Case: Union Saw Mills and Others Vs. A. P. Narasinga Shenoy and Others

In order to appreciate the contentions raised before us, it is necessary to set out the following facts : One Shri A. N. Padmanabha Shenoi, father of the two plaintiffs, was carrying on a joint Hindu family business under the name and style of " A. N. Guna Shenoi and Bros." in the former State of Cochin. At the relevant time, the Cochin Excess Profits Tax Act 1117 M.E. (II of 1117 M.E.) (1941 A.D.) and Cochinx Act, 1117 M. E. (VI of 1117 M.E.) were in force in the Cochin State. Cochin later became part of the State of. On the commencement of the Constitution, the latter State became a Part B State in the Union of India. The Government of India on May 20, 1951, issued a notification giving certain terms to assessees if they disclosed their hidden income or income which had escaped taxation. We are not concerned with the exact concessions given but only with the question whether this notification was also concerned with the assessment under the Excess Profits. Our attention was invited by the plaintiffs to the opening sentence of the notification, which is as follows:" Detailed measures for launching a special drive for the clearance of arrears ofx have now been finalised by the Government of India."It was also pointed out that onlyx Officers were mentioned in various parts of the notification and no reference was made to Excess Profits Tax Officers. In pursuance of this notification, A. N. Padmanabha Shenoi made two statements dated August 30, 1951, and October 22, 1951, disclosing income of the joint family business from5 M.E. (1939) to end of 1122 M.E. (1946) to the extent of Rs. 3, 70, 000 which had escaped assessment tox in those years. In the disclosure dated October 22, 1951, it was stated that" a portion of these profits amounting to Rs. 81, 759 has already been taxed in the assessments for the years 1116 and 1117 and a sum of Rs. 30, 000 was added back to the disclosed profits in the year 1123." In paragraph 7 of the disclosure statement dated October 22, 1951, it was stated" I request that I may be allowed to pay the aggregate tax due by me in twenty monthly instalments as I am not in a position to command the cash necessary for paying the whole of the deficient tax that may be due by me in a lump."He further requested that certain investigations being carried on against him in respect of the assessment years 1121, 1122 and 1123 be dropped. Various amounts were paid by the said A. N. Padmanabha Shenoi under four challans dated March 23, 1952, February 25, 1953, March 27, 1953, and August 25, 1953, totalling Rs. 1, 04,0 towards payment ofx on the disclosed income as a result of reassessment for the years 1119, 1120, 1121, 1122 and 1123 (i.e.,7 and. It may be mentioned that the High Court apparently saw these challans inoriginal. The High Court states" In the challans, which are Exhibits P3 to P6, the head "x Miscellaneous ; Surcharge ; and Excess Profits Tax " are scored and only the head "x " is left intact, indicating thereby that the demands related only tox and not to excess profits tax. "2. We have mentioned this matter here because it is one of the contentions of the learned counsel for the defendant that these payments were made towards taxes in general and not towardsx only, while the plaintiffs contend that the demands related only tox and payments were also made towards. According to the plaintiffs, on August 11, 1953, for the first time thex Officer wrote to A. N. Padmanabha Shenoi that excess profits tax was also payable under the voluntary disclosure statements for 1119, 1120 and 1121. Thex Officer stated in this letter that total excess profits tax due was Rs. 1, 29,, and after adjusting payments already made to the extent of Rs. 71,, Rs. 57,, was payable as balance excess profits tax. A. N. Padmanabha Shenoi replied on August 19, 1953, requesting that they may be permitted to pay the said amount of Rs. 57,0 as tax for thex year 1119, in three equal monthly instalments. However, on August 25, 1953, A. N. Padmanabha Shenoi took the position that no excess profits tax was due as the assessments in respect of excess profits tax for the years 1119, 1120 and 1121 became final by the orders of the Commissioner of Excess Profits Tax in Excess Profit Appeals Nos. 3 of 1120, 7 of 1121 and Excess Profits Tax Review No. 2 of 1124, respectively. He alleged that the said orders have not been and could not be reopened under the provisions of the Excess Profits Tax Act. He, further asserted that thex Officer had no jurisdiction to appropriate the sum of Rs. 71,0 which had been paid by him as advance tax towardsx andx that may be legally due under the disclosure scheme towards the excess profits tax alleged to be dueFurther correspondence ensued between the parties. However, on August 31, 1954, three demand notices forx were issued to A. P. Damodara Shenoi, A. N. Padmanabha Shenoi having died in the meantime.3 was for recovery of Rs. 8,4 for Rs. 38,, and5 for Rs. 8,. The total came to Rs. 55, 200. The plaintiffs filed three petitions under article 226 of the Constitution challenging these demand notices. The High Court dismissed the petitions on February 27, 1955, stating:" We think it desirable, therefore, that the matter be considered in an original suit which the petitioners are free to file. "A. P. Damodara Shenoi, son of late A. N. PadmanabhaShenoi,andA. P. NarasingaShenoi,brother of A. P. DamodaraShenoi,the plaintiffs, thereupon filed a suit in the Anjikaimal District Court, Ernakulam (Original Suit No. 31 of 1955), praying for a decree:" (A) declaring that the plaintiffs or the estate of late A. N. Padmanabha Shenoi are not  defaulters  in the payment of, that thenotices dated August 31, 1954, to the tune of Rs. 55,, mentioned in paragraph 4 supra are void, their issue being beyond the competence of the defendants for the reasons statedrestraining the defendants by a permanent injunction from enforcing the saidd byany coercive process(B) declaring that no excess profits tax is leviable by the defendants or thex department from the plaintiffs or the estate of the late A. N., Padmanabha Shenoi during the relevant periodsandthat the amounts paid shouldcredited towards(C) ordering the first defendant to make good to the plaintiffs the sum of Rs. 16,0 with interest thereon by way of damages at 6 per cent. from September 22, 1954, till date of realisationThe trial court held that Padmanabha Shenoi had not agreed to pay excess profits tax on the disclosed income as per the statements made by him on April 25,1952,andJuly 31, 1953. The trial court observed" There is no record at all to show that either the plaintiffs or their father agreed to pay excess profits tax..... There is also no case of an, oral agreement to pay excess profits tax."The trial court further held:" Admittedly, all the challans for payment ofx were filled upandissued from thex office under the direction of D. W. 1. All other items exceptx have been scored offandthe amounts are paid into the Treasury towards the head x  ..... It was for the first tame on 11th August,1953,that theadjustment of Rs. 71,0 was made by thex Officer The letter is not an assessment order. Thex Officer does not say under what authority he has adjusted the said amount towards excess profits tax..... There is nothing in exhibit9 to show that either Padmanabha Shenoi or his son, the first plaintiff, agreed to pay the excess profits tax."The trial court further held:" If payments are already made towards, they could not bed or, thenotices for payment of

Reasoning:
Both the trial courtandthe High Court have found thattherewas no such agreement. No writing is produced in support of this contention. The notification of the Government of India, dated May 20, 1951, does not mention excess profits tax or Excess Profits Tax Officers. We have not been shown any material to enable us to set aside this concurrent finding. In the result, it must be held that, it is not provedthat theplaintiffs father had agreed to pay excess profits tax6. There is also no force in the plea of estoppel. Apart from the fact that in the letter dated August 19,1953,the plaintiffs father did not contest his liability to pay excess profits tax, no fact has been brought to our notice which could sustain the plea of estoppel. It appearsthat theplaintiffs father in the letter dated August 25,1953,definitely took thed thatno excess profits tax was due. The learned counsel for the defendant also relied on the payment of Rs. 1, 04,0 under four challans dated March 23,1952,February 25,1953,March 27,1953,andAugust 25, 1953. But both the trial courtandthe High Court have foundthat inthese challans the heads ", miscellaneous, surchargeandexcess profits tax " were scored out. In ouropinion,thereis no force in this point7. The last point regarding jurisdiction is equally without any substance. First, no such point was raised in the trial court or the High Court. It appearsthat thedefendant successfully pleaded in the writ petitions filed in the High Courtthat theproper remedy for the plaintiffs was a suitandnot a writ petition under article 226. Be that as ite is noforce in thispoint.Section 111 of the Cochinx Act of 1117 M. E. bars a suit to set aside an assessment. No prayer was made in the suit for setting aside any assessment. What was claimed in the suit wasthat theplaintiffs father had not agreed to pay excess profitstaxandthe department had no jurisdiction to appropriate payments made towardsto excess profits, due not under any assessment orders made under the Excess Profits Tax Act but under executive orders or calculations made on the suppositionthat theplaintiffs father had agreed to pay. Such a suit, in ouropinion,lies wholly outside the scope of section 111. We may here, deal with the question of refund of Rs. 16, 650d bythe trial court butd bythe High Court. The learned counsel for the plaintiffs saysthat theplaintiffs have filed an application or applications for refundandas these applications have not been disposed of yet, he does not press for the passing of a decree for the refund of Rs. 16, 650. In view of this statement we do not consider it necessary to deal with the point whether the High Court was right in reversing the trial court on thispoint.In the result we holdthatthereis nomerit in the appealfiledby thedefendant. Civil Appeal No. 101 of 1966 is accordingly dismissed with costsComing to the plaintiffs appeal, we are of the viewthatthe High Courterred in holdingthatthe5 were valid totheextent of Rs. 21, 884.81. This sum was arrived at by revisingtheassessment orders, not under any provision ofthex Act,butbythecounsel fortherevenue. The assessment ordersd asy were before. We are unable to appreciate howtheassessment orders can be revised except undertheprovisions of