PRADEEP KUMAR JAIN and ANOTHER V. CHIEF COMMISSIONER OF INCOME TAX and 2 OTHERS

WTAX/606/2017

AI Insights

The case involves a dispute over the appropriation of funds seized from the legal heirs of Late Giri Lal Jain by the Income Tax Department, which were allegedly used to settle the tax liabilities of another individual, Sri Amrish Kumar Jain. The petitioners, Pradeep Kumar Jain and his brother, contested the appropriation, arguing that they had no legal or business relations with Sri Amrish Kumar Jain and that the appropriation was done without notice or opportunity for them to contest. The court had previously ruled in favor of another brother, Deepak Kumar Jain, in a similar case, setting a precedent that the legal heirs were not liable for the deceased's tax dues. The current petition seeks to extend the benefits of that ruling to the petitioners.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 769729 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 15-09-2022
• Assessment Year: misc
• Other Referred Cases: Writ Tax no.1748 of 2011
• Laws Referred To: Income Tax Act, RTI Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MANU GHILDYAL
• Assessee Lawyers: SARVESHWAR SINGH
• Keywords: Block assessment; Income Tax; Legal heirs; Refund; Search and seizure; Wealth Tax
• Section: 132; 159

Judgement Text

"Court No. - 39 Case :- WRIT TAX No. - 606 of 2017 Petitioner :- Pradeep Kumar Jain And Another Respondent :- Chief Commissioner Of Income Tax And 2 Others Counsel for Petitioner :- Sarveshwar Singh Counsel for Respondent :- S.S.C.,Manu Ghildyal Hon'ble Mrs. Sunita Agarwal,J. Hon'ble Vipin Chandra Dixit,J. Heard Sri Sarveshwar Singh learned counsel for the petitioners and Sri Manu Ghildyal learned counsel for the respondent revenue. The petitioners herein are sons and grandson of Late Giri Lal Jain. There were four sons and one daughter of Late Giri Lal Jain namely Ashok Kumar Jain (since deceased), Pradeep Kumar Jain, Deepak Kumar Jain, Vipin Kumar Jain and Smt. Asha Jain. The petitioner no.2 is the son of Late Ashok Kumar Jain and grandson of Late Giri Lal Jain. In a search and seizure operation under Section 132 of the Income Tax Act carried out at the premises of the petitioners and his brothers/uncles on 04.10.2004 and subsequently during search of locker, the officers of the Income Tax Department had seized cash amount of Rs.1,90,12,500/- belonging to petitioner no.1 and Rs.2,12,12,500/- belonging to Sri Ashok Kumar Jain, father of the petitioner no.2, Rs.2,15,12,000/- belonging to Sri Deepak Kumar Jain and Rs.2,07,12,500/- of Sri Vipin Kumar Jain were seized. The proceedings for block assessment were initiated against all four brothers and they had participated in the same. It is stated in the writ petition that all the cases relevant to the search and seizure were completed and refunds short by Rs.72,72,524/- was granted to petitioner no.1 and Rs.72,69,248/- were granted to the petitioner no.2. Sri Deepak Kumar Jain had also received refunds short by Rs.72,72,524/-. It is stated that on an application under RTI Act filed by the petitioners, CIT Ghaziabad in response to the same vide order dated 20.03.2007 informed that a demand of Rs.2,18,07,748/- was outstanding against one Amrish Kumar Jain and the said dues were appropriated from P.D. account on 18.01.2005 from the legal heirs of deceased Sri Giri Lal Jain. It stated that there is no legal basis to realise outstanding against Sri Amrish Kumar Jain from the P.D. account of the legal heirs of the deceased Sri Giri Lal Jain. It is stated that the petitioners have no business relations with Sri Amrish Kumar Jain at any point of time and moreover, the demand against Sri Amrish Kumar Jain had been realised by the department suo motu without any notice or opportunity to the petitioners. The contention is that the petitioners and his brother Deepak Kumar Jain had approached the department on various occasions but no response had been received to their request. The writ petition no.84 of 2011 was filed by Sri Deepak Kumar Jain, one of the brothers of the petitioners, wherein vide judgment and order dated 19.01.2011, CCIT Ghaziabad was directed to decide the representation dated 20.08.2009. It is stated that the petitioner no.1 had been requesting for refund of wrongly adjusted amount of Rs.72,69,250/- from his P.D account. The CCIT, Ghaziabad by the order dated 17.08.2011 had rejected the representation of Deepak Kumar Jain holding that the entire outstanding amount against Amrish Kumar Jain was liable to be appropriated from the legal heirs of the deceased Giri Lal Jain. Being aggrieved against the said order, Deepak Kumar Jain had filed Writ Petition (Tax) no.1748 of 2011. After exchange of counter and rejoinder affidavits, the said writ petition was finally decided vide judgment and order dated 11.08.2016. The contention is that the order passed by the CCIT, Ghaziabad dated 17.08.2011 related to all four brothers, upholding the appropriation of the entire amount of outstanding against Sri Amrish Kumar Jain from three sons of late Giri Lal Jain namely Pradeep Kumar Jain, Ashok Kumar Jain and Deepak Kumar Jain. The said order having been set aside by this Court vide judgment and order dated 11.08.2016, the petitioners herein are also entitled for the refund as directed therein in the matter of Deepak Kumar Jain. To this submission of the learned counsel for the petitioners, no plausible objection could be taken by the learned counsel for the revenue. It is, however, stated by him that the prayer no.(i) of the writ petition seeking for quashing of the order dated 17.08.2011 which was passed on the representation of Sri Deepak Kumar Jain is misconceived. The said order is not in existence with the passing of the judgment and order dated 11.08.2016 and hence, the prayer for its quashing is misconceived. On the said submission learned counsel for the petitioners states that the petitioners may be allowed to withdraw the prayer no. (i) of the writ petition and they are pressing the prayer no.(ii) with the claim that they are entitled for the mandamus commanding the respondents to consider the claim of the petitioners in light of the judgment and order dated 11.08.2016 passed in Writ Tax no.1748 of 2011 filed by Deepak Kumar Jain, one of the brothers of the petitioner no.1 and uncle of the petitioner no.2. The counsels for the parties agreed to the extent that the judgment and order dated 11.08.2016 has not been varied, altered or set aside by a higher Court of law. Considering the submissions of the learned counsels for the parties and perused the record, we may note that while adjudicating the claim of Deepak Kumar Jain for refund, this Court had framed the following question for consideration:- \"24. The short question up for consideration in this writ petition is \"whether liability of tax of Amrish Kumar Jain has rightly been appropriated from the funds seized from petitioner and kept in P.D. A/c by Revenue.\" However, while answering the said question, this Court had recorded the events which occurred after the death of Late Giri Lal Jain on 28.11.1973. It was noted that the firm M/s Giri Lal Mamchand and Company was constituted in 1951. It had two partners namely Late Giri Lal Jain and S.D Jain. The firm continued till assessment year, 1966-67 (financial year 1965- 66). The firm was reconstituted w.e.f 01.05.1966 as M/s Girilal Mam Chand and Company. At that time, two more partners were introduced besides two earlier partners i.e Giri Lal Jain and S.D. Jain. The new partners were Smt. Moonga Devi Jain and Amrish Kumar Jain. Sri Amrish Kumar Jain had attained majority in 1970 and became full-fledged partner through the partnership deeds dated 03.04.1970. On 04.04.1972, a search team of Income Tax Department conducted searches of residence and business premises of the partnership firm, M/s Girilal Mamchand Company and other connected establishments and seized cash and certain jewellery. Giri Lal Jain had died on 28.11.1973, Sri S.D.Jain on 12.05.1974 and Smt. Moonga Devi died on 30.10.1978. Wealth Tax assessment for the assessment years 1970-71 to 1974-75 were finalized by the Wealth Tax Officer, Central Circle, Ghaziabad on 24.03.1986. At that time neither Giri Lal Jain was alive nor any legal heirs of Giri Lal Jain were given any opportunity to participate in the proceedings as none of them were put to notice. It was noted by this Court that on behalf of the firm, an application was filed before the Income Tax Settlement Commission on 20.09.1982. Looking to the position that all three previous partners of the firm had died uptil the year 1978, it was noted by the Court that the existing firm M/s Girilal Mamchand and Company had been dissolved and it may have at the best became an proprietorship firm with the only partner being alive who was Amrish Kumar Jain. Relevant paragraphs '33' & '34' of the judgment and order dated 11.08.2016 are required to be reproduced as under:- \"33. Wealth-tax assessments for the assessment years 1970-71 to 1974-75 were finalized by Wealth Tax Officer, Central Circle, Ghaziabad on 24.03.1986. At that time also, admittedly, neither Girilal Jain was alive so as to have any participation in the said proceedings nor any legal heir of Girilal Jain had any opportunity since none was put on notice. 34. M/s. Girilal Mamchand & Co., which may have been heard by Wealth Tax Officer, when made assessment order dated 24.03.1986, could have been a proprietorship firm at that time, having only Amrish Kumar Jain alive. It also appears from order dated 24.03.1986 that same was passed with reference to the issues settled by Settlement Commission under Section 35 of Act, 1957 but no such order of Settlement Commission, relating to the wealth-tax dispute, has been placed on record and what has been stated therein has neither been brought to the notice of Court nor there is any averment that it was communicated to petitioner. Only order of Settlement Commission is on record and is dated 09.01.1996 which is in respect of income-tax. The demand notice placed on record along with supplementary counter affidavit dated 24.03.1986 and 11.01.1989 also relate to wealth-tax liability which has nothing to do with Settlement Commission's order dated 09.01.1996 which was in respect of income-tax liability. How and in what manner wealth-tax liability was created in 1986-89 and such demand could have been saddled upon petitioner could not be demonstrated by respondents at all. \" It was also noted that the respondents at no point of time laid their claim that the petitioner namely Deepak Kumar Jain therein or any of his brothers (the petitioners herein) were party before the Settlement Commission, when application dated 20.09.1982 was filed. It, thus, became an admitted fact that no notice or opportunity was given to the heirs and legal representatives of Giri Lal Jain at the time of assessment vide order dated 24.03.1986. It was further noted that with respect to assessment years 1967-68 to 1974-75, 1976-77 to 1977-78, 1981-82 and 1982-83, application was filed before the Income Tax Settlement Commission, which obviously would have been filed by Amrish Kumar Jain, the sole proprietors at that time. It therefore could not be established as to how the proceedings would be binding upon the petitioner (Deepak Kumar Jain). The final assessment order was passed on 23.02.1996 determining liability for the assessment year 1969-70 and onwards. Relevant paragraphs'35', '38' and '39' are reproduced as under:- \"35. With respect to the assessment years 1967-68 to 1974-75, 1976-77 to 1977-78, 1981-82 and 1982-83, application was filed before Income Tax Settlement Commission and it is quite obvious that such application would have been filed by Amrish Kumar Jain, being sole proprietor at that time but application was filed i.e. 20.09.1982 on behalf of M/s. Girilal Mamchand & Co. How these proceedings could have been held binding upon the petitioner, we actually fail to understand. Thereupon final order was passed on 23.02.1996 determining liability for A.Y. 1969-70 and onwards. In respect of the A.Y.s 1967-68 and 1968-69, Settlement Commission accepted income of Rs. 61660/- and 1,09,182/-. Settlement Commission also granted immunity from all penalties imposed under Act, 1961 for assessment years 1969-70 and onwards to which settlement relates. Copy of said order dated 09.01.1996 passed by Settlement Commission is on record as Annexure No. 11 to writ petition. The entire order no where shows that petitioner or any of his brothers, in any manner, were party in proceedings before Settlement Commission or had any opportunity of hearing. 38. The period of assessment of income-tax or wealth-tax, as the case may be, to some extent relates to when (Late) Girilal Jain was alive. But all proceedings have been conducted and finalized long after his death. In none of such proceedings, petitioner or his brothers have been shown to be made party or given any opportunity of hearing. Against a dead person no liability can be created unless his legal heirs are there. If reconstituted firm after death of Girilal Jain is taken to be the legal representative then liability and recovery could have been made from the then partners/ proprietor and not from any person who has no relation, by any means with such reconstituted firm. 39. Facts are evident to show that reconstituted firm or assessment had no participation of petitioner or his brothers. The assessment or settlement, whatsoever may be, all was with the participation of only Amrish Kumar Jain, and quite obvious, as a proprietor of reconstituted firm. If that be so, imposing liability upon petitioner, without placing anything on record that petitioner inherited anything from his father, is patently illegal and without jurisdiction. Petitioner's money was seized in a fresh and separate search and seizure operation and that too conducted in 2004. The search and seizure has nothing to do with any assets of funds of (Late) Girilal Jain who had died some 30 years ago. Nothing could be shown to us, which may authorize respondents to appropriate funds belong to petitioner, which is not shown to have been inherited from ancestors. There is no material placed on record to show that petitioner held or holds money for and on account of assessee. Mere fact that (Late) Girilal Jain happened to be father of petitioner, would not entitle respondents to recover any tax dues, not belong to petitioner, from petitioner unless it is shown that petitioner has inherited a Estate from his father and recovery is being made from such inherited estate.\" It was, thus, concluded that the petitioner (Deepak Kumar Jain), the brother of the petitioners herein had no participation in the stage of assessment. The participation of anyone, if was, quite obvious, he was Amrish Kumar Jain, the proprietor of the reconstituted firm. It was, thus, concluded that imposing liability upon the petitioner (Deepak Kumar Jain) without placing anything on record that the petitioner (Deepak Kumar Jain) was inherited nothing from his father is patently illegal and without jurisdiction. Further, it was held in para '40' and '41' that Section 159 of the Act, 1961 while making legal representative responsible for assessment proceedings or tax liability of a deceased, confines it to the extent to which estate is capable to meet liability. Meaning thereby, legal representative's liability is confine to the extent, as estate has been succeeded by him and not beyond that. This provision further makes it clear that the proceedings shall be initiated against legal representative in the same manner as it could not have been against deceased-assessee but that, if so, like deceased assessee, legal representatives were entitled to be heard before finalisation of liability, after the death of the deceased assessee. It was, thus, finally concluded in paragraphs-'48' and '49' as under:- \"48. In view of above discussion, we are clearly of the view that recourse to Section 159 is thoroughly misconceived and illegal on the part of Revenue. Neither there existed any liability against deceased nor any liability was finalized after giving notice to the alleged legal heirs nor the amount which was seized in search and seizure operation under Section 132, otherwise could have been appropriated against the alleged dues of deceased Girilal Jain by referring to Section 159 as discussed above.9 In the present case, it is not the case of respondents that an assessment was made against (Late) Girilal Jain and from the assets of deceased which was received by his legal representatives, the demand has been satisfied. At no point of time any notice or opportunity was given to the petitioner or any of his brothers before finalizing the alleged liability of deceased after his death. In fact highhandedness on the part of respondents is writ large from the fact that they did not keep on informing petitioner or his legal brothers but petitioner has to collect correct information by approaching respondents under RTI Act and not otherwise. This clearly shows a hide and seek approach, patently erroneous and malicious in law, on the part of respondents in appropriating assets of petitioner in respect of certain dues which were not shown to be adjustable there against. 49. In our view here is a clear case of patent illegality, unauthorized appropriation, and unfair and unjust treatment made by the respondents to the petitioner in depriving him his huge amount which in law was refundable to him. The action on the part of respondents also comes within the ambit of patent abuse of process of law. \" The relief granted to Sri Deepak Kumar Jain, one of the sons of Late Giri Lal Jain therein is as under:- \"In the result, writ petition is allowed. The entire amount of petitioner which was appropriated by respondent is directed to be refunded with interest at the rate of 12% per annum from the date the amount was seized till repayment to petitioner. The order dated 17.08.2011 passed by CCIT upholding appropriation of Rs. 72,72,524/- is hereby set aside. \" Having gone through the abovenoted decision of this Court dated 11.08.2016, we find that the controversy as to whether the legal representatives of deceased Giri Lal Jain were liable by virtue of Section 159 of Act, 1961 for the Wealth Tax as per the final assessment the order dated 23.02.1996 has been set at rest, in so far as the heirs and legal representatives of late Giri Lal Jain were concerned. The claim of the petitioners herein is that they are at the same footing as that of Sri Deepak Kumar Jain, (one of the sons of late Giri Lal Jain). And as determined in the judgment and order dated 11.08.2016, the petitioners herein are also entitled for the same relief. We find substance in the said submission and hold that nothing remains to be adjudicated on the controversy in question. The claim of the petitioners herein is covered by the judgment and order dated 11.08.2016 and the petitioners are entitled to the benefit of the said decision. We, therefore, dispose of the present petition with the observation that the competent authority shall consider the claim of the petitioners strictly in light of the judgment and order dated 11.08.2016 passed in Writ Tax no.1748 of 2011 (Deepak vs Chief Commissioner of Income Tax and others) and determine the amount to be refunded to both the petitioners herein along with interest as provided therein. The said determination shall be made within a period of four weeks from the date of reciept of copy of this order. It is further clarified that the petitioners herein shall be entitled for the same relief as has been granted to Sri Deepak Kumar Jain in the judgment and order dated 11.08.2016, noted above. Order Date :- 15.9.2022 Harshita Digitally signed by HARSHITA Date: 2022.09.19 17:27:35 IST Reason: Location: High Court of Judicature at Allahabad "