MOOSA SAIT v. AGRL. INCOME TAX OFFICER — 1980 DIGILAW 188 (KER)

Judgment :- 1. This writ petition comes before us on a reference by Dr. Justice T. Kochu Thommen. The order of reference reads: "Two important questions arise in this petition. (1) Can the Agricultural Income-tax Officer validly refuse to make a refund in accordance with the directions of the Appellate Assistant Commissioner when the tatter's order was not challenged within the statutory period and hence became final, for the reason that a subsequent decision of the Supreme Court in a different case invalidated the reasoning of the appellate authority. (2) Whether S.50 of the Agricultural Income-tax Act is applicable to a claim for refund as per the order of the appellate authority. 2. In view of the general importance of these questions, I am of the view that this case should be heard by a Division Bench. The case is accordingly adjourned in terms of S.3 of the Kerala High Court Act." 2. The petitioner is a charitable institution. For the assessment years 1959-60 and 1962-63 to 1965-66, the Agricultural Income Tax Officer, Alwaye fixed the tax payable by the institution under the Agricultural Income Tax Act, 1950, for short, the Act at Rs. 2,22,454.41 Ps (for all the years together). This amount was fully paid in time though the petitioner challenged the orders of assessment in appeals. By a common order dated 22-7-1967, all the appeals were allowed, setting aside the orders of assessment on the ground that the income of the institution is income derived from properties held under a Trust solely for religious and charitable purposes and therefore exempt from levy of Agricultural Income Tax. The order also contained a direction in the following terms: "Tax paid if any shall be refunded". This entitled the petitioner institution to get a total refund of Rs. 2,22,454.41 Ps. 3. When assessment orders of 1969-70 and 1970-71 with notices of demand were served on the petitioner by a letter of 15-3-1971 (marked as Ex. P2 here), the petitioner prayed for adjustment of the amount due to the institution on account of the aforementioned direction for refund towards those subsequent demands. The assessment of 1969-70 and 1970-71 were for Rs. 1,00,025.28 and Rs. 84,736.32. It was alleged in Ex. P2 that the institution had already applied for the amounts wrongly collected. In reply to Ex. P2 here), the petitioner prayed for adjustment of the amount due to the institution on account of the aforementioned direction for refund towards those subsequent demands. The assessment of 1969-70 and 1970-71 were for Rs. 1,00,025.28 and Rs. 84,736.32. It was alleged in Ex. P2 that the institution had already applied for the amounts wrongly collected. In reply to Ex. P2, the petitioner was informed by the Agricultural Income Tax Officer, that the earlier appellate decision was based on a ruling rendered by the Appellate Tribunal which had been subsequently quashed by the High Court. The Agricultural Income Tax Officer would further say that as the basis of the appellate order was no more in existence, the same was vitiated by error apparent from the records and is rectifiable. The letter (the office copy of which is marked as Ex. P3 in the case) would then state that petitioner is not entitled to the refund of the amount and the failure to remit the tax dues for the subsequent years will result in the imposition of the penalty on the petitioner, On the insistence of the demand for payment of the tax assessed for the subsequent years, without prejudice to the contentions the institution had raised, the amount of Rs, 84,736.32 was paid (assessment for the period 1970-71, the lesser of the two demands then made). 4. It may be noted that in the meanwhile the Agricultural Income Tax Officer filed second appeals, in respect of the assessments quashed by the Appellate Assistant Commissioner who had also directed the tax paid as per the assessments to be repaid before the Income Tax Appellate Tribunal with applications to condone the long delay of six years in filing the appeals. The Tribunal by its order dated 17-2-1974 marked in this proceeding as Ex P9 refused to condone the delay and consequently rejected the appeals. 5. The Commissioner of Agricultural Income Tax, the third respondent then initiated proceedings under S.34 of the Act seeking to revise the order of the Appellate Assistant Commissioner, Ex.P1. Ex.P10 is the copy of the notice issued to the petitioner. The petitioner objected to the initiation of such proceedings; under S.34. The Commissioner after hearing the petitioner's representative had not taken any further steps in the matter. 6. Ex.P10 is the copy of the notice issued to the petitioner. The petitioner objected to the initiation of such proceedings; under S.34. The Commissioner after hearing the petitioner's representative had not taken any further steps in the matter. 6. The petitioner was repeating the demand for refund of the tax collected from him and in respect of which refund had been directed by Ext. P1 order. This was not complied with. On the other band, the Inspecting Assistant Commissioner of Agricultural Income Tax issued notice under S.40 (1) of the Act proposing to impose penalty for the alleged default of the payment of the tax of Rs. 86,697.90 determined and demanded from the petitioner for the assessment year 1971-72. In his reply to the notice, the petitioner once again prayed for adjustment of the refund due to him to the tax that had fallen due subsequently. In the circumstances petitioner also made two representations to the Secretary, Board of Revenue, and the Government (addressed to the Secretary, Government of Kerala (Taxes)) praying for passing appropriate orders for directing the concerned authority to refund the tax amount pursuant to the earlier order of the Appellate Assistant Commissioner, Ext. P1. Copies of these two representations are marked as Ex. P14 and Ex. P15. 7. Having failed to get the authorities comply with his request for refund or adjustment of the amount towards the subsequent demands the petitioner institution has approached this court praying for a writ in the nature of mandamus directing the assessing authority to pass order refunding the tax amount of Rs. 2,22,454.51 Ps. paid as per the orders of assessment 1959-60 and 1962-63 to 1965-66 pursuant to Ex. PI order of the Appellate Assistant Commissioner and for quashing the notice Ex P10 issued by the Commissioner of Agricultural Income Tax or in the alternative to issue a direction to the Commissioner of Agricultural Income Tax to dispose of Ex. P10 proceedings in accordance with law. 8. The petitioner's case before this court is short and simple. Under law, the assessing authority is duty bound to pass appropriate consequential orders refunding the amount pursuant to the directions contained in Ext. P10 proceedings in accordance with law. 8. The petitioner's case before this court is short and simple. Under law, the assessing authority is duty bound to pass appropriate consequential orders refunding the amount pursuant to the directions contained in Ext. P1 under S.44 of the Act "44(1) If any person satisfies the Agricultural Income-tax Officer that the amount of agricultural income-tax paid by him for any year exceeds the amount with which such person is properly chargeable under this Act for that year, he shall be entitled to a refund of any such excess. (2) The appellate or revisional authority in the exercise of his appellate or revisional powers, if satisfied to the like effect shall cause a refund to be made by the Agricultural Income tax Officer of any amount found to have been wrongly paid or paid in excess." Under S.48 of the Act, "where under any of the provisions of this Act, a refund is found to be due to any person, the Agricultural Income tax Officer, the Assistant Commissioner or the Commissioner, as the case may be, may in lieu of payment of the refund set off the amount to be refunded, or any part of that amount against the agricultural income tax if any, remaining payable by the person to whom the refund is due". 9. In the counter affidavit filed on behalf of respondents 1 to 3, who are the Agricultural Income Tax Officer, Alwaye, the Commissioner of Agricultural Income Tax (Board of Revenue), and the Inspecting Assistant Commissioner of Agricultural Income Tax, Trichur respectively (the State, being the fourth respondent), it is pointed out that in respect of the assessment for the years 1960-61 and 1961-62, this court had held overruling the decision of the Agricultural Income Tax Tribunal, that the entire income of the petitioner-institution is not being used for the charitable purposes and the orders of assessment passed by the officer were correct. This order of this court was upheld in appeal by the Supreme Court. Therefore while the sum of Rs 2,22,454.41 paid by the petitioner for the years 1959-60,1962-63 to 1965-66 became refundable to him on account of the appellate order Ex, P1 which was not taken up in appeal in time by the Department, it was not a "genuine case of refund" in view of the decision of the Supreme Court. Therefore while the sum of Rs 2,22,454.41 paid by the petitioner for the years 1959-60,1962-63 to 1965-66 became refundable to him on account of the appellate order Ex, P1 which was not taken up in appeal in time by the Department, it was not a "genuine case of refund" in view of the decision of the Supreme Court. The Department consequently explored the possibilities of revising the order of the Appellate Assistant Commissioner. One such possibility was suo motu revision of the appellate order under S.34 of the Act. When notice to that effect was issued to the petitioner, it was objected to on the basis of the decisions of this court in 52 ITR. 977 and 82 ITR 845. Therefore, the counter affidavit states the proposal could not be implemented. It is again pointed out that in the interest of State Revenue the possibility of revising the orders of the Appellate Assistant Commissioner was explored. Finally it is said in the counter affidavit that under S.50 of the Agricultural Income Tax Act, no claim to any refund shall be allowed unless it is made within three years from the last date of the financial year commencing next after the expiry of the previous year in which the agricultural income was received. The assessment orders for 1959-60,1962-63 to 1965-66 were made on 6-1-1960, 30-1-1963,10-2-1964, 20-10-1964 and 20-1-1966 respectively. The appellate orders were passed on 12-7-1967. The assessee applied for refund only on 15-3-1971, long after three years and therefore, the counter affidavit would assert the refund was barred by limitation. 10. S.50 of the Act reads: "50. Limitation of claims for refund. No claim to any refund of agricultural income-tax under this Chapter shall be allowed, unless it is made within three years from the last day of the financial year commencing next after the expiry of the previous year in which the agricultural income was received." 11. We have no hesitation in overruling the plea of limitation raised by the respondents. On a reading of the provision it is apparent that the section is applicable for entertaining a claim for refund, not to a case where the claim of the assessee for refund has been settled by an order of any of the authorities. We have no hesitation in overruling the plea of limitation raised by the respondents. On a reading of the provision it is apparent that the section is applicable for entertaining a claim for refund, not to a case where the claim of the assessee for refund has been settled by an order of any of the authorities. As the ruling of the Allahabad High Court in M/s, Sohan Pathak and Sons v. Commissioner of Income-Tax, Lucknow, and Another (1922, 46 ITR 523) would indicate (with reference to limitation prescribed for claim for refund under Indian Income Tax Act S.50 of 1922 Act corresponding to S.239 (2) of 1961 Act) in any case where, as a result of any order passed in appeal, reference, revision, rectification or amendment proceeding, refund of any amount becomes due to the assessee the Income Tax Officer is bound to refund the amount to the assessee without his having to make any claim in that behalf and the period of limitation laid down in the provision would not apply. As the learned Authors of "The Law and Practice of Income Tax Kanga and Palkhivala Seventh Edition" point out, to hold otherwise would be to deprive the assessee of the right to refund in cases, where, for instance, the appellate order is made after the expiry of the time limit laid down in the statutory provision. 12. The respondents' plea would in effect be denial of justice and furthermore destructive of the basic principles in the administration of justice. Here the direction for refund was given by the appellate authority setting aside in appeal the order of the assessing authority. In Ext. P3 when the Agricultural Income Tax Officer said that the petitioner institution is not entitled to refund and the appellate order is vitiated by mistake apparent from the records liable for rectification he was virtually refusing to carry out the directions which a superior Tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. In the words of Justice S.K. Das in Bhopal Sugar Industries Ltd. v. Income tax Officer, Bhopal AIR. 1961 SC. 182, such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles of administration of justice based as it is in this country on a hierarchy of Courts. In the words of Justice S.K. Das in Bhopal Sugar Industries Ltd. v. Income tax Officer, Bhopal AIR. 1961 SC. 182, such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles of administration of justice based as it is in this country on a hierarchy of Courts. If a Subordinate Tribunal refuses to carry out directions given to it by a Superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice. There was no necessity for the petitioner to make an application in the matter. It may here be noted that under S.44 (2) of the Act the appellate or revisional authority if satisfied that the amount paid towards the tax by the assessee is in excess of the amount with which such person is chargeable shall cause a refund to be made by the Agricultural Income Tax Officer of any amount found to have been wrongly paid or paid in excess. S.50 is not attracted in such cases. 13. As regards subsequent assessments which no doubt are legal and enforceable justice demands that before the petitioner is coerced to make the payments as per the assessment orders, amounts refundable to it are paid or adjusted so that the demand may be executed only for the balance. S.48 of the Act enables the officer to make such adjustment and interest of justice requires such adjustment or set off See in this connection N.C. Mukherjee and Co. v. Union of India, and another (68 ITR. 500). 14. We are afraid that none of the decisions relied on by the learned Government Pleader would be applicable on the facts of this case. Suganmal v. State of Madhya Pradesh and others (1965) 66 ITR, 84 is a case where the petitioner therein, appellant before the Supreme Court sought solely for the issue of a writ of mandamus in a petition under Art.226 of the Constitution of India for directing the State to refund money alleged to have been illegally collected by the State as tax under the Indore Industrial Tax Act. Confirming the decision of the High Court in the matter dismissing the petition, the Supreme Court pointed out that the appellant before it had not been able to bring his claim for refund within any statute or statutory rule. Confirming the decision of the High Court in the matter dismissing the petition, the Supreme Court pointed out that the appellant before it had not been able to bring his claim for refund within any statute or statutory rule. The mere order of the appellate authority that the tax collected was not authorised by any law is not a decision to the effect that the State is to return the amount to the assessee nor can it be taken to amount to a law making it incumbent on the State to refund the amount to the assessee. The Supreme Court was of the view that the appellant before it had no right under any statutory law to the refund of the tax paid and that no duty is cast on the State to refund the amount it had realised which had been subsequently found to be not in accordance with law. The claim for refund could be made in a suit against the authority which had illegally collected the amount. That case is no parallel to the present one in the nature of the statutory provision to which we have referred to earlier, and the direction for refund contained in the appellate order. 15. So also the decision in D. Cawasji & Co. v. Stale of Mysore (AIR. 1975 SC. 813). There the matter arose out of writ petitions praying for refund of the Educational Cess paid during 1951-52 to 1965-66 under the Mysore Elementary Education Act, 1941 as amended by the Amendment Act of 1955. The appellants-petitioners in the earlier writ petitions had not prayed for refund of the amounts paid by way of Cess. There the Supreme Court held that in the circumstances of the case having regard to the conduct of the appellants in not claiming these amounts in the earlier writ petitions, the Supreme Court would not be justified in interfering with the discretion exercised by the High Court in dismissing the writ petitions which were filed only for the purpose of obtaining the refund and in directing them to report to the remedy of suits. Obviously this cannot be of any help to the respondents on the facts and circumstances of this case. 16. The next authority that was relied on by Mr. Dharmadan, the learned Government Pleader was the decision of the Supreme Court in G F. Industries v. Union of India (AIR. Obviously this cannot be of any help to the respondents on the facts and circumstances of this case. 16. The next authority that was relied on by Mr. Dharmadan, the learned Government Pleader was the decision of the Supreme Court in G F. Industries v. Union of India (AIR. 1977 SC. 456) In that case the appellant before the Supreme Court was a manufacturer of dry battery cells. He had received a consignment of ten metric tons of manganese dioxide on which the Assistant Collector of Customs had levied a duty under Tariff Item 28. This levy was confirmed in appeal by Appellate Collector but in revision the Revisional Authority held that the goods should be assessed under Tariff Item 26 and ordered refund of duty. The appellant asked for refund and sent reminders to Customs Authorities for refund. Finally he issued notice under S.80 of the Civil Procedure Code for institution of a suit for recovery of the money directed to be refunded. About four months thereafter he received a notice under S.131(3) of the Customs Act which empowers the Government of its own motion to annul or modify any order passed under S.128 or S.130 of the said Act. The contention of the appellant was that the power of suo motu revision under S.131(3) of the Act in so far as it relates to a case of non-levy or short levy of duty must be exercised within the period of limitation prescribed in S.131(5) of the Customs Act. Or in other words, the power of suo motu revision contained in S.131(3) of the said Act is subject to the provisions contained in S.131(5) of the same Act. S.131(5) reads as follows: "Where the Central Government is of opinion that any duty or customs has not been levied or has been short-levied, no order levying or enhancing the duty shall be made under this section, unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in S.28." S. 28 of the Customs Act provides for notice for payment of duties not levied, short-levied or erroneously refunded. Under S.28 when any duty has not been levied or has been short-levied or erroneously refunded, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or which has been short-levied or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. The Supreme Court pointed out that once the provisions contained in S.131(3) are attracted, the Central Government may of its own motion annul or modify any order passed under S.128 or S.130. This provision indicates the power of Central Government to annul or modify any order. This power is exercised by the Central Government suo motu. The provisions in S.131(5) of the Customs Act speak of limitation only with regard to non-levy or short-levy. It does not speak of any limitation in regard to revision by the Central Government of its own motion to annul or modify any order of erroneous refund of duty. The provisions contained in S.131(5) with regard to non-levy or short-levy cannot be equated with erroneous refund inasmuch as the three categories of errors in the levy are dealt with separately. The Supreme Court was of opinion that the prayers made in the case for writs of certiorari and mandamus were misconceived. There was no order either judicial or quasi-judicial which could attract certiorari. No mandamus could go because there was nothing which was required to be done or forborne under the Act. The issue of the notice in the case required the parties to re-present their case. There was no scope for mandamus to do any duty or act under the statute. A writ of prohibition could not have been issued for the obvious reason that the Central Government had jurisdiction to revise. We are not able to understand how that case could be related to the facts of the present case. 17. It might be noted that this is a case where the petitioner's right under Art.19(1)(f) had been infringed. By the order of the Appellate Authority the petitioner became entitled to refund of the tax paid. The amount concerned became his property. See in this connection the observations in the majority judgment rendered by Bhagwati J. in M. M Pathak v. Union of India (1978) 1 LLJ. By the order of the Appellate Authority the petitioner became entitled to refund of the tax paid. The amount concerned became his property. See in this connection the observations in the majority judgment rendered by Bhagwati J. in M. M Pathak v. Union of India (1978) 1 LLJ. 406) where the earlier Supreme Court cases have been referred to 18. Therefore, in the circumstances we would issue a writ in the nature of a mandamus directing the assessing authority to pass the consequential order refunding the tax amount pursuant to Ext. P1 We are not quashing Ext. P10, as respondents themselves have stated in the counter affidavit that the proposal for reviewing the appellate order under S.34 of the Act could not be implemented in view of the decision of this Court in 52 ITR. 977 and 82 ITR 845. The Original Petition is allowed as above. We make no order as to costs in the circumstances of the case. Allowed.