counsel for contesting respondents 1 to 4, on the other hand, defended the impugned action of the department - both on the count of necessity and desirability of the said action and also because, in his submission, the officials of the income tax department have had authority to convert the amount from the bank account of the petitioner which was attached in terms of order under section 132 of the act. for, the amount lying with the bank in the account of the petitioner was in the nature of debtor creditor relationship between the bank and the petitioner inter se. that amount was available for conversion and the direction so issued by officials of the income tax department to the respondent no. 5 bank which, in turn, have been executed by respondent no. 5 bank, merit no interference. counsel for respondents has placed reliance on the decision in the case of lan eseda steels ltd. and anr. v. assistant commissioner of income tax and ors. reported in : [1994]209itr901(ap) in particular at pages 911 and 921 onwards.5. we shall presently deal with the later contention raised on behalf of the petitioner that will have to be accepted in the light of exposition of the apex court in the recent decision in the case of k.c.c. software limited (supra). in para no. 11 of the said decision, the apex court has adverted to the stand of the appellant before it that the officials of income tax department had no power for retaining any amount seized for the purpose of meeting estimated liability especially after deletion of sub-section (5) of section 132 of the income tax act. that contention was refuted on behalf of the department with reference to the provisions contained in section 132 of the income tax act as can be discerned from para no. 13 of the said judgment. the apex court, however, in the ultimate analysis, accepted the stand of the appellant before it that the officials of the income tax department could not have legitimately converted the amount lying in the bank account which is conceptually different from the amount to be seized in the form of cash in hand.6. that opinion can be discerned from para nos. 16 and 19 of the self-same decision: insofar as the decision of our high court in the case of jagdish joshi (supra) is concerned, the department's counsel had conceded the position that there is no provision in the income tax act auhorising the officials to encash the fds or withdraw the cash from the bank account without the order of assessment. similar observation is found in the decision of the patna high court in the case of santosh verma (supra) at pages 552 and 553 of the report edj udgment.we shall now revert to the decision in the case of lan eseda steel ltd. (supra) on which strong reliance was placed by the counsel for respondents. this decision, in the first place, is not an authority on the question that needs to be addressed in the present case. inasmuch as, the question that arises for our consideration is whether the official of the income tax department had authority in law to direct conversion of any amount partly or wholly from and out of the attached bank account of the assessee even before the order of assessment has been passed in exercise of powers under section 132 of the act.7. in view of the observations of the two decisions of the high courts referred to earlier and more particularly that of the apex court which, in our opinion, is directly on the point, the stand taken on behalf of the petitioner in this behalf will have to be accepted.as a necessary corollary, the department will be obliged to bring back the amount appropriated in the form of demand draft in the sum of rs. 9 lakhs from the attached bank account of the petitioner to be deposited in the same savings account of the petitioner.8. learned counsel for respondents has, however, invited our attention to the operative order passed by the apex court in the case of k.c.c. software (supra), more particularly clause (ii) of para no. 19 of the said judgment. in that case, the apex court directed that the amount converted by the department to be transferred in interest bearing fixed deposit i.e. p d account so that no prejudice would be caused to any of the parties. we are inclined to accept this suggestion given on behalf of the respondents.that takes us to the first contention canvassed before us that the respondents in the fact-situation of the present case, could not have invoked powers under section 132 of the act. that being subjective satisfaction of the authority. it is not open for the court to interfere with that opinion merely because some other view was also possible.9. in any case, we are not examining this contention in detail for the simple reason that we are inclined to direct the authority to pass assessment order not later than three months from today which direction will mitigate all the apprehensions and grievances of the petitioner. in the event, the assessment order is adverse to the petitioner, obviously the amount which will remain invested in interest bearing fixed deposit will be adjusted on the basis of such assessment order, subject, however, to any other order to be passed by the competent court or authority.10. accordingly, we proceed to pass the following order :we partly allow this writ petition to the extent of impugned action of the department of converting the attached bank account of the petitioner to the extent of rs. 9 lakhs. the department shall transfer the said amount in interest bearing fixed deposit forthwith. the department would be liable to repay the said amount to the petitioner, subject to the assessment order to be passed. in the event, the liability of the petitioner is less than the amount of rs. 9 lakhs, to that extent, the department will be obliged to compensate the petitioner by paying appropriate specified interest as per the act (i.e. 12% per annum) with effect from 14th february, 2007 till the amount is realised by the petitioner.11. it is made clear that this decision is not an expression of opinion either way on the merits of the assessment proceedings pending before the competent authority. all questions raised in the said proceedings be decided on its own merit and in accordance with law. as aforesaid, the income tax officer shall pass assessment order within three months from today. the counsel appearing for respondents assures that he will inform the concerned income tax officer to ensure compliance of this direction.