Punjab & Haryana H.C : The petitioner has prayed for issuance of a direction to the authorities of the IT Department to pay Rs. 3,65,17,800 along with interest out of the assets of respondent No. 7 seized/attached by them.

High Court Of Punjab & Haryana

Gem Granites vs. CIT & Ors.

Section 246A, ART. 226

G.S. Singhvi & K.S. Garewal, JJ.

Civil Writ Petn. No. 10193 of 2002

26th September, 2003

Counsel Appeared

H.L. Sibal with Sapan Dhir & Adarsh Jain, for the Petitioner : A.S. Tewatia, for the Respondents

JUDGMENT

G.S. SINGHVI, J. :

In this petition, the petitioner has prayed for issuance of a direction to the authorities of the IT Department to pay Rs. 3,65,17,800 along with interest out of the assets of respondent No. 7 seized/attached by them. It has further prayed for issuance of a direction to them to remit the amount of Rs. 38,03,511.50 recovered from account No. 1030-142816-100 of respondent No. 7 in Times Bank, Faridabad. The petitioner is a registered partnership firm having its office at 78, Cathedral Road, Chennai. It is mainly engaged in granite quarrying, processing and marketing of the same in India and abroad. It is also engaged in the business of textiles, construction, hotel, sugar, software, etc. The chairman of the petitioner-firm, Shri R. Veeramani, is said to have been induced by respondent Nos. 6 and 7 to agree to setting up a residential colony at Gurgaon and persuaded him to remit money in the name of respondent No. 7 and one Dharam Pal for the purpose of obtaining the requisite permission from the office of the Director, Town and Country Planning, Haryana. According to the petitioner, a total sum of Rs. 5,20,04,800 was paid at the instance of respondent Nos. 6 and 7. Out of this, a sum of Rs. 3,65,17,800 was sent in the name of respondent No. 7 and a sum of Rs. 1,54,87,000 was sent in the name of Dharam Pal through bank drafts. The house of respondent Nos. 6 and 7 situated at Faridabad was searched by the authorities of the IT Department on 15th May, 1999, under s. 132 of the IT Act, 1961 (for short, “the Act”). In the course of search, a number of papers and documents concerning movable and immovable assets including various bank accounts were seized. It was also revealed that respondent No. 7 was holding bank account No. 1030-142816-100 with Times Bank, Faridabad Branch, which she did not disclose to the authorities of the IT Department. On coming to know about the search conducted at the premises of respondent Nos. 6 and 7, the petitioner filed a complaint against respondent No. 7 and Dharam Pal on the basis of which FIR No. 382, dt. 22nd May, 1999, was registered at the Police Station, Central Faridabad, under ss. 420/467/468/471/406/120B of the Indian Penal Code. Respondent Nos. 6 and 7 were prosecuted in the Court of Addl. Chief Judicial Magistrate, Faridabad, who, vide judgment dt. 2nd Nov., 2001, convicted and sentenced them to undergo rigorous imprisonment for various offences and imposed a fine of Rs. 35 lakhs, in all, with a direction that 50 per cent of the fine be paid to the claimant as compensation and 50 per cent be deposited in the State exchequer. In default of payment of fine, respondent Nos. 6 and 7 were directed to undergo further rigorous imprisonment for six months under each heading.

After the registration of the criminal case against respondent Nos. 6 and 7, the general manager of the petitioner sent a letter dt. 19th July, 1999 (Annex. P8), to the Dy. Director (Investigation), IT Department, Faridariad (respondent No. 3), that the money sent to respondent No. 7 and Dharam Pal did not belong to them and the same should not be treated as their assets and be returned to the Gem group of companies. This was repeated in a communication dt. 27th May, 1999 (Annex. P9), sent by R. Veeramani, the chairman of the Gem group of companies to respondent No. 3 and letter dt. 10th Feb., 2000 (Annex. P10), sent by the general manager of the Gem group of companies to respondent No. 3. In October, 2001, the chairman of the Gem group of companies was served with summon (Annex. P11, dt. 5th Oct., 2001) under s. 131 of the Act to appear as a witness in connection with the proceedings initiated against respondent Nos. 6 and 7 and to produce all books of account from which the amounts were transferred to them. On 18th Oct., 2001, the general manager of the petitioner sent a letter Annex. P12 to the Dy. CIT (Range-I), Faridabad (respondent No. 5), that the money recovered from respondent Nos. 6 and 7 be returned to the Gem group of companies. The grievance of the petitioner is that notwithstanding the representations made from time to time, the authorities of the IT Department have attached the movable and immovable assets in the hands of respondent No. 7 including Rs. 38,23,500 and the appeals filed by it under s. 246A of the Act in relation to the asst. yrs. 1997-98, 1998-99 and 1999-2000 were summarily dismissed by the CIT(A), Faridabad (respondent No. 4), without giving opportunity of hearing to its representative.

The petitioner has challenged the order of assessment as well as order dt. 1st Feb., 2002, vide which respondent No. 4 dismissed the appeals filed by it by contending that respondent Nos. 1 to 5 committed a grave illegality by treating the money lying in the account of respondent No. 7 as her income despite the fact that in the criminal case, the same has been proved to be belonging to it. It has challenged the appellate order passed by respondent No. 4 on the ground of violation of the rules of natural justice. In the written statement filed by respondent No. 5 on behalf of himself and respondent Nos. 1 and 2, it has been averred that the petitioner is not entitled to invoke the jurisdiction of the High Court under Art. 226 of the Constitution of India because it has already filed a civil suit in the High Court of judicature at Chennai for recovery of Rs. 9,31,73,287 including the amount of Rs. 5,20,04,800. It has been further averred that the writ petition is liable to be dismissed because the petitioner has failed to avail of the remedy of appeal before the Tribunal in so far as order Annex. P13 passed by respondent No. 4 is concerned. On the merits of the petitioner’s assertion that the amount remitted by respondent No. 7 has been treated as her income for the purpose of assessment, respondent Nos. 1, 2 and 5 have made the following averments in paras 25, 26, 29 and 30 : “25. It is correct that an assessment order was passed by respondent No. 5 on 31st Oct., 2001, under s. 158BC(c) r/w s. 144 of the IT Act, 1961, in respect of Smt. Sabita Behl (respondent No. 7) for the block period 1st April, 1989 to 15th May, 1999, but no part of the moneys (Rs. 3,65,17,800 received by M/s BAS Consultants and Rs. 1,54,87,000 received by Sh. Dharam Pal) sent by M/s Gem Granites, Chennai, was assessed as income in the hands of respondent No. 7. In fact, the AO after examination of the books of account of the petitioner produced under s. 131 during the course of assessment proceedings held that the sources of these remittances have been taken as explained and therefore no addition was made of this amount. (Copy of assessment order passed in the case of respondent No. 7 is annexed as Annex. R1). As regards the amount of Rs. 38,03,511 allegedly lying in bank account No. 1030-142816-100 in the Times Bank, Faridabad, no specific addition of this amount has been made (para 21 of the assessment order). In fact, an addition of Rs. 30 lakhs made in the assessment order was on account of thousands of entries made in various bank accounts whereafter the deposit of drafts/cheques, same amount was withdrawn and these entries appearing in the various bank accounts are not discernible to any particular depositor and hence to be fair to the assessee, the AO made an addition of Rs. 30 lakhs only and not the aggregate of various amounts deposited in different bank accounts. From the various bank accounts maintained by respondent No. 7, it was clear that she had received huge amounts from not only M/s Gem Granites but also from others. Amongst the parties who had also sent the money to respondent No. 7 were M/s Tatav Darshi Bandhu (P) Ltd.–Rs. 38.16 lakhs; M/s Dolphin International Ltd.–Rs. 76.48 lakhs; M/s Palm Pharmaceuticals Ltd.–Rs. 34.00 lakhs; M/s Mac Agro Industries Ltd.–Rs. 18.88 lakhs; M/s Suncity Projects Ltd.– Rs. 18.76 lakhs; etc. Further, an addition of Rs. 120 lakhs was made out of total addition of Rs. 1,34,40,000 on account of unexplained investment in FDRs (para 16 of the assessment order). This addition was made on the basis of papers seized during search at the residence of respondent No. 7 and in the absence of any explanation coming forth from the assessee, i.e., respondent No. 7.

26. It is not correct that the amount of Rs. 5,20,04,800 has been treated as income of Sabita Behl as discussed above in para 25. Further in respect of Rs. 38,03,511.50 lying in the bank account of respondent No. 7, no specific addition has been made in respect of this amount but only an addition of Rs. 30 lakhs on estimate basis has been made (para 21 of assessment order) as peak credit of thousands of entries could not be ascertained out of various bank accounts. Further an addition of Rs. 120 lakhs has been made in respect of unexplained investments in FDRs on the basis of seized documents (para 16 of the assessment order).

29. & 30. As stated above, against paras 25 and 26, the specific amount of Rs. 38,03,511.50 has not been treated as income of Smt. Sabita Behl (respondent No. 7) in the assessments for the asst. yr. 1997-98 or 1998-99 or 1999-2000. In fact, no return for the block period 1st April, 1989 to 15th May, 1999, has been filed by Smt. Sabita Behl. The assessment has been made ex parte under s. 158BC(c) r/w s. 144 of the IT Act, 1961, on the basis of seized documents and records for earlier years. As regards filing of appeals by the petitioner before the CIT(A), Faridabad (respondent No. 4), who rightly dismissed the appeal as being invalid and non est in the eyes of law as is clear from the order Annex. P13. The appeal filed by the petitioner before respondent No. 4 was incompetent on further ground that the assessment order Annex. R1 is not against the petitioner but against respondent No. 7 and the petitioner cannot be said to be aggrieved against the said order and even the demand notice has not been served on the petitioner. In response to a notice under s. 131, the petitioner’s representatives appeared with books of account and balance sheet in which it was found debited in the account of respondent No. 7 as amount paid. The same also stood reflected in the balance sheet of the petitioner whereas respondent Nos. 6 and 7 did not produce any books of account nor did they file any return for the block period. Therefore, the petitioner has absolutely no legal claim against the Department in respect of this amount. It is further clarified that the amount in question has not been treated as income of respondent No. 7.” Respondent Nos. 1, 2 and 5 have controverted the petitioner’s plea that it falls within the scope of the expression “any person aggrieved” appearing in s. 246A of the Act. Along with the written statement, they have placed on record copy of the assessment order (Annex. R1) passed by respondent No. 5.

In his separate written statement, respondent No. 3 has averred that an order under s. 132(3) of the Act was made to safeguard the interests of the Revenue. In the replication filed on behalf of the petitioner, it has been averred that the civil suit filed in the High Court of judicature at Chennai has nothing to do with the proceedings drawn by the IT Department. It has been further averred that respondent No. 4 committed a grave illegality by dismissing the appeal filed by it against the order of assessment. Shri H.L. Sibal, learned senior counsel appearing for the petitioner, vehemently argued that in view of the categorical finding recorded by the Addl. Chief Judicial Magistrate in his judgment dt. 2nd Nov., 2001, the movable and immovable properties recovered during the course of search under s. 132 of the Act cannot be treated as assets of respondent No. 7 and respondent No. 5 committed a grave illegality by treating the same as income of respondent No. 7 for the purpose of assessment under s. 158BC(c) r/w s. 144 of the Act. Shri Sibal further argued that order Annex. P13 is liable to be declared as nullity because respondent No. 4 did not give opportunity of hearing to the petitioner’s representative before dismissing the appeal filed against the order of assessment. Shri A.S. Tewatia, learned counsel for respondent Nos. 1 to 5 laid emphasis on the fact that the petitioner has already filed a civil suit against respondent Nos. 6 and 7 and others for recovery of the amount allegedly paid to them and, therefore, the writ petition is liable to be dismissed. He referred to the averments contained in the plaint (Annex. P12/A) to show that Rs. 5,20,04,800 which the petitioner is said to have paid to respondent No. 7 and Dharam Pal is a part of the claim made by the petitioner against respondent Nos. 6 and 7 and others who have been impleaded as defendants and argued that in the face of the said claim, the petitioner cannot seek a mandamus for directing respondent Nos. 1 to 5 to pay the said amount. Learned counsel submitted that the findings recorded by the Addl. Chief Judicial Magistrate cannot be made basis for nullifying the order of assessment passed by the competent authority under s. 158BC(c) r/w s. 144 of the Act.

13. We have thoughtfully considered the respective arguments. A careful reading of the plaint (Annex. P12/A) shows that after the decision of the criminal case and finalisation of the assessment proceedings initiated by respondent No. 5 against respondent No. 7, the petitioner joined other sister-companies and filed suit on 12th April, 2002, against respondent Nos. 6 and 7, M/s AVB Project, of which respondent No. 6 is shown to be the proprietor, and Dharam Pal with the following prayers : “(a) directing the defendant Nos. 1 to 4 herein to pay jointly and severely a sum of Rs. 9,31,73,287 (rupees nine crores thirty one lakhs seventy three thousand two hundred and eighty seven only) to the first plaintiff herein together with further interest at the rate of 24 per cent per annum for the principal amount of Rs. 6,90,17,250 from the date of plaint till realisation; (b) directing the defendants Nos. 1 to 4 herein to pay jointly and severally a sum of Rs. 68,04,675 (rupees sixty eight lakhs four thousand six hundred and seventy five only) to the second plaintiff herein together with further interest at the rate of 24 per cent per annum for the principal amount of Rs. 50,40,500 from the date of plaint till realisation; (c) directing the defendant Nos. 1 to 4 herein to pay jointly and severally a sum of Rs. 13,47,300 (rupees thirteen lakhs forty seven thousand three hundred only) to the third plaintiff herein together with further interest at the rate of 24 per cent per annum for the principal amount of Rs. 9,98,000 from the date of plaint till realisation; (d) directing the defendant Nos. 1 to 4 herein to pay jointly and severally a sum of Rs. 21,44,475 (rupees twenty one lakhs forty four thousand four hundred and seventy five only) to the fourth plaintiff herein together with further interest at the rate of 24 per cent per annum for the principal amount of Rs. 15,88,500 from the date of plaint till realisation; (e) to pay the cost of the suit to all the plaintiffs; (f) to pass such further or other orders as this Hon’ble Court may deem fit and proper and thus render justice.” In paras 7, 8 and 9 of the plaint, reference has been made to the events which led to the payment of Rs. 5,20,04,800 to respondent No. 7 and Dharam Pal for the purpose of development of a housing colony. It is, thus, evident that the petitioner has already availed of the remedy of civil suit for recovery of the amount paid to respondent No. 7 and Dharam Pal. It is, therefore, not possible to entertain its plea for issuance of a writ in the nature of mandamus to respondent Nos. 1 to 5 to release the sums of Rs. 3,65,17,800 and Rs. 38,03,511.50 which are said to be the subject-matter of assessment. We are also not inclined to entertain the petitioner’s prayer for quashing of order Annex. P11 because the appeals filed by it were not accompanied by the order of assessment. Moreover, the reason assigned by respondent No. 4 for declining to entertain the appeals is consistent with the language of s. 246A of the Act. For the reasons mentioned above, the writ petition is dismissed leaving the petitioner free to pursue the civil suit which it has filed along with sistercompanies in the High Court of Chennai.

[Citation : 267 ITR 640]

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