Assistant Commissioner Of Income Tax v. Ak. Menon And Ors

ASSISTANT COMMISSIONER OF INCOME TAX AK. MENON AND ORS. JULY 18, 1995 [A.M. AHMADI, CJ AND S.P. BHARUCHA, J.] Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992: Section I I-Special Court-Jurisdiction of-Tax liability of a notified person-Held: Special Court has no jun'sdiction to detemiine whether the liability is bonafide reasonable, justified or enf orceable-lt can only deter-mine the pliorities in which claims upon the property under attachment shall be paid. The Special Court (Trial of Offences Relating to Transactions in Securities) Act was enacted in 1992 to provide for the establishment of a Special Court for the trial of offences relating to transactions in securities D and for matters connected therewith or incidental thereto. The appellant· Assistant Commissioner of Incometax sought release of a certain sum being the tax liabilities of the respondents, who were the notified persons under Act. The Special Court adjourned the matter holding that the notified parties were entitled to try and show to court that the claim was E unreasonable and unjustified. Hence this appeal. Allowing the appeal, this Court HELD : 1. The Special Court has no jurisdiction to sit in appeal over the assessment of the tax liability of a notified person by the authority or tribunal or court authorised to perform that function by the statute under which the tax is levied. The Special Court has, therefore, no jurisdiction to determine whether or not any assessment of the tax liability of a notified person by the appropriate authority is bona fide or reasonable or justified or enforceable. [185-E] 2. The order under appeal is set aside insofar as it requires the appellant to· produce the records and permits the notified persons to satisfy the Special Court that the claims made in regard to their tax liability were not bonafide, or were unreasonable, unjustified or unenfor-ceable. [185-F] S. V. Kondaskar v. V.M. Deshpande, AIR (1972) S.C. 878, distin-guished. CIVIL APPELLATE JURISDICTION Civil Appeal No. 6323 (NT) of 1995. From the Judgment and Order dated 21.3.95 of the Special Court (Trial of Offences Relating to Transactions in Securities) at Bombay in Misc. Application No. 107 of 1993. D.P. Gupta, Solicitor General, (Ms. A. Subhashini) for S.N. Terdol for the Appellant. Atul Setalvad, A.D.N. Rao and A. Sobba Rao for the Respondent No. 1. Jahangir DJ. Mistri, Kartik Desai and Ms. Lata Krishnamurthy for D the Respondents 2-14. The following Order of the Court was delivered : Special leave granted. This appeal is filed against an order of the Special Court appointed E under the provisions of the Special Court (Trial of Offences Relating To Transactions in Securities) Act, 1992. The appellant, an Assistant Commis-sioner of Income Tax, sought release of the sum of Rs. 80,80,198.34, being the tax liabilities of the respondents, who are notified persons under the said Act, from the funds available with the Custodian appointed under. the F provisions thereof. Learned counsel appearing for some of these notified persons submitted to the learned judge that he wished to show .that the demands. of the appellant were unreasonable and unjustified and, if satis-fied, he should not order release of the amounts claimed. Having heard counsel, the learned judge passed the impugned order. It said that while the Special Curt could not sit in appeal over orders of the tax authorities, G it was entrusted with the task of distributing the funds in the manner laid down under section 11 of the said Act and the priorities laid down thereunder had to be observed. The priorities and objects of the said Act could and would -be defeated if the Special Court could not "go into the bonafides of a claim. In that case a party, like the Income Tax Department, H may make a claim in an absurdly large amount." Whether a claim was 181 1995-2-SCR-181-185