Brief of the Case
Delhi High Court held In the case of Vishwanath Khanna vs. CCIT that as per section 293, no civil suit lies against the Income Tax Department with respect to any dues claimed from the Income Tax Department if such dues are/can be the subject matter of proceedings under the Income Tax Act. In the given case it was specifically mentioned that if the Order wrongly disallows the claim, then assessee had appropriate remedy to challenge the said order in an appeal but the assessee failed to do so. This suit in view of Section 293 of the Income Tax Act is not the remedy and the only remedy of the assessee was to challenge the order in the appropriate forum.
Facts of the Case
The Assessee is a proprietor of M/s Foto Traders. A search and seizure operation was carried out on 4.2.1995 in the office and business premises of the assessee. In terms of the search and seizure operation, total silver of 7003.859 kgs was seized from the plaintiff alongwith cash of Rs.49,86,500/-. The seized silver was valued at Rs.4,44,66,395/- at that time and since the value of silver which was seized by the Income Tax Department would fluctuate during the pendency of assessment proceedings to be taken, hence, assessee had filed a writ petition for return of the silver bars, and in this writ petition by an Order dated 08.10.1998, this Court directed the defendants to release the seized silver to the plaintiff on plaintiff making payment of the value of the seized silver. Assessee further pleads that accordingly he kept on making payments of different amounts in different installments to the defendants and consequently plaintiff got released the seized silver from the defendants
The dispute in the present suit pertains to payment of interest on the amounts of three pay orders of the value of Rs.30,50,000/- deposited by the plaintiff with the defendants on 05.04.2000 but which were not encashed by the defendants and hence the principal amount of Rs.30,50,000/- remained dormant in the suspense accounts of the banks without interest accruing thereon. These three pay orders were got enchased by the plaintiff in June, 2004/August, 2004, and therefore, this suit is filed claiming interest on this amount of Rs.30,50,000/- from the date of deposit of pay orders with the defendants on 05.04.2000 till the dates of their encashment in June, 2004/August, 2004.
Held by High Court
In the case of Commissioner of Income Tax, Bhubaneswar and Another Vs. Parmeshwari Devi Sultania and Others (1998) 3 SCC 481 which pronounces upon Section 293 by observing that no civil suit lies against the Income Tax Department with respect to any dues claimed from the Income Tax Department if such dues are/can be the subject matter of proceedings under the Income Tax Act.
In the present case, it is seen that there is no dispute that what are the dues of the plaintiff towards the defendants that stood determined in terms of the Order dated 7.7.2003 passed by the Income Tax Settlement Commission, and which Settlement Commission was approached by the plaintiff for settlement of the disputes and determination of the entitlement of the defendants with respect to the amounts on account of tax pursuant to the search and seizure of the plaintiff’s premises on 4.2.1995. Pursuant to the order of the Settlement Commission, the computation of income of the plaintiff was to be done and this computation of income was done by the Income Tax Officer under Section 245(D)(6) of the Income Tax Act vide Order dated 20.9.2005. It is this order which crystallized/assessed the amount payable by the plaintiff to the defendants and the amounts; including interest; which were to be refunded by the defendants to the plaintiff.
It is not disputed that when this Order was passed on 20.9.2005 , the assessee was aware of the fact that the three bank drafts totaling to Rs.30,50,000/- were not encashed by the revenue and the assessee had a right to claim interest on these bank drafts in the proceedings under Section 245(D)(6) of the Income Tax Act, inasmuch as, by June/August 2004, assessee had encashed the pay orders totaling to the amount of Rs.30,50,000/-. The assessee thus ought to have raised but did not raise the claim of the amount which is the subject matter of the present suit before the Income Tax Officer who passed the computation or if the assessee did make the claim with respect to interest payable on three drafts, then the same stood denied in terms of the aforesaid Order.
Therefore, looking at the matter from any angle, if this issue was raised and the claim was denied by the ITO or the issue was not raised at all, the claim of the assessee definitely stood merged in the Order dated 20.9.2005 being the claim of the assessee with respect to interest on the amount of Rs.30,50,000/-. If the case of the plaintiff is that the Order wrongly disallows the claim, then assessee had appropriate remedy to challenge the said order in an appeal but the assessee failed to do so. This suit in view of Section 293 of the Income Tax Act however is not the remedy and the only remedy of the plaintiff was to challenge the Order in the appropriate forum and which the assessee failed to do.
The ratio of the judgment of the Supreme Court in the case of Parmeshwari Devi Sultania (1998) 3 SCC 481 clearly applies that with respect to any claim which is made in a civil suit against the Income Tax department which will result in modification of proceedings under the Income Tax Act, then the cognizance of such a civil suit cannot be taken by a civil court in view of the categorical bar contained in Section 293 of the Income Tax Act. In this case , the Supreme Court has referred to a judgment of the Privy Council in Raleigh Investment Co. Ltd. Vs. Governor General-in Council, AIR 1947 PC 78 wherein a similar issue was decided. It is settled law that under Section 9 of the Code of Civil Procedure, 1908 a suit is not maintainable once there is an express or implied bar to the suit. Section 293 of the Income Tax Act is an express bar to the present suit. Hence the suit is not maintainable in law.
Accordingly, appeal of the assessee dismissed.