Wp/919/2008 Of Mrs. Sitadevi Satyanarayan Malpani And 3 Ors v. Income Tax Settlement Commission And 3 Ors

Digitallysigned by1/11MEERAMEERAMAHESHMAHESHJADHAVJADHAVDate:2023.07.0610:52:45 IN THE HIGH COURT OF JUDICATURE AT BOMBAY+0530ORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.919 OF 2008 Mrs. Sitadevi Satyanarayan Malpani & Ors ….Petitioners V/s. Income Tax Settlement Commission & Ors …Respondents ---- Mr. Nitesh Joshi a/w Ms Sheetal Shah and Ms Dimple D Bitra i/b Mehta & Girdharilal for Applicant/original Petitioner. Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM & FIRDOSH. P. POONIWALLA, JJ DATED : 30[th] JUNE 2023 P.C. : 1This Petition was filed by one Mr. S. N. Malpani (original petitioner).In view of the death of the original petitioner, his Legal heirs viz; his widowand three children were brought on record as petitioners. The widow oforiginal petitioner expired on 6[th] January 2023 and in view thereof, petitionhas been further amended to delete the name of the widow of the originalpetitioner. 2Petitioners are aggrieved by an order dated 3[rd] January 2008 passedby the Income Tax Settlement Commission dismissing the application of theoriginal petitioner for AY-1989-1990 to 1996-1997 on the ground thatprovisions of Section 245D(2D) of the Income Tax Act 1961 (the Act) castan obligation on original petitioner to pay, on or before 31[st] July 2007, theadditional tax on the income disclosed before the Settlement Commissionand interest thereon notwithstanding any extension of time already grantedby the commission. It is petitioners’ case that on facts it is an erroneous finding because original petitioner had infact paid more than the amount hewas required to pay. 3At the outset, Mr. Joshi stated that petitioner is not pressing prayerclause (d) by which petitioner was challenging the constitutional validity ofSection 245HA and Section 245D(2D) of the Act. Rule was issued on 24[th]March 2008. 4Original petitioner, as sole proprietor, carried on business as builderand developer in the name and style M/s Gopal Constructions. On or about27[th] July 1993 there was a search carried out at the residence and thebusiness premises of original petitioner under Section 132 of the Act. On25[th] April 1997 petitioner filed settlement application under Section245C(1) of the Act for AY-1989-90 to 1996-1997. The application wasadmitted on 22[nd] April 1998 under Section 245D(1) of the Act. As per thesaid order of admission of the Settlement Commission, original petitionerwas required to pay the additional amount of income tax payable on theincome disclosed within 35 days of the receipt of the order. Originalpetitioner paid additional tax and, by a letter dated 7[th] May 1998 furnishedthe copies of challans. 5Original petitioner’s application was thereafter proceeded with.During the pendency of the application, original petitioner, by a letter dated17[th] July 2007 approached respondent nos.2 and 3 that was received on 23[rd]July 2007 by respondent nos.2 and 3 for verification of the working of taxand interest payment. Original petitioner also informed that if any short fall is found he is ready and willing to pay the same. A similar letter also dated17[th] July 2007 was also addressed to respondent no.1 and filed on 23[rd] July2007. Respondent no.2 responded by a letter dated 28[th] July 2007 andinformed original petitioner that a sum of Rs.55,03,494/- was payable byoriginal petitioner on account of tax and interest. Original petitioner by aletter dated 7[th] August 2007 objected and submitted that various paymentsmade by original petitioner had not been considered by respondent no.2.Original petitioner furnished copies of challans and requested respondentno.2 to revise the calculations. is found he is ready and willing to pay the same. A similar letter also dated17[th] July 2007 was also addressed to respondent no.1 and filed on 23[rd] July2007. Respondent no.2 responded by a letter dated 28[th] July 2007 andinformed original petitioner that a sum of Rs.55,03,494/- was payable byoriginal petitioner on account of tax and interest. Original petitioner by aletter dated 7[th] August 2007 objected and submitted that various paymentsmade by original petitioner had not been considered by respondent no.2.Original petitioner furnished copies of challans and requested respondentno.2 to revise the calculations. 6During the hearing on 5[th] November 2007 before the SettlementCommission, original petitioner has informed that original petitioner has notcomplied with the mandatory requirement of Section 245D(2D) of the Act.The matter was thereafter stood over to 5[th] December 2007. Originalpetitioner received a letter dated 7[th] November 2007 from respondent no.2asking petitioner to produce the proof of payment to tax and interest andworking and that was to be submitted on or before 14[th] November 2007.Original Petitioner was also informed by respondent no.2 vide letter dated29[th] November 2007, that a balance amount of Rs.1,16,511/- was payable.To cover the shortfall, original petitioner made payment of Rs.1,30,000/- on5[th] December 2007 and by a letter dated 10[th] December 2007 intimated thesame to respondent nos.1 and 2 . 7On 3[rd] August 2008, the impugned order came to be passed byrespondent no.1 holding that petitioner having failed to comply with the amended provisions of Section 245D(2D) of the Act, the application oforiginal petitioner was not maintainable and the application was held tohave abated under Section 245HA(1)(ii) of the Act. 8Mr. Joshi submitted that the conclusion of respondent no.1 thatpetitioner had not complied with the amended provisions of Section245D(2D) of the Act as amended was factually incorrect. 9Mr. Suresh Kumar of course stood by what the affidavit in replycontained, justifying the impugned order. 10We have with the assistance of Mr. Joshi and Mr. Suresh Kumarperused the petition and affidavits in reply filed and also the rejoinder. Theonly issue remains in the petition, petitioner having withdrawn theconstitutional challenge to Section 245HA and 245D(2D), is whetheroriginal petitioner had paid the amounts of tax and interest on or before 31[st]July 2007. 11As noted earlier by its letter dated 29[th] November 2007, respondentno.2 had provided to petitioner a statement containing the working of taxand interest payable. The same, for ease of reference is reproducedhereinbelow and marked Statement-A. Statement A Shri S. N. Malpani TOTAL TAX AND INTEREST PAYABLE TOTAL TAX PAID (S.H.B.Inamdar)Income Tax Officer18(1)(3), Mumbai From this statement, it is evident that respondent no.1 have adjusteda sum of Rs.49,477/- which was a refund that admittedly respondents hadto pay to petitioner and has arrived at a balance figure of Rs.1,16,511/- aspayable. Mr. Joshi tendered a statement of tax and interest payable, paidrefund and interest on refund etc; which is reproduced hereinbelow andmarked Statement-B. Statement B Mr. Satyanarayan Malpani Assessment years: 1989-90 to 1996-97 Upto column 9 the total of figures are available from the statement supplied by respondent no.2 as quoted above. The break up for column 9,i.e., Refund as considered by AO, of Rs.49,477/- is available in paragraph 6 TOTAL TAX AND INTEREST PAYABLE TOTAL TAX PAID (S.H.B.Inamdar)Income Tax Officer18(1)(3), Mumbai From this statement, it is evident that respondent no.1 have adjusteda sum of Rs.49,477/- which was a refund that admittedly respondents hadto pay to petitioner and has arrived at a balance figure of Rs.1,16,511/- aspayable. Mr. Joshi tendered a statement of tax and interest payable, paidrefund and interest on refund etc; which is reproduced hereinbelow andmarked Statement-B. Statement B Mr. Satyanarayan Malpani Assessment years: 1989-90 to 1996-97 Upto column 9 the total of figures are available from the statement supplied by respondent no.2 as quoted above. The break up for column 9,i.e., Refund as considered by AO, of Rs.49,477/- is available in paragraph 6 of the affidavit in reply affirmed on 31[st] August 2009 by one GurbinderSingh on behalf of respondents (the said affidavit). The break up asprovided in paragraph 6 of Rs.49,477/- is Rs.37,339/- for AY-1997-1998,Rs.8,384/- for AY-1999-2000, Rs.3,754/- for AY-2000-2001. The total ofRs.37,339/- + Rs.8,384 + Rs.3,754/- is Rs.49,477/-. In paragraph 6,respondent no.2, however, has stated that these refund amounts includingthe interest were adjusted already. If interest had already been adjusted,that in our view would have reflected in the Statement-A made available byrespondent no.2 vide his letter dated 29[th] November 2007. Since only creditfor Rs.49,477/- as refund adjusted has been given in the statement, it isquiet evident that interest on the amount has not been factored in. As perthe Statement-B given by Mr. Joshi today, the interest on these three figureswould work out to Rs.46,583/-. 12 As regards columns 11 and 12 in paragraph 4 read with paragraph7.5 of the said affidavit of Gurbinder Singh, it is stated that even if thecredit for the refund is granted that would total to amount of Rs.26,143/-.Of course the said Gurbinder Singh claims that the matter was very old andhe had to verify. Mr. Joshi is correct in saying that if the effect of the refundand interest thereon had been granted, it would have reflected in theStatement-A provided by respondent no.2 alongwith his letter dated 29[th]November 2007. 13That would still leave a sum of Rs.50,674/- which also, Mr. Joshiclaims, the original petitioner has already paid. Mr. Joshi states that original petitioner had paid an excess tax on self assessment. From the Statement-Amade available by respondent no.2 along with letter dated 29[th] November2007, it is clear that the tax payable was only Rs.19,52,372/- whereas thetotal tax paid was Rs.20,06,280/- which would leave excess amount ofRs.53,098/- as paid. In paragraph 7.3 of the said affidavit of GurbinderSingh, it is not denied that there was an excess tax paid of Rs.53,098/- butthe stand of respondent no.2 is that credit for such excess tax paid hasalready been granted to original petitioner but no interest was payable onthe same as the excess tax paid is arising out of self assessment tax paid byoriginal petitioner which is not eligible for any interest. A Division Bench ofthis court in Stock Holding Corporation of India Ltd Vs. N. C. Tewari & Ors.1has held that tax paid on self assessment would fall under Section 244A(1)(b) of the Act, i.e., residuary clause covering refunds of amount not fallingunder Section 244A(1) of the Act and as confirmed by a circular issued bythe CBDT referred to in the judgment, the said payment should beconsidered to be a tax and interest thereon would be payable to theassessee. Paragraph nos. 7 and 8 of Stock Holding Corporation (Supra) read as under: as under: “ 7. We have considered the rival submissions. On a bare analysis ofSection 244A(1) of the Act it is clear that amount paid by thepetitioner as tax on self assessment would not stand covered bySection 244A(1)(a) of the Act. This is so as it is neither the paymentof tax by way of advance tax or by way of tax deducted at source.Thus tax paid on self assessment would fall under Section 244A(1)(b)of the Act, i.e. a residuary clause covering refunds of amount notfalling under Section 244A(1) of the Act. The revenue contends thatin the absence of tax on self assessment finding mention in Section244A(1)(a) of the Act, no interest is payable under Section 244A(1)Section 244A(1) of the Act it is clear that amount paid by thepetitioner as tax on self assessment would not stand covered bySection 244A(1)(a) of the Act. This is so as it is neither the paymentof tax by way of advance tax or by way of tax deducted at source.Thus tax paid on self assessment would fall under Section 244A(1)(b)of the Act, i.e. a residuary clause covering refunds of amount notfalling under Section 244A(1) of the Act. The revenue contends thatin the absence of tax on self assessment finding mention in Section244A(1)(a) of the Act, no interest is payable under Section 244A(1) 1. 2014 SCC Online Bom 1762 of the Act and Section 244A(1)(b) of the Act would have noapplication. This contention is opposed to the meaning of theprovision disclosed even on a bare reading. If the tax paid is notcovered by clause (a) of Section 244A(1), it falls within clause (b),which is a residuary clause. Besides, this contention stands negativedby the CBDT Circular bearing No.549 dated 31 October 1989 whereinreference is made to Section 244A and para 11.4 thereof reads asunder :- 11.4 The provisions of the new section 244A are as under: (i) Subsection (1) provides that where in pursuance of any orderpassed under this Act, refund of any amount becomes due to theassessee then- (a) if the refund is out of any advance tax paid or taxdeducted at source during the financial year immediately precedingthe assessment year, interest shall be payable for the period startingfrom the 1[st] April of the assessment year and on the date of grantofthe refund. No interest shall, however, be payable, if the amount ofrefund is less than 10 per cent of the tax determined on regular assessment; (b) if the refund is out of any tax, other than advance tax ortax deducted at source or penalty, interest shall be payable for theperiod starting from the date of payment of such tax or penalty andending on the date of the grant of the refund. (Refer to example III inpara 11.8).” (Emphasis supplied) The inferences to be drawn from the Board's circular is clear that ifrefund is out of any tax other than out of advance tax or tax deductedat source, interest shall be payable from the date of payment of taxand ending on the date of the grant of refund. It is to be noted thatnowhere does the CBDT even remotely suggest that interest is notpayable by the Department on self-assessment tax. Moreover, theamount paid under Section 140A of the Act on self assessment is anamount payable as and by way of the tax after noticing that there islikely to be shortfall in the taxes already paid. Thus this payment isconsidered to be a tax under the aforesaid provision. (Emphasis supplied) The inferences to be drawn from the Board's circular is clear that ifrefund is out of any tax other than out of advance tax or tax deductedat source, interest shall be payable from the date of payment of taxand ending on the date of the grant of refund. It is to be noted thatnowhere does the CBDT even remotely suggest that interest is notpayable by the Department on self-assessment tax. Moreover, theamount paid under Section 140A of the Act on self assessment is anamount payable as and by way of the tax after noticing that there islikely to be shortfall in the taxes already paid. Thus this payment isconsidered to be a tax under the aforesaid provision. 8. The contention of revenue is that no interest at all is payable to thepetitioner under Section 244A(1)(a) and (b) of the Act unless theamounts have been paid as tax. It would not cover cases where thepayment is gratuitous as is evident from the fact that the petitioner inits computation after paying tax on self assessment of Rs.2.60 croresseeks a refund of Rs.47 lacs. According to him it has to be refund ofamounts paid as tax. We find that Section 244A(1) of the Actcommences with the word “when refund of any amount becomes dueto the assessee under this Act...”. Subclause (b) thereof commenceswith the words “in any other case....”. The words used in Section244A(1) of the Act are clear inasmuch as it provides that refund ofany amount that become due to any assessee under the Act willentitle the assessee to interest. In any case in the present facts, theamount on which the refund is being claimed was originally paid astax on selfassessment under Section 140A of the Act and evidence of the same in the form of challan was enclosed to the Return of Income.In fact when the Assessing Officer passed the Assessment Order on 31December 1996, he accepted the entire amount paid as tax on selfassessment as a payment of tax. One more feature to be noticed isthat when any refund becomes due to an assessee out of tax paid, itbecomes so only after holding that it is not the tax payable. Thus wefind no substance in the first objection of the revenue that the amountpaid as tax on self assessment is not tax and therefore no interest canbe granted on refund of such amounts which are not tax.” 14In the circumstances, the original petitioner would be entitled tointerest on the excess payment of Rs.53,098/- which according to petitioneris Rs.50,674/-. If we add together the amount of Rs.46,583/- interest onrefund of AY-1997-1998, 1999-2000 and 2000-2001, Rs.26,143/- towardsrefund and interest thereon relating to AY-1998-1999 and 2003-2004 andinterest of Rs.50,674/- on excess payment of tax of Rs.53,908/-, the originalpetitioner would have paid Rs.1,23,400/- (Rs.46,583/- + Rs.26,143/- +Rs.50,674/-), which is more than the short fall of Rs.1,16,511/- indicated byrespondent no.2 in Statement-A, vide his letter dated 29[th] March 2007.Therefore, we are satisfied that original petitioner has complied with hisobligations under the provisions of Section 245D of the Act. 15In the circumstances, we are quashing and setting aside the impugnedorder dated 3[rd] January 2008. We direct the matter be placed before theInterim Board for Settlement constituted under Section 245AA forconsideration. Since the matter is old, petitioners shall file a copy of thesettlement application that was originally filed on 27[th] April 1997 before theBoard within two weeks of this order being uploaded. The photocopy shallbe certified as true copy by the Advocates / Chartered Accountant of petitioners. The Interim Board shall dispose the application on merits inaccordance with law. 16We of course hasten to state that we have not considered the matteron merits and the only issue we have considered was whether petitioner hadinfact complied with the mandatory requirements of Section 245D(2D) of the Act. 17Petition disposed. (FIRDOSH P POONIWALLA, J.) (K.R. SHRIRAM, J.)