Wp v. The Chief Commissioner Of Income Tax- Thane And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTIONWRIT PETITION NO. 440 OF 2008 M/s. Anand Nagar & Company & Anr. ….Petitioners. v/s. The Chief Commissioner of Income Tax-Thane& Others ….Respondents. ---- Mr. S. Sriram with Ms. Ushashi Datta i/b. PDS Legal for Petitioners.Mr. Sham Walve with Mr. Pritesh Chatterjee for Respondents. ---- CORAM: K. R. SHRIRAM & AMIT B. BORKAR,JJ.DATED : 9[th] DECEMBER, 2021. P.C:- 1.Kar Vivad Samadhan Scheme, 1998 (KVSS) sought to providea quick and voluntary settlement of tax dues outstanding as on31[st] March, 1998 both on the direct tax enactment as well as indirect taxenactment by offering waiver of a part of the arrears of tax and interestand providing insulation against institution of prosecution and impositionof penalty. Petitioner No.1 sought to take advantage of the Scheme andfiled declaration under the provisions of KVSS to settle the tax payable. 2.Petitioner No.1 filed a declaration on 31[st] January, 1999declaring disputed income to be Rs.3,04,156/- and tax payable at 30%being Rs.91,247/- in terms of clause (iii) to Section 88 (A) of the FinanceAct (No.2) Act, 1998 (the said Act). 3.Respondent No.2 issued ‘order to pay’ in Form of IntimationNo.413 dated 24[th] February, 1999 determining the amount payable under clause (iv) to Section 88 (A) of the said Act. As per this ‘order to pay’, theamount payable under KVSS was Rs.7,25,991/- being 50% of interest.Respondent No.2 had relied upon a report dated 17[th] February, 1999 givenby Respondent No.3, copy of which has not been made available toPetitioners. It is alleged that Respondent No.2 converted declaration fromclause (iii) to clause (iv) of Section 88(A) of the said Act. Clause (iii) andclause (iv) in sub-section (a) of Section 88 of the said Act reads as under:- \ “Section 88:- (a) Where the tax arrear is payable under the Income TaxAct, 1961 (43 of 1961),- (i) ……. (ii) …….. (iii) in the case where tax arrears includes income- tax,interest payable or penalty levied, at the rate of thirty-fiveper cent of the disputed income for the persons referred to inclause (i) or thirty per cent of the disputed income for thepersons referred to in clause (ii), (iv) in the case where tax arrears comprises only interestpayable or penalty levied, at the rate of fifty percent of thetax arrears.” 4.Without going into details, it is Petitioners’ case as submitted by Shri Sriram that Respondent No.2 concluded that amount payablewould be covered under Clause (iv) of Section 88 (A) of the said Act because the tax payable by Petitioner had already been adjusted againstrefund to be given by the Revenue to one of the partners of PetitionerNo.1 firm. 5.Shri Sriram submitted that the adjustment has been held tobe illegal by Commissioner of Income Tax (Appeals) [CIT(A)] and in an appeal filed by the legal heirs of the said partner, the ITAT has confirmedthe order of CIT (A). Shri Sriram submitted that, therefore, the Tribunalhaving held that the adjustment by Revenue of the tax payable byPetitioner against the refunds due to its partner was illegal, the liability ofthe firm to pay the tax gets revived and, therefore, on the date thedeclaration was filed there was tax arrears that included income tax andinterest and therefore, Court should endorse Petitioners’ stand that only35% of the tax arrears, i.e., income tax and interest was payable and not50% of the interest which has been claimed by Respondents. 6. The reason why we are not going into details is because appeal filed by the legal heirs of the said partner, the ITAT has confirmedthe order of CIT (A). Shri Sriram submitted that, therefore, the Tribunalhaving held that the adjustment by Revenue of the tax payable byPetitioner against the refunds due to its partner was illegal, the liability ofthe firm to pay the tax gets revived and, therefore, on the date thedeclaration was filed there was tax arrears that included income tax andinterest and therefore, Court should endorse Petitioners’ stand that only35% of the tax arrears, i.e., income tax and interest was payable and not50% of the interest which has been claimed by Respondents. 6. The reason why we are not going into details is because Respondents, in its reply opposing the Petition, have averred thatPetitioners’ Chartered Accountant, by a letter dated 5[th] August, 1998, hasinformed the Revenue that refund of Rs.2,21,995/- that was due to apartner of the Firm – late Shri Kanhaiyalal Jain be adjusted againstdemand for Assessment Year 1987-88 against M/s. Anand Nagar &Company, i.e., Petitioner No.1. A copy of the said letter is also annexed atEx. ‘C’ to the affidavit in reply. In the rejoinder, there is no denial ofaddressing this letter. 7.We have to observe that even in the Petition, Petitioner istotally silent about having addressed the said communication dated5[th] August, 1998. Petitioner No.2 is a partner of Petitioner No.1-Firm andhe ought to have disclosed to the Court and been truthful to the Court andnot suppressed that such a communication was so addressed and the adjustment was made at the request of Petitioner No.1 firm. That was amaterial fact that has been suppressed. Courts have consistentlydeprecated parties or litigants who are economical with truth and whoresort to falsehood and unethical means for achieving their goals. 8.If clever drafting has created the illusion of a cause of action, the Court must nip it in the bud at the first hearing by examining theparty searchingly. An activist judge is the answer to irresponsible law suitssaid V. R. Krishna Iyer, J. (as he then was) in T. Arivandandam V/s. T. V.Satyapal [1]. 9.In Dalip Singh V/s. State of Uttar Pradesh[2], the Courtbemoaned that a new creed of litigants has cropped up who do not haveany respect for truth and they shamelessly resort to falsehood andunethical means for achieving their goals. Such a litigant who attempts topollute the stream of justice or who touches the pure fountain of justicewith tainted hands, is not entitled to any relief. 10.It will also be useful to reproduce paragraph 1 and 2 of Dalip Singh V/s. State of U.P. and Ors. (Supra) and they read as under : “1. For many centuries Indian society cherished two basicvalues of life i.e. “satya” (truth) and “ahimsa” (non-violence).Mahavir, Gautam Buddha and Mahatma Gandhi guided thepeople to ingrain these values in their daily life. Truthconstituted an integral part of the justice-delivery systemwhich was in vogue in the pre-Independence era and thepeople used to feel proud to tell truth in the courtsirrespective of the consequences. However, post- Independence period has seen drastic changes in our valuesystem. The materialism has overshadowed the old ethos andthe quest for personal gain has become so intense that thoseinvolved in litigation do not hesitate to take shelter offalsehood, misrepresentation and suppression of facts in thecourt proceedings. 2. In the last 40 years, a new creed of litigants has croppedup. Those who belong to this creed do not have any respectfor truth. They shamelessly resort to falsehood and unethicalmeans for achieving their goals. In order to meet thechallenge posed by this new creed of litigants, the courtshave, from time to time, evolved new rules and it is now wellestablished that a litigant, who attempts to pollute the streamof justice or who touches the pure fountain of justice withtainted hands, is not entitled to any relief, interim or final. ” 2. In the last 40 years, a new creed of litigants has croppedup. Those who belong to this creed do not have any respectfor truth. They shamelessly resort to falsehood and unethicalmeans for achieving their goals. In order to meet thechallenge posed by this new creed of litigants, the courtshave, from time to time, evolved new rules and it is now wellestablished that a litigant, who attempts to pollute the streamof justice or who touches the pure fountain of justice withtainted hands, is not entitled to any relief, interim or final. ” 11.The Apex Court and this Court have, on many occasions,stated that if a party comes to the Court with unclean hands, which in thiscase petitioner have, the party should be dealt with very strongly andsubstantial costs also should be imposed on the party. The conduct ofpetitioner in suppressing a material fact intends to impede and prejudicethe administration of justice. Judiciary is the bedrock and handmaid oforderly life and civilized society. In Sciemed Overseas Inc. V/s. BOC IndiaLtd.[3] the Apex Court has lamented about the unhealthy trend in filing ofaffidavits which are not truthful. Para 2 of the said judgment reads asunder : “2. A global search of cases pertaining to the filing of a falseaffidavit indicates that the number of such cases that arereported has shown an alarming increase in the last fifteenyears as compared to the number of such cases prior to that.This is illustrative of the malaise that is slowly but surelycreeping in. This 'trend' is certainly an unhealthy one thatshould be strongly discouraged, well before the filing of falseaffidavits gets to be treated as a routine and normal affair.” 12.Kuldip Singh, J. (as he then was) in S.P. Chengalvaraya Naidu (Dead) by LRs. V/s. Jagannath (Dead) by LRs.[4], in paragraph 5 observed : “5. ................ We are constrained to say that more oftenthan not, process of the Court is being abused. Property–grabbers, tax-evaders, bank loan-dodgers and otherunscrupulous persons from all walks of life find the Courtprocess a convenient lever to retain the illegal-gainsindefinitely. We have no hesitation to say that a person,who's case is based on falsehood, has no right to approachthe Court. He can be summarily thrown out at any stage ofthe litigation.” 13.In Oswal Fats and Oils Limited V/s. Additional Commissioner(Administrator), Bareilly Division, Bareilly [5], the Apex Court followed the same principal that if a person is found guilty of concealment of materialfacts or making an attempt to pollute the pure stream of justice, the Court not only has the right but a duty to deny relief to such person. Theobservations of the Hon'ble Supreme Court in S. P. Chengalvaraya NaiduV/s. Jagannath (Dead) by LRS (Supra) are relevant in this context. TheCourt observed as under : “The Courts of law are meant for imparting justicebetween the parties. One who comes to the Court mustcome with clean hands ….. We have no hesitation tosay that a person whose case is based on falsehood, hasno right to approach the Court. He can be summarilythrown out at any stage of the litigation.” The Apex Court also observed in paragraph 6 of the said judgment that : 4. (1994) 1 SCC 1 5. (2010) 4 SCC 728 “A fraud is an act of deliberate deception with thedesign of securing something by taking unfair advantage ofanother”. 14.In the circumstances, we are not inclined to entertain the Petition. 15.Petition dismissed. (AMIT B. BORKAR,J.) (K. R. SHRIRAM,J.)