Devamani Atha Vs. Commissioner of Income-tax, OrissA. - Court Judgment

Excerpt:
- state financial corporations act, 1951 [63/1951]. section 29; [p.k. tripathy, a.k. parichha & n.prusty, jj] discharge of loan orissa forest act (14 of 1972), section 56 confiscation of vehicle - held, the authorities under section 56 of the orissa forest act, 1972 are not obliged to release the vehicle from the confiscation proceeding or to pay the sale proceeds of the vehicle after the order of confiscation in favour of orissa state financial corporation when such vehicles were purchased on being financed by the orissa state financial corporation and the loan had not been liquidated by the date of the seizure/confiscation of the vehicle. concept of first charge or second charge has no applicability when the vehicle is not otherwise disposed of to determine the liabilities of the loanee. on the other hand the vehicle having been found indulged in forest offences was made subject matter of a confiscation proceedings, and therefore, the procedure followed for confiscation of the vehicle and for its sale is punitive in nature and not with a view to give benefit to anybody including the department which initiated the confiscation proceeding. apart from that, the claim of the orissa state financial corporation as against its loanee (who had taken the vehicle on hire- purchase agreement) brings the loanee and the sureties within the default clause under the state financial corporation act, 1951 or the heirs and successors of such persons. procedure is provided in the act, 1951 and the rules thereof about the manner in which such loan is to be recovered, and in that context only the vehicle under the hire-purchase agreement is placed as the first charge. if such property is not available for any reason, then the loan is not automatically waived or the loanee and his sureties are not automatically redeemed of the liabilities to repay. the financial corporation is concerned with repayment of loan either from the property or persons offered as surety. thus, a vehicle, which is subject matter of confiscation proceeding under the act, 1872, being not available to the orissa state financial corporation for adjustment of the unpaid loan, that does not at all bring out an anomalous situation so as to defeat the right of the orissa state financial corporation. agreement between the orissa state financial corporation and the loanee is a pure and simple contract governed by the provisions of the contract act, 1872 read with the provisions in the act, 1951 and its rules. on the other hand, a confiscation proceeding under the act, 1972 is punitive in nature for commission of a forest offence. thus, by virtue of the provision in section 56 read with section 64 (2) of the act, 1972, the action taken for confiscation of the vehicle cannot be extended to grant protection of the loan advanced by orissa state financial corporation. by doing that it amounts to grant premium to the pick-pockets in as much as, by making payment of the confiscation amount in favour of the orissa state financial corporation the loan burden of the accused of the forest offence is reduced to the extent of the sale proceeds of the vehicle. in other words, on payment of the sale proceeds of the confiscation proceeding to the orissa state financial corporation towards discharge of the loan account of the accused of a forest offence, it would lead to a system to reward him by repayment of his loan. then it does not become a penalty nor the action become punitive, but it remains as a reward to the accused of forest offence. such a concept is totally not conceivable from any provision in the act, 1972 or the act, 1951. [air 2002 orissa 130 overruled]. -- state financial corporations act, 1951. section 29; discharge of loan orissa forest act (14 of 1972), section 56 confiscation of vehicle - held, the authorities under section 56 of the orissa forest act, 1972 are not obliged to release the vehicle from the confiscation proceeding or to pay the sale proceeds of the vehicle after the order of confiscation in favour of orissa state financial corporation when such vehicles were purchased on being financed by the orissa state financial corporation and the loan had not been liquidated by the date of the seizure/confiscation of the vehicle. concept of first charge or second charge has no applicability when the vehicle is not otherwise disposed of to determine the liabilities of the loanee. on the other hand the vehicle having been found indulged in forest offences was made subject matter of a confiscation proceedings, and therefore, the procedure followed for confiscation of the vehicle and for its sale is punitive in nature and not with a view to give benefit to anybody including the department which initiated the confiscation proceeding. apart from that, the claim of the orissa state financial corporation as against its loanee (who had taken the vehicle on hire- purchase agreement) brings the loanee and the sureties within the default clause under the state financial corporation act, 1951 or the heirs and successors of such persons. procedure is provided in the act, 1951 and the rules thereof about the manner in which such loan is to be recovered, and in that context only the vehicle under the hire-purchase agreement is placed as the first charge. if such property is not available for any reason, then the loan is not automatically waived or the loanee and his sureties are not automatically redeemed of the liabilities to repay. the financial corporation is concerned with repayment of loan either from the property or persons offered as surety. thus, a vehicle, which is subject matter of confiscation proceeding under the act, 1872, being not available to the orissa state financial corporation for adjustment of the unpaid loan, that does not at all bring out an anomalous situation so as to defeat the right of the orissa state financial corporation. agreement between the orissa state financial corporation and the loanee is a pure and simple contract governed by the provisions of the contract act, 1872 read with the provisions in the act, 1951 and its rules. on the other hand, a confiscation proceeding under the act, 1972 is punitive in nature for commission of a forest offence. thus, by virtue of the provision in section 56 read with section 64 (2) of the act, 1972, the action taken for confiscation of the vehicle cannot be extended to grant protection of the loan advanced by orissa state financial corporation. by doing that it amounts to grant premium to the pick-pockets in as much as, by making payment of the confiscation amount in favour of the orissa state financial corporation the loan burden of the accused of the forest offence is reduced to the extent of the sale proceeds of the vehicle. in other words, on payment of the sale proceeds of the confiscation proceeding to the orissa state financial corporation towards discharge of the loan account of the accused of a forest offence, it would lead to a system to reward him by repayment of his loan. then it does not become a penalty nor the action become punitive, but it remains as a reward to the accused of forest offence. such a concept is totally not conceivable from any provision in the act, 1972 or the act, 1951. [air 2002 orissa 130 overruled]. - he, however, was satisfied that there was evidence to show that the assessee had withdrawn a sum of rs. assessee appeal to the appellate assistant commissioner and failed.r. n. misra j. - the income-tax appellate bench at calcutta has stated this case and referred the following question for the opinion of the court :'whether, on the facts and in the circumstances of the case, the tribunal was justified in upholding the addition of rs. 1,01,000 as concealed income of the assessee ?'the year of assessment is 1960-61. assessees father-in-law, sivji nathubhai, was engaged in business in manganese and iron ores. he having died in 1964 and the assessment for the year in question having remained incomplete until his death, the assessment has been completed in the hands of the present assessee as legal heir.the income-tax officer found that in the books of account there were different amounts stated to be loans taken against hundis. called upon to explain, the assessee produced letters of confirmation from seven of the creditors. the income-tax officer wanted production of the discharged hundis and confirmation letters from the remaining creditors. the assessee expressed her inability to produce the same on the ground that the original assessee who had privity with the creditors was dead. there was a long lapse of time and in many cases the creditors had changed their addresses and it would be difficult to contact them. it was, however, claimed before the income-tax officer that in most of the cases there were opening balances which had to be taken into account in working out the peak credits. it was further claimed that in the case of m/s. chaturbhuj & co. of the titilagarh the transactions could be verified. the income-tax officer instead of making any verification as suggested treated the peak credit of rs. 2,31,000 as income from unexplained sources.the assessment was set aside by the appellate assistant commissioner with a direction to reassess. the income-tax officer on fresh assessment found that rs. 2,31,000 represented the peak credit. he, however, was satisfied that there was evidence to show that the assessee had withdrawn a sum of rs. 1,30,000 in previous years and that amount was available with him and could have been re-introduced. accordingly, he reduced the addition by rs. 30,000 and directed a lakh and a thousand rupees to be added.assessee appeal to the appellate assistant commissioner and failed. in second appeal, the tribunal observed that the assessees counsel could not point out any evidence which would justify and interference. accordingly, that order was sustained.mr. roy for the assessee relies on a letter written by his client to the income-tax officer which is annexure '3' to the statement of the case. therein it has been categorically stated that the loans were taken by her father-in-law during his lifetime and he having died in the year 1964, it has indeed become difficult for her to produce the entire evidence for the satisfaction of the income-tax officer. it was, however, stated that rs. 50,000 standing to the credit of m/s. chaturbhuj & co. came under a cheque and complete particulars for this amount were supplied. the income-tax officer did not proceed to make any verification by saying :'deduction of rs. 50,000 in its name is, therefore, sought to be made from rs. 2,31,000. this need not be done since there will be no change in the peak credit of rs. 2,31,00 as originally worked out.'the appellate tribunal, however, reiterated the stand of the income-tax officer in paragraph 4 of the appellate order and declined to give any relief on that score. petitioners counsel with reference to the original order of assessment wherein all the credits have been noted indicates that rs. 50,000 has been taken into account to reach the peak credit and if this is deleted, the peak credit would be reduced by rs. 50,000. the reasoning given by the income-tax appellate tribunal to refuse to interfere with the assessment particularly with reference to the addition of rs. 50,000 seems to be wholly unsustainable. an enquiry should have been made to find out whether the genuineness of the loan of rs. 50,000 had been established and, if that was accepted, addition of rs. 1,01,000 would have stood reduced by a further sum of rs. 50,000. learned standing counsel also accepts this submission to be substantial. we would accordingly hold that, on the facts and in the circumstances of the case, the tribunal was not justified in upholding the addition of rs. 1,01,000 as concealed income of the assessee.this, however, would not mean that the addition should stand deleted. the tribunal may itself examine the justifiability of the assessees contention or in its discretion it might remit the matter to the income-tax officer for investigation and report whereafter the appeal be re-disposed of in accordance with law.we make no direction for costs.panda j. - i agree.