MRS KAMLA DEVI RASTOGI V. COMMISSIONER OF INCOME TAX

WPMS/1537/2011

AI Insights

The case involves Mrs. Kamla Devi Rastogi, who sold a plot of land and deposited the proceeds under the Capital Gains Accounts Scheme, 1988. The Assessing Officer initially withheld Rs. 5 lakhs from the proceeds without any reason, which led to the filing of this writ petition. The petitioner sought various reliefs including the release of the withheld amount with interest, refund of excess tax paid, and compensation for legal expenses. The court found that the withholding of the amount was without jurisdiction and arbitrary, but did not attribute mala fide intentions to the Assessing Officer. The court disposed of the petition by directing the release of the withheld amount and emphasizing the proper application of Sections 54F and 54EC of the Income Tax Act in future cases.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 751054 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 24-03-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: H M BHATIA
• Assessee Lawyers: S K POSTI
• Keywords: Capital Gains Accounts Scheme; Income Tax; Jurisdiction; Withholding of Amount; Arbitrary Exercise
• Section: 54F; 54EC

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No. 1537 of 2011 (M/S) Mrs. Kamla Devi Rastogi …..Petitioner Versus The Commissioner of Income Tax, Appeals-1, Subhash Road, Dehradun, Uttarakhand ......….Respondent Present: Mr. S.K. Posti, Advocate for the petitioner. Mr. H.M. Bhatia, Advocate for the respondent. Hon’ble Alok Singh, J (Oral). Present petition is filed seeking following reliefs : “I. Interest on Rs. 5 Lac for six months from June 2009 to Dec. 2009 due to not releasing the amount in June 2006 alongwith Rs. 17.00 Lac. II. Refund of Tax of Rs. 4.40 lac assessed and paid to department. III. Payment of interest on Rs. 2,64,000/- deposited on 11.12.2009 and s. 1,76,000/- deposited on 03.03.2010 to the date of refund as per income tax department rules. IV. Expenses incurred Rs. 10,000/- in filing this petition. V. Any other relief as deemed fit by the Hon’ble High Court.” Brief facts of the present case, inter alia, are that petitioner sold a plot of land at Jaipur (Rajasthan) in the month of April, 2006 for Rs. twenty two lakhs. The entire sale amount was deposited by the petitioner in the month of April, 2006 itself under the Capital Gains Accounts Scheme, 1988 as a special term deposit for 2 thirty six months under Section 54F of Income Tax Act with State Bank of India, Branch Malviya Nagar, Jaipur. Petitioner filed her return for the financial year 2006-07 specifically showing the capital gains out of sale proceed of the said plot. The capital gains account stood matured in the month of April, 2009, therefore, approval of the Assessing Income Tax Officer was necessary. Consequently, approval was sought vide application dated 11.5.2009, however, learned Assessing Officer (Income Tax Officer) accorded his approval for release of Rs. seventeen lakhs only vide letter No. 690 dated 4.6.2009 and Rs. five lakhs were withheld for no reason. It is further contended that Income Tax Officer/Assessing Officer had absolutely no jurisdiction to withhold any amount, however, amount was illegally withheld by the Income Tax Officer. Thereafter, Income Tax Officer, Kotdwar vide order No. 1558 dated 13.12.2009 assessed the tax amounting Rs. four lakhs forty thousand on the capital gains and petitioner was permitted to deposit the same in two installments. Petitioner paid the tax as assessed by the Assessing Officer. Petitioner preferred an appeal against the assessment order, however, the same was dismissed vide order dated 8.2.2010. Initially stand taken in the petition was that under Section 54F (1) of the Act, out of the sale proceed, if assessee purchases another immovable property within the stipulated time then no tax can be assessed on the alleged capital gains, however, as per Section 54EC of the Act, a provision is made to keep the entire sale proceed in a capital gains account for a locking period of three years, therefore, assessing the income tax on the alleged capital gains in the event of failure to purchase another immovable property within the stipulated time is contrary. 3 Mr. S.K. Posti, learned Amicus Curiae appearing on behalf of the petitioner fairly submits that order of the Income Tax Officer withholding the amount of Rs. five lakhs out of the total sale proceeds deposited under the Capital Gains Accounts Scheme was without jurisdiction. He further submits that learned Assessing Officer ought to have released entire amount and if after release of the amount assessee would have failed to purchase immovable property within the stipulated time, he could have assessed and imposed the tax. However, depriving the assessee for his money for no fault of him can be said to be arbitrary exercise on the part of the Assessing Officer, therefore, petitioner should be awarded interest for the period Rs. five lakhs remained deposited for no fault of the petitioner. Mr. Posti further fairly submits that both the provisions, viz., Section 54F as well as 54 EC of the Act cover different fields, therefore, cannot be said to be contrary to each other. On the other hand, Mr. H.M. Bhatia, learned counsel appearing for the Revenue fairly submits that there seems to be no reason for the Assessing Officer for withholding Rs. five lakhs of the petitioner. Mr. H.M. Bhatia, in all fairness, for which he is known at the Bar, submits that in the event of failure on the part of the assessee to purchase another immovable property within the stipulated time, tax could have been assessed and imposed under Section 54F, however, there seems to be no reason to withhold the amount. He further submits that order of the Income Tax Officer/Assessing Officer withholding the amount of the petitioner was bona fide and no mala fide can be attributed against the Income Tax Officer, therefore, there is no question of awarding interest thereon. He further contends that soon after realizing the mistake, amount was directed to be released 4 and it was withdrawn by the petitioner within 4 – 5 months, therefore, there is no question of paying damages/compensation to the petitioner. I have carefully gone through the contents of the writ petition and have given my serious thought to the submissions made by Mr. S.K. Posti, learned Amicus Curiae appearing for the petitioner. There seems to be no reason to attribute mala fide on the part of the Assessing Officer in withholding the amount, however, order of the Assessing Officer withholding the amount was totally without jurisdiction and seems to be arbitrary. In my opinion, if mala fide cannot be attributed against the officer then merely because his order is without jurisdiction does not mean that some compensation should be granted. Therefore, present petition can be disposed of with the direction that Assessing Officer has absolutely no jurisdiction to withhold any part of the amount deposited under the Capital Gains Accounts Scheme. In the event of failure of the assessee in investing the amount of capital gains within the stipulated period, Assessing Officer can pass appropriate orders under Section 54F of the Act. I hope and trust that Assessing Officer shall be careful in future in such type of matters. Petition stands disposed of accordingly. (Alok Singh, J.) 24.3.2014 Avneet "