Mukundray K. Shah Vs. Director General of Income-tax (investigation) and ors. - Court Judgment

Kalyan Jyoti Sengupta, J.

1. This matter was called on for hearing on the last occasion. On the prayer of learned counsel for the Revenue the matter was adjourned for hearing today on the ground of non-availability of the learned Additional Solicitor-General. On that date the hearing could have been concluded but for the adjourment prayed for by learned counsel on the ground as above. Today he prayed for further adjournment. I feel the matter cannot be adjourned because it is a partly heard matter.

2. Mr. Poddar concluded his submission on the last occasion. He submitted that there is no lawful reason for withholding 9 per cent. Reserve Bank of India Bonds, 99, valued at Rs. 7.2 crores in total. He submits that under the provisions of the block assessment the aforesaid securities were seized pursuant to seizure followed by preparation of panchanama. Block assessment of the petitioners have been completed. Even regular assessment has also been completed. Even after completion of all these the securities were retained on the plea that there is a deemed dividend which is required to be assessed. The assessing authority completed the block assessment in relation to the said bonds and held the amount covered thereby was undisclosed income of deemed dividend. Being aggrieved by the order of the Assessing Officer, the petitioner filed an appeal and the Commissioner of Income-tax (Appeals) allowed the appeals and set aside the order of the Assessing Officer. He submits drawing my attention to the relevant documents that the appeal has been allowed in fact has been acted upon. In spite of all these the aforesaid bonds have not been released. He submits in reference to the stand taken in the affidavit-in-opposition that the provisions of Section 132B have no manner of application. He contended that the precondition to apply the aforesaid provision is that there must be existing liability under the Wealth-tax Act, the Expenditure-tax Act, the Gift-tax Act and the Interest-tax Act, 1974. There is no existing liability as yet nor there is any determination. In anticipation of determining by the learned Tribunal the security cannot be detained. He submits that the Department has not made any application for stay of operation of the order of the Commissioner of Income-tax (Appeals) so that the securities can be withheld till the determination of the appeal pending before the Tribunal. He further submits that mere pendency of appeal does not operate stay of the order appealed against, as separate application has to be made. The next contention is that the departmental authorities are duty bound to implement the order of the appellate authority or any other authority unless the same is set aside. In support of his contention he has relied on a decision of the Supreme Court reported in Collector of Customs v. Krishna Sales (P.) Ltd., : 1994(73)ELT519(SC) . Then he refers to the judgments of the learned single judge of this court reported in Nicco Corporation Ltd. v. CIT : [2001]251ITR791(Cal) in the case of Pankaj Guljarilal Gupta v. Collector of Customs : 1995ECR654(Calcutta) in the case of Agrawal Warehousing and Leasing Ltd. v. CIT : [2002]257ITR235(MP) , in the case of Hariharnath Agarwal and Sons (HUF) v. CIT : [1996]221ITR486(All) . He further submits drawing my attention to the proviso to Section 132B that if the contention of the Department is to be accepted then the proviso will be meaningless and then the goods cannot be released until and unless the matter is decided by all the forums available under the law.

3. The Department has kept the appeal before the Tribunal pending and is obtaining adjournment after adjournment and he has produced a document in support of the factum obtaining adjournment. Under such circumstances, he contends that retention and/or detention of the securities are wholly unauthorised and not permitted under the law. Learned counsel for the respondent has drawn my attention to paragraph (i) of the affidavit-in-opposition. He submits that admittedly appeal has been preferred against the order of the Commissioner (Appeals) and such appeal is pending before the Income-tax Appellate Tribunal. According to him, this appeal is the continuation of the original proceedings, namely, the assessment. It is true the Commissioner of Income-tax (Appeals) has reversed the order of the Assessing Officer, but then it has not reached its finality. According to him, the liability is to be determined and it will be crystallised only when the decision of the Tribunal will be passed. He further submits that the effect of appeal in revenue matters stands on a different footing from that of the civil proceedings.

4. Therefore, he submits that these Reserve Bank of India bonds should not be released at this stage and it will be premature. Having heard the respective contentions of learned counsel it appears to me the point involved in this matter is whether the pendency of the appeal will authorise and/or justify the Revenue to withhold the aforesaid Reserve Bank bonds or not. From the records available before me it appears to me the Commissioner of Income-tax (Appeals) set aside the order of assessment of the Assessing Officer who had taken into consideration the income arising out of dividend. I find there is force in the argument of Mr. Poddar that mere filing of the appeal does not operate as a stay of the order appealed against and this has been decided in a customs matter by the Supreme Court in the case of Collector of Customs v. Krishna Sales (P.) Ltd., : 1994(73)ELT519(SC) . In paragraph 6 of the said judgment it has been observed as follows (page 1241) :

'According to the said para. 4, the goods will not be released even where the party succeeds in cases where the customs authorities decide to go in appeal before the Tribunal or the Supreme Court. They will consider the issuance of such certificate only after the decision of the Tribunal or the Supreme Court, as the case may be. The learned counsel for the respondent characterises the said direction as arbitrary and contrary to law. We see, the force in his submission. If the authorities are of the opinion that the goods ought not to be released pending the appeal, the straight-forward course for them is to obtain an order of stay or other appropriate direction from the Tribunal or the Supreme Court, as the case may be. Without obtaining such an order they cannot refuse to implement the order under appeal. As is well-known, mere filing of an appeal does not operate as a stay or suspension of the order appealed against. Moreover, such detention is likely to create several complications relating to the demurrage charges besides the possible deterioration of the machinery and goods. We hope and trust that the Collector of Customs, Bombay, shall appropriately revise the said public notice in the light of the observations made herein. If he does not do so, there is a likelihood of the customs authorities being themselves made liable for demurrage charges in appropriate cases.'

5. The judgment of the Supreme Court has been followed by this court in the case of Nicco Corporation Ltd. v. CIT : [2001]251ITR791(Cal) . Another learned single judge of this court has followed the aforesaid decision and accepted the said principle in the case of Pankaj Guljarilal Gupta v. Collector of Customs : 1995ECR654(Calcutta) . Similar view has also been taken by the Madhya Pradesh High Court in the case of Agrawal Warehousing and Leasing Ltd. v. CIT : [2002]257ITR235(MP) . The Allahabad High Court has also taken the same view in the case of Hariharnath Agarwal and Sons (HUF) v. CIT : [1996]221ITR486(All) .

6. In view of the aforesaid consistent observations of the apex court and the various High Courts I do not find any reason to deviate therefrom.

7. Therefore, the question is as to whether as on today or even on the date of filing of the writ petition whether there was any existing liability within the meaning of Section 132B or whether such liability has been determined or not. In view of the order of the Commissioner (Appeals) there is no existing liability at all and the determination which was made by the Assessing Officer has been set aside. The aforesaid section is not intended to be made applicable for future course of action but will be applicable in praesenti. That is clear from two provisos mentioned in the aforesaid section. Therefore, I appropriately quote the said Section 132B in its entirety.

'132B. Application of seized or requisitioned assets.--(1) The assets seized under Section 132 or requisitioned under Section 132A may be dealt with in the following manner, namely : --

(i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958), and the Interest-tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment under Section 153A and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default, may be recovered out of such assets ;

Provided that where the person concerned makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of the asset and the nature and source of acquisition of any such asset is explained to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the Chief Commissioner or Commissioner, to the person from whose custody the assets were seized :

Provided further that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last of the authorisations for search under Section 132 or for requisition under Section 132A, as the case may be, was executed ;

(ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in Clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied ;

(iii) the assets other than money may also be applied for the discharge of any such liability referred to in Clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the Chief Commissioner or Commissioner under Sub-section (5) of Section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule.

(2) Nothing contained in Sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act

(3) Any assets or proceeds thereof which remain after the liabilities referred to in Clause (i) of Sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.

(4) (a) The Central Government shall pay simple interest at the rate of eight per cent. per annum on the amount by which the aggregate amount of money seized under Section 132 or requisitioned under Section 132A, as reduced by the amount of money, if any, released under the first proviso to Clause (i) of Sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (i) of Sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in Clause (i) of Sub-section (1) of this section.

(b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under Section 132 or requisition under Section 132A was executed to the date of completion of the assessment under Section 153A or under Chapter X1V-B.

Explanation.-- In this section,--

(i) 'block period' shall have the meaning assigned to it in Clause (a) of Section 1581J ;

(ii) 'execution of an authorisation for search or requisition' shall have the same meaning as assigned to it in Explanation 2 to Section 158BE.'

8. Following the cue of the observation of the apex court I am of the view that in order to withhold the security the Revenue should have made an application for stay before the Tribunal so that they could have retained seized RBI bonds. I think the Revenue is not interested in this matter seriously. Otherwise they could have taken this course of action. Even I do not find any promptitude on the part of the Revenue for getting the appeal heard and disposed of by the Tribunal. Rather they are interested in obtaining adjournment as it appears from a document submitted by Mr. Poddar. Under such circumstances, I do not find any reasons for withholding the securities by the Revenue. Accordingly, I direct the Revenue to release these securities within a period of eight weeks from the date of communication of this order. However, I make it clear that in the event meanwhile the Tribunal passes any order on this appeal either in favour of the Revenue and in relation to these securities, then this order will be subject to that order of the Tribunal.

9. There shall be no order as to costs.

10. The writ petition is disposed of.

11. All parties are to act on a xerox signed copy of this dictated order on the usual undertaking.