Case: Kanaka Bai &amp; Others Vs. Union of India &amp; Others

2. In order to appreciate the contentions raised before us it is necessary to set out the following facts:One Shri A.N. Padmanabha Shenoi, fater of the two plaintiffs, was carrying on a Joint Hindu Family business under the name and style of "A.N. Guna Shenoi & Bros." in the former State of Cochin. At the relevant time, the Cochin Excess Profits Tax Act (II of 1117 M.E.) (1941 A.D.) and Cochin Income Tax Act (VI of 1117 M.E.) were in force in Cochin State. Cochin later became part of the State of. On the commencement of the Constitution, the latter State became part B State in the Union of India3. 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 e;,act concessions given but only with the question whether this notification was also concerned with the assessment under the Excess Profits Tax Act. 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 of income tax have now been finalised by the Government of India."It was also pointed out that only Income Tax 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.h had escaped assessment to income tax 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 para 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 dropped4. 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.s payment of income tax on the disclosed income as a result oft 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 in original. The High Court states.:In the challans, which are Exs.3 to, the head "Supertax, Miscellaneous; Surcharge; and Excess Profits Tax" are scored and only the head "Income tax" is left in tact, indicating thereby that the demands related only to Income tax and not to Excess Profits Tax."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 towards income tax only, while the plaintiffs contend that the demands related only to income tax and payments were also made towards income tax5. According to the plaintiffs, on August 11, 1953, for the first time the Income Tax Officer wrote to A.N. Padmanabha Shenoi that Excess Profits Tax was also payable under the voluntary disclosure statements for 1119, 1120 and 1121. The Income Tax Officer stated in this letter that total excess profits tax due was Rs. 1,29,724/3/and after adjusting payments already made to the extent of Rs., Rs. 57,872/10/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. 57,872/10/as tax for the Income Tax 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 Appeal Nos. 3/1120, 7/1121 and Excess Profits Tax review No. 2/1124, 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 the Income Tax Officer had no jurisdiction to appropriate the sum of Rs. 71,851/9/which had been paid by him as advance tax towards income tax and supertax that may be legally due under the disclosure scheme towards the Excess Profits Tax alleged to be due6. Further correspondence ensued between the parties. However, on August 31,1954, three demand notices for income tax were issued to A.P. Damodara Shenoy, A.N. Padmanabha Shenoi having died in the mean time.P23was for recovery of, P.24 for Rs. 38023/7/and P.25 for Rs., The total came to Rs. 55200/15/7. The plaintiffs filed three petitions under Art.226 of the Constitution challenging these demand notice. 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."8. A.P. Damodara Shenoi son of late A.N. Padmanabha Shenoi, and A.P. Narasinga Shenoi, brother of A.P. Damodara Shenoi, 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 Income Tax, that the demand notices dated4 to the tune of Rs.0 mentioned in para 4 supra are void, their issue being beyond the competence of the defendants for the reasons stated above, and restraining the defendants by a permanent injunction from enforcing the said demand by any coercive process;(B) declaring that no excess profits tax is leviable by the defendants or the Income Tax Department from the plaintiffs or the Estate of the late A.N. Padmanabha Shenoi during the relevant periods and that the amounts paid should stand credited towards income tax;(C) Ordering the 1st defendant to make good to the plaintiffs the sum of Rs. .0 with interest thereon by way of damages at 6 per cent from4 till date of realisation"9. The 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 and July 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 E.P.T."The Trial Court further held:"Admittedly all the challans for payment of income tax were filled up and issued from the Income tax Office under the direction of DW.I. All other items except income tax have been scored off and the amounts are paid into the Treasury towards the head Income tax.........It was for the first time on 11th August, 1953, that the adjustment of Rs.0 was made by the Income tax Officer.......The letter is not an assessment order. The Income tax Officer does not say under what authority he has adjusted the said amount towards E. P.T...........There is nothingin Ex.9 to show that either Padmanabha Shenoi or his son the first plaintiff agreed to pay the E.P.T."The Trial Court further held:"if payments are already made towards income tax, they could not bed or re" opened, the demand notices for payment of income tax cannot be considered to be valid, because no amount remains to be paid towards income taxThe Trial Court also held that excess profits tax was not leviable from the plaintiffs on the relevant dates. The Trial Court further repelled the contention of the Union of India that the plaintiffs are estopped from denying their liability to pay excess profits tax. In the result, the Trial Court passed a decree granting the prayers made by the plaintiffs10. "The defendant appealed to the High Court. The High Court upheld all the findings of the Trial Court but observed:"Having assesseds tax, the department has allowed deduction in regard thereto in the assessment of Income tax for the relevant years. As the assessee is found not liable tos tax and has not therefore to pay the same, we must necessarily quash the deduction made by the department and declare the assessee liable to pay Income tax (inclusive of Supertax) on the income disclosed by him. Counsel for the Revenue has submitted a statement showing the amount of tax payable by the plaintiffs as the legal representatives of the assessee if no deduction fors tax is made, and has served a copy thereof on counsel for the plaintiff respondents who has conceded the correctness thereof before us. Under that statement a sum of Rs.0 remains due from the plaintiffs to the department. It must then follow that the decree of the court below has to be discharged, except in regard to the declaration ofy of the assessse fors Tax and the Demand Notices Exs., P24 and P25dated August 31, 1954, issued by the Department to the Plaintiffs held valid for the aggregate sum of Rs. 21,884.81 np. Judgment accordingly."Accordingly, the High Court passed a decree in the following terms: "This court doth order and decree as follows:1. that the decree of the court below be and hereby is discharged, except in regard to the declaration ofy of the plaintiffs (legal representatives of the assessee) for Excess Profits Tax2. that the demand notices Exs., P24 and P25dated August 31,1954, issued by the appellant 1st defendant to the plaintiffs are held valid for the aggregate sum of1 np. and3. that the appeal is allowed as indicated above."

Reasoning:
We will first deal with the points raised Civil Appeal No. 101 of 1966 by the learned counsel for the defendant, seriatinBoth the Trial Court and the High Court have found that there was 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 findings in the result it must be held that it is not proved that the pliantiffs father had agreed to pay Excess Profits Tax13. 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 appears that the plaintiffs father in the letter dated August 25, 1953, definitely took the stand that no Excess Profits Tax was due. The learned counsel for the defendant also relied on the payment of Rs.1,04,628/13/under four challans dated March 23, 1952, February 25, 1953, March 27, 1963 and August 25, 1953. But both the Trial Court and the High Court have found that in these challans the heads "Super Tax, Miscellaneous, Surcharge and Excess Profits Tax" were scored out. In our opinion, there is no force in this point14. 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 appears that the defendant successfully pleaded in the writ petitions filed in the High Court that the proper remedy for the plaintiffs was a suit and not a writ petition under Art.226. Be that as it may, there is no force in this point. Section III of the Cochin Income Tax 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 was that the plaintiffs father had not agreed to pay Excess Profits Tax and the Department had no jurisdiction to appropriate payments made towards Income Tax to Excess Profits Tax, due not under any assessment orders made under the Excess Profits Tax but under executive orders or calculations made on the supposition that the plaintiffs father had agreed to pay tax. Such a suit, in our opinion, lies wholly outside the scope of S.III. We may here deal with the question of refund of Rs.16,650/ordered by the Trial Court but denied by the High Court. The learned counsel for the plaintiffs says that the plaintiffs have filed an application or applications for refund and as these applications have not been disposed of yet he does not press for the passing of a decree for the refund of Rs.. 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 this point. In the result we hold that there is no merit in the appeal filed by the defendant. Civil Appeal No.101 of 1966 is accordingly dismissed with costs15. Coming to the plaintiffs appeal, we are of the view that the High Court erred in holding that the demand notices, P24 and P25were valid to the extent of Rs.21,884/81.This sum was arrived at by revising the assessment orders, not under any provision of the Income Tax Act, but by the counsel for the revenue. The assessment orders stand as they were before. We are unable to appreciate how the assessment orders can be revised except under the provisions of the Income Tax Act. Neither the counsel for the defendant nor the High Court has power to revise any assessment orders. Indeed, S.111 of the Cochin Income Tax Act interdicts the High Court. It is true the High Court has not done it directly, but indirectly it has done so.