Case: Molly Trading Company Private Limited &amp; Another Vs. Union of India Through The Secretary, Ministry of Finance &amp; Others

A notice was issued to the assessee company on 18th July, 2007 under Section 226(3) directing to pay a sum of Rs.4,15,54,248/as due of Shri Amit Jhaveri on account of Income Tax. A similar notice was issued to HDFC Bank directing the bank to pay the amount due and/or held by them on account of M/s.Molly Trading Co. Pvt. Ltd., the petitioner. Accordingly HDFC had sent the sum of Rs.4,35,459/being balance in the account of M/s.Molly Trading Co. Pvt. Ltd. vide banks letter dated 30th July, 2007. On behalf of the assessee company M/s.Jain SinghalAssociates by letter of 28th July, 2007 had taken a stand that nothing was payable by the assessee to Mr. Amit Jhaveri. Subsequent to that the assessee had filed Writ Petition No.1457 of 2008. This Court accepted the statement of the respondent therein, that the final order pursuant to notice dated 18th July, 2007 will be made as expeditiously as possible. The petitioners also filed an affidavit of Satinder Kshetrapalas Director of the assessee. It was stated therein that they had no financial transactions with Mr. Amit H.Jhaveri of any nature during the last five years and that no amount is due to Mr. Jhaveri as on date and no amount is paid to him during the last five years.The Tax Recovery Officer in his order noted that Shri Subhash Arora as a Director of M/s.Subhash Arora Investment P. Ltd., has taken the loan of Rs.1.25 crores from Amit Jhaveri. Shri Subhash Arora is also a Director of the petitioner company which in fact is a sister concern and the petitioners had pledged the shares of HCL Infosystems Ltd., to Mr. Amit Jhaveri. Considering those facts, the Tax Recovery Officer held that the money received from the Molly Trading Company Limited cannot be termed as wrong and hence cannot be refunded.

Reasoning: It is, therefore, clear from the pleadings and documents on record that the petitioner is a guarantor for the loan taken by Shri Subhash Arora on behalf of the M/s.Subhash Arora Investments (I) Pvt. Ltd., The amount is crystalized and in respect of which M/s.Subhash Arora Investments (I) Pvt. Ltd., had deposited the F.D.R. before the DRT which FDR they had sought leave to apply for withdrawal.6.During the course of the hearing as it was noticed that the same Lawyers are appearing both for M/s. Molly Trading Company Pvt. Ltd., and another as also M/s.Subhash Arora Investments (I) Pvt. Ltd., learned Counsel was asked whether Subhash Arora as the common Director, would make a statement and give undertaking on behalf of Subhash Investment through Subhash Arora that F.D. deposited before the D.R.T. would not be withdrawn, the learned Counsel on taking instructions states that he has no such instructions.7.From the documents on record once the petitioner is a guarantor for the loan taken by M/s.Subhash Arora (I) Private Limited and that debt has not been discharged, the liability of the petitioners continues to remain joint and several along with M/s.Subhash Investments. Apart from that the petitioners have suppressed the fact that they had stood as guarantors for the loan atleast to the tune of Rs.75.00 lakhs as can be seen from the documents on record. The affidavit filed by the petitioner before the T.R.O., they only averred that they do not owe any monies for the last five years.8.It is true that the Tax Recovery Officer has not dealt with this aspect as this was not set out in the affidavit of the petitioner before the Tax Recovery Officer. We are, however, concerned with the exercise of extra ordinary jurisdiction. Both on merits as also on account of suppression of material facts (that they were guarantors) in our opinion this would not be a fit case to exercise our extra ordinary jurisdiction.9.Learned Counsel has sought to draw our attention to the judgment of the Madhya Pradesh High Court in New Amir Iron Works and Anr. vs. Union of IndiaOrs., 252 ITR 663  (M.P.). The M.P. High Court proceeded on the footing that it was for the Recovery Officer to show that the affidavit was false and ought to have afforded sufficient opportunity to the assessee. We are really not concerned with the ratio of that judgment for the reasons set out in the order. Even otherwise from the facts on record before the Court it is clear that a false affidavit was filed before the Tax Recovery Officer.