Delhi High Court

Rakesh Kumar Aggarwal vs Income Tax Settlement Commission ... on 15 November, 2000

Equivalent citations: (2001) 165 CTR Del 177

Author: C Arijit Pasayat

ORDER UNDER SECTION 245D(4)Validity

Catch Note:

The Settlement Commission recorded various findings, most of which do not form the subject-matter of challenge in the petition--The dispute, relates to the pay order issued by the Punjab National Bank, in favour of HCL which was seized by the department--Petitioner in its assets statement claimed this pay order to be a part of its assets and at the same time claimed as a liability a sum of Rs. 49,03,000 being amount payable, so far as M/s. B is concerned-- Two conclusions, have been assailed by the petitioner on the ground that they have no legal basis--Firstly, it is submitted that after the order under section 132(11) was passed, the conclusion that the deemed seizure was illegal is patently illegal and not sustainable--Similarly, conclusion that there was no dispute between the department and the petitioner on the issue that sum of Rs. 50,40,000 actually belonged to M/s. B is factually not correct--Not proper--The matter is remitted back to the Commission, in view of the confused conclusions arrived at by the Commission and the inconsistent stand of the parties at various points of time.

Held:

The whole case is shrouded in mystery, in a maze of factual controversies, and department's role in creating a confused situation is writ large. The stands of contesting claimants have no visible consistency. It is borne out from records that after the order under section 132(11) was passed, a report was submitted to the Commission by the Commissioner, which contained somewhat different conclusions from those contained in the order under section 132(11). It is not clear from the order passed by the Commission as to whether the order under section 132(11), was brought to its notice. Had that been so the least the Commission was required to do was to record as to how the said order was not correct and as to under what circumstances it held that the deemed seizure was illegal. Additionally, materials on record reveal that there is in fact a dispute between the department and the petitioner on the issue that Rs. 50,40,000 actually belongs to M/s. B Commodities, petitioner, at different stages, has been raising dispute about the amount in respect of which the pay order was in the possession of M/s. B Commodities.

In view of the aforesaid factual position, Commission has to take fresh look at the matter, so far as the dispute relateable to liabilities, as contained in para (18) of impugned order is concerned. It is submitted that two claims were made i.e., Rs. 1,40,38,200 in respect of suit filed by MMTC and a sum of Rs. 1,01,178 relateable to HCL, which have not been dealt with by the Commission. As the matter is remitted back to the Commission for the purpose of determining liability, these two aspects may also be considered by the Commission in its proper perspective.

The matter is remitted back to the Commission, in view of the confused conclusions arrived at by the Commission and the inconsistent stand of the parties at various points of time.

Application:

Also to current assessment year.

Decision:

Matter remanded.

Income Tax Act 1961 s.245D

In the Delhi High Court Arijit Pasayat, C.J. & D.K. Jain, J.

JUDGMENT

Arijit Pasayat, C. J.

This is a writ petition questioning correctness of the order passed by the Income Tax Settlement Commission (hereinafter referred to as "the Commission") under section 245D(4) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").

2. The background facts reveal this case has a chequered history and the starting point of the controversy seems to be the search and seizure operation conducted at the residential and business premises of Rakesh Kumar Agarwal, the petitioner, on 27-4-1989. Certain books of accounts, documents, cash, jewellery, bank accounts, fixed deposit receipts, pay orders inter alia were seized/restrained. It surfaced during the investigation that though certain assessments were done in the case of one Mr. S.K. Aggarwal, he was non-existent. The present dispute revolves round pay orders worth Rs. 50,40,000 purchased in the name of M/s Hindustan Copper Ltd. (hereinafter referred to as the 'HCL"). Lot of controversies seem to be attached on the question, whether they related to one M/s. Bansal Commodities. Different stands appear to be taken at different points of time, as regards the payability of any sum to M/s. Bansal Commodities. Learned counsel for the petitioner accepts the position that aforesaid S.K. Aggarwal was non-existent and whatever transactions were done in the name of S.K. Aggarwal really related to the petitioner. The pay orders were in the possession of M/s. Bansal Commodities. Petitioner moved the Commission praying that his income may be determined on year to year basis and connected issues like chargeability of interest, etc., may also be determined. In the application for settlement, prayer inter alia was as follows:

"(i) to determine the ownership of the various businesses as referred to in petition;

(ii) to determine the investment made by the applicant in business activities and the income earned therefrom, including in respect of such businesses as may be considered to be the alleged benami businesses of the applicant;

(iii) to determine the ownership and source of acquisition of cash amounting to Rs. 14,70,217; jewellery valued at Rs. 1,07,145; bank deposits of Rs. 23,30,070 pay orders for Rs. 50,40,000; bank withdrawals of Rs. 46,37,710 from Punjab National Bank, Mall Road, Delhi., fixed deposit receipts of Rs. 38,48,138, the stocks allegedly valued at Rs. 54,55,000 machinery and other investments in factory premises estimated at Rs. 10 lakhs, cars allegedly valued at Rs. 4 lakhs; investment in renovation alleged to be Rs. 1 lakh; investment in electrical appliance alleged to be Rs. 1,49,000 alleged unexplained investment of Rs. 81,34,610 supposedly reflected in the seized documents, alleged investment of Rs. 2 crores in various immovable properties, and/or other assets/investments found as a result of the above-mentioned search operations.

(iv) to determine the genuineness of cash credits aggregating to Rs. 80,16,406 claimed by the applicant as representing genuine borrowings, evidenced as such by the seized documents; and

(v) to otherwise determine the income of the applicant from year to year and to settle consequential issues relating to chargeability of interest, imposition of penalty, immunity from prosecution, etc."

It is to be noted at this juncture that orders under section 132(5) and section 132(11) were passed by the authorities in relation to the assets searched during the search. Petitioner has placed reliance on an order dated 4-6-1992, which was passed on an appeal filed by M/s Bansal Commodities under section 132(11) of the Act to attach vulnerability to Commission's order. The Commission recorded various findings, most of which do not form the subject-matter of challenge in the petition. The dispute, as indicated above, relates to the pay order issued by the Punjab National Bank, Man Road, in favour of HCL which was seized by the department. Petitioner in its assets statement claimed this pay order to be a part of its assets and at the same time claimed as a liability a sum of Rs. 49,03,000 being amount payable, so far as M/s Bansal Commodities is concerned. In regard to this claim Commissioner recorded the following finding:

"M/s Bansal Commodities and their associate firms had advanced loan to the applicant and his benami concerns from time to time. Towards discharge of this liability, the applicant issued a pay order of Rs. 50,40,000 in favour of HCL with a direction to them to hand over goods worth this amount to M/s Bansal Commodities. The pay order was handed over to M/s Bansal Commodities who still hold the same. Letter of Authority was issued to M/s Bansal Commodities for taking delivery of goods from HCL. Since HCL did not have enough material to supply the pay order remained to be encashed. Meanwhile, the department conducted a search and took possession of the amount from the bank as deemed seizure, although the deemed seizure made by the department is illegal because once the pay order was handed over to M/s. Bansal Commodities the applicant had no control over the amount. The applicant preferred to show this amount as his assets and later claimed it as a liability. There is no dispute between the department and the applicant on the issue that the sum of Rs. 50,40,000 actually belonged to M/s. Bansal Commodities. Therefore, we do not think it proper to consider this sum as an asset belonging to the applicant and then allow it as a deduction as a liability."

3. Two conclusions, as contained in the quoted portion above, have been assailed by the petitioner on the ground that they have no legal basis. Firstly, it is submitted that after the order under section 132(11) was passed, the conclusion that the deemed seizure was illegal is patently illegal and not sustainable. Similarly, conclusion that there was no dispute between the department and the petitioner on the issue that sum of Rs. 50,40,000 actually belonged to M/s. Bansal Commodities is factually not correct.

4. The whole case is shrouded in mystery, in a maze of factual controversies, and department's role in creating a confused situation is writ large. The stands of contesting claimants have no visible consistency. It is borne out from records that after the order under section 132(11) was passed, a report was submitted to the Commission by the Commissioner, which contained somewhat different conclusions from those contained in the order under section 132(11). It is not clear from the order passed by the Commission as to whether the order under section 132(11), dated 4-6-1992, was brought to its notice. Had that been so the least the Commission was required to do was to record as to how the said order was not correct and as to under what circumstances it held that the deemed seizure was illegal. Additionally, materials on record reveal that there is in fact a dispute between the department and the petitioner on the issue that Rs. 50,40,000 actually belongs to M/s. Bansal Commodities, petitioner, at different stages, has been raising dispute about the amount in respect of which the pay order was in the possession of M/s. Bansal Commodities.

5. In view of the aforesaid factual position, Commission has to take fresh look at the matter, so far as the dispute relateable to liabilities, as contained in para (18) of impugned order is concerned. We make it clear that we have not expressed any opinion, as regards the stands of the parties. It is submitted that two claims were made i.e., Rs. 1,40,38,200 in respect of suit filed by MMTC and a sum of Rs. 1,01,178 relateable to HCL, which have not been dealt with by the Commission. As we are remitting the matter back to the Commission for the purpose of determining liability, these two aspects may also be considered by the Commission in its proper perspective.

M/s Bansal Commodities has filed CWP No. 3738/94 questioning correctness of the order passed under section 132(11), dated 4-6-1992. The acceptability of the stand of M/s. Bansal Commodities shall be decided in the said writ petition. As indicated above, we have not recorded any finding on the merits of the case and are remitting the matter back to the Commission, in view of the confused conclusions arrived at by the Commission and the inconsistent stand of the parties at various points of time.

The writ petition is allowed to the extent indicated above.