Delhi High Court

Vijay Kumar Bhati vs Commissioner Of Income Tax & Anr. on 28 August, 2000

Equivalent citations: (2001) 164 CTR Del 29

Author: A K Sikri

JUDGMENT

A. K. Sikri, J.

This application is offshoot of judgment dated 21-5-1993, passed by this court in Civil Writ Petition No. 2292 of 1987 (reported as Vijay Kumar Bhati v. CIT & Anr. (1994) 118 CTR (Del) 65). By aforesaid judgment, a writ petition filed by the petitioner was allowed with costs. What compelled the petitioner to file the aforesaid writ petition may be recapitulated first by stating those necessary facts which have bearing on the present Civil Misc.

2. Petitioner is a non-resident Indian. He had left and went to Riyadh in Saudi Arabia in February, 1982, on getting employment there. On 10-3-1985, he visited India for 19 days. During his stay in India, he opened FCNR S.B. account No. 5810 for US $ 500 with Indian Overseas Bank, Tolstoy Marg, New Delhi. On 17-7-1985, from Saudi Arabia; he remitted a sum of US $ 35,000 in account No. 9/85. Therefore, he remitted another sum of US $ 99,995 by opening another account No. 10/85 on 10-8-1985. On 10-9-1985, Income Tax Department wrote a letter to the Manager, Indian Overseas Bank directing the branch manager not to release the said amount to the petitioner. This was followed by attachment order, dated 12-9-1985, and 18-9-1985, in respect of the aforesaid account. These attachment orders remained in force till 6-6-1986, in respect of first account and 9-1-1996, in respect of second account when the money was delivered out of these accounts to the department to the extent of Rs. 6,20,572 (US $ 5,09,979.99) out of the second account and Rs. 9,96,532 (US $ 80,744) out of the first account as well as balance lying in the second account. Petitioner filed appeal, first to the Commissioner (Appeals) and thereafter to the Tribunal against the aforesaid orders of the assessing officer and as a result of appellate orders, he became entitled to some refund out of the tax realised from the bank from FCNR/SDR accounts mentioned aforesaid. However, this refund was withheld by the department under the provisions of section 241 of the Act. Aggrieved by such actions on the part of the respondents, petitioner filed Civil Writ Petition No. 2292 of 1987. This petition was allowed by judgment dated 21-5-1993, and the Income Tax Department was directed to refund the amount of US $ 35,000 and US $ 99,995 along with interest accrued thereon. It would be appropriate to reproduce the relevant directions given in this judgment as much reliance was placed by counsel for the petitioner on these directions :

"This petition is allowed. The amount of U.S. dollars 35,000 (Rs. 4,55,000) and U.S. dollars 99,995 (Rs. 12,99,935) along with interest accrued thereon be deposited back by the respondents in the FCNR/SDR accounts of the petitioner in the Indian Overseas Bank, Rohit House, 3, Tolstoy Marg, New Delhi, within one month from today. If any permission is required for crediting the amount of interest in the accounts of the petitioner, a non-resident Indian as aforesaid, from the Reserve Bank of India or any other authority under the provisions of the Foreign Exchange Regulations Act, 1973, or any other law, the same shall be obtained by the Indian Overseas Bank."

The department filed special leave petition against the said order in the Supreme Court which was dismissed. Department thereafter complied with the directions by depositing a sum of Rs. 32,52,673 (equivalent to US $ 1,03,272.37) in the bank as the principal amount and interest thereof. According to the department, the amounts were deposited including the interest, which had been calculated as per provisions of section 244 of the Income Tax Act, thereby fully complying with the directions contained in the judgment. However, as the petitioner was dissatisfied with the computation made by the department, he filed CCP which was dismissed giving liberty to the petitioner to move Civil Misc. in this writ or take other appropriate proceedings. This is how Civil Misc. No. 7829/95 has been filed.

In this Civil Misc. the petitioner claims that balance amount of US $ 78,968.500 is still due which the department be directed to pay to the petitioner.

3. Parties are not at idem on the calculation part of the interest and the difference in their perspective is due to the following reason :

The petitioner had deposited the aforesaid amount in the two SDR accounts opened by him with Indian Overseas Bank for a period of 30 days. These accounts had matured on 16-8-1985, and 9-9-1985, respectively. The petitioner is claiming interest with effect from 17-8-1985, and 10-9-1985, onwards. On the other hand, department has paid him interest in respect of these accounts starting from 6-6-1986, and 9-1-1986, respectively, that is the dates on which money was actually received by the department from the bank. The other bone of contention is in respect of rate of interest. Whereas the department had paid interest at the rates prescribed under section 244 of the Income Tax Act, petitioner is claiming interest as per RBI circulars. His submission is that at the time of deposit of FCNR/SDR the rate of interest was 13 per cent and 12 per cent per year to be computed at six monthly rates and he should be entitled to the interest as per these rates.

4. We may state at the outset that Mr. R.D. Jolly, learned counsel appearing for income-tax department had argued that once order dated 21-1-1997, was passed by Commissioner (Appeals) in his capacity as the appellate authority, the appropriate remedy for the petitioner was to file appeal against that order and Civil Misc. was not maintainable. On the other hand, contention of the learned counsel of the petitioner was that Civil Misc. was maintainable as petitioner was seeking compliance of the directions contained in judgment dated 21-5-1993, and moreover while dismissing his CCP by order, dated 5-11-1995, the court had permitted him to file the present application. There may be some substance in the objection raised by the respondent about the maintainability of the petition after the writ petition had been disposed of, however, there are certain peculiar facts of this case which persuade us to decide the present Civil Misc. on merits. Petitioner a non-resident Indian had filed the main petition in the year 1987 against illegal and unauthorised assessments and attachments and more than thirteen years have passed since the filing of the writ petition and seven years have passed since the judgment of this court. He is still agitating the matter as according to him, his grievances have not been met in entirety. The parties were heard at length. In the interest of justice we consider it appropriate to dispose of the controversy on merits.

5. Mr. R.R Bansal, learned senior counsel for the petitioner was at pains to point out from the judgment dated 21-5-1993, of this court in Civil Writ Petition No. 2292/87 that the petitioner was accorded a rough deal and was unnecessarily harassed. This was in fact observed by the court in judgment dated 21-5-1993 (supra). It was submitted that once the court found that attachment and assessment orders were bad in law and the income-tax department was not right in withdrawing the amount in question from the petitioner's bank account, the petitioner was entitled to be restored back to the same stage in which petitioner was, but for the attachment orders passed by the income tax department. He expanded his submission by arguing that had the amount remained in the bank account, which belonged to the petitioner, interest would have accrued thereon as per the agreed rate to be given by Indian Overseas Bank and petitioner had been deprived of this interest for which blame squarely lies on the respondent. Therefore the direction contained in judgment , dated 21-5-1993, (supra) directing the respondents to deposit back the amount in question in the FCNR/SDR accounts of the petitioner along with "Interest accrued" thereon should mean the interest which would have accrued in FCNR-SDR accounts of the petitioner. As would be noticed later, after the initial period of one month deposit was over, petitioner had not given any instructions to the bank to renew the same. The attachment order was made much thereafter. However, the petitioner is claiming interest for this period also on the ground that but for this attachment, the petitioner could have given the instructions to the bank to renew the FCNR/SDR even after the initial period of deposit had expired and on such instructions being given he would have become entitled to the interest from back date i.e., 16-8-1985, and 9-9-1985, respectively when these deposits had initially matured.

6. On the other hand, Mr. R.D. Jolly, learned counsel appearing for incomtax department argued that petitioner was not entitled to any interest from the date anterior to the date when money was in fact delivered to the department. His submission was that section 244 of the Income Tax Act clearly stipulates that interest is to be paid from the date when the amount is received by the department. His further submission was that in any case the argument of the petitioner was hypothetical inasmuch as the attachment orders dated 12-9-1985, and 18-9-1985, were the orders in the nature of provisional attachment under section 281B of the Income Tax Act as by the said orders, bank was only directed not to release the amount in question to the petitioner. There was no embargo on the petitioner in getting the FDRs renewed and he could still give those instructions to the bank. He also submitted that petitioner could not show any such embargo in giving instructions to the bank. It is, therefore, petitioner, according to Mr. R.D. Jolly, who is to be blamed for his inaction in not getting the FDRs renewed. The petitioner had not given any instructions to the bank to renew the terms of the deposit which matured on 16-8-1985, and 9-9-1985, till the attachment orders were issued on 12-9-1985, and 18-9-1985. This he argued to show the conduct of the petitioner without prejudice to his argument that there was no such bar even after the attachment orders were passed. His further submission was that if any money received by the income-tax department is to be paid back to the assessee, the rate of interest is statutorily stipulated in section 244A of the Income Tax Act, and, therefore, the petitioner cannot claim any interest beyond the provisions of section 244A of the Act.

7. At this stage, it would be appropriate to state some of the relevant dates having bearing on the question of interest :

17-7-1985

Petitioner opened FCNR/SDR A/c No. 9/85 with Indian Overseas Bank and deposited US $ 35,000 for a period of thirty days.

10-8-1985

Petitioner opened FCNR/SDR A/c No. 10/85 with Indian Overseas Bank and deposited US $ 99,995 for a period of thirty days.

16-8-1985

Deposit in A/c No. 9/85 matured.

9-9-1985

Deposit in A/c No. 10/85 matured.

10-9-1985

Restrain order was served by the Income Tax Department on the bank.

12-9-1985

Attachment orders in respect of A/c No. 9/85 passed by Income Tax Department.

18-9-1995

Attachment orders in respect of A/c No. 10/85 passed by Income Tax Department.

6-6-1986 & 9-1-1986

Rs. 6,20,572 (US $ 50,979.99) out of the second account and 9,96,532 (US $ 80,744) out of the balance of second account and the first account received by the department.

8. On the basis of aforesaid facts and after giving our arduous thoughts to the points urged by the both the parties, we proceed to decide both the aspects.

Period of interest

9. As pointed out by the Commissioner (Appeals) in his order, dated 21-1-1999, period of interest can be split into two parts as follows :

(a) First Account (No. 9 of 1985)

(1) Interest from the date of maturity 17-8-1985, to the date of restraint/attachment, i.e., 10-9- 1985, and

(2) Interest from the date of restraint/attachment i.e., 10-9-1985, to the date of payment of the amount by the bank to the department i.e., 6-6-1986.

(b) Second Account (No. 10 of 1985)

(1) Interest from the date of maturity to the date of restraint/attachment-none, as both the dates are the same i.e., 10-9-1985.

(2) Interest from the date of restraint/attachment, i.e., 10-9-1985, till the date of payment of the amount by the bank to the department, i.e., 9-1-1986.

First period in both the accounts is the period when the accounts were free from any restraint/attachment. Petitioner was free to deal with these amounts in any manner he like. Therefore, petitioner cannot make a claim of interest for this period for this reason alone. The only plea given by the petitioner is that he could have renewed the deposits retrospectively at any time subsequently which could not be done because of the intervention by the income-tax department in serving attachment orders on the bank. However, even this plea is of no avail to the petitioner. We entirely agree with the reasoning of the Commissioner (Appeals) rejecting this plea and claim of interest for this period in the following words :

"No interest can be claimed by the petitioner on the basis of a hypothetical claim that by a subsequent action, the department took away the right of the petitioner to get the deposit renewed retrospectively. It is well settled that while deciding a matter, the court has to answer only the questions which are posed on the basis of actual events and not imaginary or hypothetical possibilities/considerations. This apart, there is another consideration which negatives the claim of the petitioner in this regard. As per the Reserve Bank of India circulars issued at the relevant time, the petitioner was entitled to renew an overdue or matured FDR only within a period of 14 days and not thereafter. Once this period was over, the depositor was required to take a fresh deposit and the old deposit could not be renewed. Only interest at the simple rate could be given for the broken period as specified in the circular. In this connection, I refer to circular of the Reserve Bank of India issued vide reference No. FX 108/88, dated 15-12-1988. "

10. Insofar as the second period in both the accounts is concerned, i.e., from the date of attachment till the date money was released by the department, again we are of the view that petitioner is not entitled to interest. It may be mentioned that petitioner has not received interest on his accounts lying with the bank during this period in the absence of any instructions to the bank to renew the deposits. Although the petitioner has submitted that he could not have given any such instructions in view of restraint attachment orders issued by income-tax department, he could not satisfactorily answer the argument of the respondents to the effect that the restraint orders dated 10-9-1985, and the attachment orders dated 12-9-1985, and 18-9-1985, only placed restrictions on the bank not to release or deliver the money lying in these accounts to the petitioner and this attachment was provisional attachment in terms of section 281B of the Income Tax Act. Section 281B of the Income Tax Act reads as under :

"Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, the assessing officer is of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. "

Thus, when the attachment was of the nature which prevented the bank to release the money to the petitioner but did not prevent the petitioner to get the deposits renewed so that interest could be earned, it is the petitioner who is to be blamed for his omission. We may mention that Commissioner (Appeals) has dealt with this aspect in detail by referring to section 281B of the Income Tax Act as well as provisions of sections 62 & 64 of Civil Procedure Code relating to attachment of property and rightly concluded that the effect of attachment order was merely to prevent private alienations of the, property to the prejudice of claims enforceable under the attachment The effect is not to annihilate the interest of the person whose property is attached.

11. We are also not inclined to accept the submission of the petitioner that the provisions of Income Tax Act, i.e., 244A or 281B of the Act are not applicable and the claim of the petitioner arises out of the directions given by this court in judgment dated 21-5-1993, (supra). When this court passed the order against the department directing it to deposit back the amount in question belonging to the petitioner in the FCNR/SDR accounts of the petitioner with Indian Overseas Bank along with "interest accrued thereon", the direction "along with interest accrued thereon" has to be read to mean interest accrued as per the provisions of Income Tax Act. Admittedly, the attachment order was passed under the provisions of the Income Tax Act. The amount was withdrawn on the basis of assessments made under the provisions of the Income Tax Act. Once in any judicial proceedings it is held that such attachment or the assessments were not proper and assessee is entitled to refund of the whole or part of the amount recovered by the income-tax department and direction is given to the department to refund the said amount to the assessee, the liability of the department is to pay the interest on such an amount as per the provisions in the Act. Section 244A of the Act precisely deals with such an aspect i.e., liability of the department to pay interest on refunds. Therefore, the direction of payment of "interest accrued thereon" occurring in the order dated 21-5-1993, has to be read as interest accrued in terms of the provisions of the Income Tax Act, i.e., as per section 244A of the Act. If the intention of the court was to give interest over and above the interest permissible under section 244A of the Act (say in the form of damages, etc.), the court would have made specific directions in respect thereof.

For the foregoing reasons, the Civil Misc. fails and is hereby dismissed.

There shall, however, be no order as to costs.