2025 (5) TMI 1249 - HC - Income Tax

Recovery of cost imposed from Managing Director of company - deduction of TDS @ 2% by the JBVNL from running account bills for supply of material by the petitioner and also retention of amount representing 2% of the value of the Work Order for supply of materials towards the TDS liability so demanded by the Income Tax Department The present review has been filed by the incumbent who is holding the post of Managing Director JBVNL for review of part of order dated 08.04.2024 passed by the Coordinate Bench of this Court by which the amount directed to be paid in favour of the writ petitioner to the tune of Rs. 5 lakhs has been directed to be re-paid by the incumbent holding the post of Managing Director JBVNL - HELD THAT - There is a clear distinction between an erroneous decision and an error apparent on the face of the record. While the first can be corrected by the higher forum the latter only can be corrected by exercise of the review jurisdiction. A review petition has a limited purpose and cannot be allowed to be an appeal in disguise . Further the law is well settled that a review petition has a limited purpose and cannot be allowed to be an appeal in disguise as has been settled in the case of Parsion Devi v. Sumitri Devi 1997 (10) TMI 369 - SUPREME COURT The amount which ought to have been transmitted to the Income Tax Department has been kept with the possession of the JBVNL and therefore the Coordinate Bench has taken note of the said order in the order dated 08.04.2024 wherein it has been ordered that if the amount of Rs. 2, 90, 32, 000/- would have been transmitted in the account of Income Tax Department which was taken as a source under the Income Tax Act 1961 then the same having said to be excess to the liability of the present petitioner would have refunded back by the Income Tax Department in favour of the writ petitioner respondent herein but the said amount has been kept in the account of JBVNL leading to financial loss to the writ petitioner and during the relevant time the Chairman-cum-Managing Director JBVNL was the review petitioner as such the Coordinate Bench has made such reference therein. In addition thereto further observation has been made that due to laches and casual approach taken by the JBVNL which was being headed by the present review petitioner the petitioner has been made to suffer by depriving him from his legal entitlement to get the amount. Law is well settled that if any individual has committed any illegality on whatever reason it will be the accountability of the individual concerned to take its liability in stead of shifting it upon the State. If the liability will be allowed to be shifted then the question would be that why the State Exchequer while dealing with the public money will be allowed to be overburdened due to laches committed on the part of the State authority. At the cost of repetition it needs to refer herein that review petitioner was party before the writ Court as well as before the Review Court wherein the issue involved in the present lis was adjudicated at length and the same has been affirmed by the Hon ble Apex Court 2024 (12) TMI 1572 - SC ORDER therefore the order passed by the Coordinate Bench of this Court has attained its finality. This Court considering the aforesaid facts and taking into consideration the scope to exercise the power of review is of the view that whatever has been argued on behalf of the learned counsel for the review petitioner-is not falling under the fold either of the error apparent on the face of the order or any document said to be not brought on record in spite of due diligence hence no ground is available to review that part of the order 2024 (5) TMI 540 - JHARKHAND HIGH COURT .

Summary

Issues Presented and Considered

The core legal questions considered in this judgment include:

1. Whether the Jharkhand Bijli Vitran Nigam Limited (JBVNL) was justified in deducting and retaining Rs. 2,90,32,000/- from the petitioner-Firm's running account bills as "Income Tax Contingency" without depositing the amount with the Income Tax Department or issuing TDS certificates.

2. Whether the retention of such amount by JBVNL without depositing it with the Income Tax Department violated the provisions of the Income Tax Act, 1961, particularly Section 201.

3. Whether the writ petitioner-Firm was entitled to refund of the withheld amount along with interest, and if so, the applicable interest rate under the Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulation, 2015.

4. Whether the imposition of costs of Rs. 5 lakhs on JBVNL, to be recovered from the Managing Director personally, was justified.

5. Whether the Managing Director of JBVNL could be held individually liable for the costs imposed, given that the decisions were taken on behalf of the Board.

6. Whether the review petition challenging the recovery of costs from the Managing Director was maintainable under the limited scope of review jurisdiction.

Issue-wise Detailed Analysis

Issue 1 & 2: Legality of Deduction and Retention of Rs. 2,90,32,000/- by JBVNL

The legal framework governing tax deduction at source (TDS) is primarily found in the Income Tax Act, 1961, especially Section 201 which deals with consequences of failure to deduct or pay TDS. The JBVNL deducted 2% from running bills as TDS but retained the amount without depositing it with the Income Tax Department or issuing TDS certificates (Form 16A) to the petitioner-Firm. The petitioner contended that this was arbitrary and unlawful, as the amount withheld was not reflected in Form-26AS, depriving the petitioner of the benefit of the TDS in their income tax returns.

The Court observed that retention of money belonging to another without authority violates fundamental principles of justice, equity, and good conscience. The JBVNL's defense that the amount was "kept back" to safeguard its interest pending appeal against a demand notice was found to lack bona fides and was not justified under the Income Tax Act. The Court noted that once TDS is deducted, it must be deposited with the Income Tax Department to enable the deductee to claim credit.

Thus, the Court held that the deduction and retention without deposit or issuance of TDS certificates was illegal and unjustified.

Issue 3: Entitlement to Refund and Interest

The Court held that the petitioner-Firm was entitled to refund of the illegally withheld amount along with interest. The applicable interest rate was drawn from Clause 10.7.4 of the Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulation, 2015, which mandates payment of interest at the rate equivalent to the delay payment surcharge on excess amounts paid by consumers. The interest was to run from the date of payment till the date of refund or adjustment in subsequent bills.

The Court emphasized the principle of unjust enrichment and the duty to restitute the petitioner-Firm, citing the Supreme Court's direction that compound interest should be imposed to neutralize unjust enrichment and prevent delay or wrongdoing.

Issue 4 & 5: Imposition of Costs and Personal Liability of Managing Director

The writ Court imposed costs of Rs. 5 lakhs on JBVNL to be recovered from the Managing Director personally, reasoning that the litigation was necessitated by the arbitrary and illegal retention of funds by JBVNL. The Court underscored the necessity of imposing costs to discourage dishonest litigants and frivolous defenses. It observed that the Managing Director, as the highest authority of JBVNL, was responsible for the decision to retain the amount and for the consequent delay and loss suffered by the petitioner-Firm.

The Managing Director challenged this personal liability, arguing that decisions were taken on behalf of the Board and no individual liability could be cast upon him. The Court rejected this contention, holding that subordinate officers do not have independent authority to make such decisions without approval from the Managing Director. The Managing Director was thus held personally liable for the costs imposed due to his conscious involvement and laches.

The Court further highlighted the settled legal principle that the public exchequer should not suffer due to illegal or unauthorized actions of public servants. It relied on Supreme Court precedent holding that officers responsible for unlawful benefits or losses must be held personally accountable to protect the public interest.

Issue 6: Maintainability of Review Petition

The review petition challenged only the part of the order directing recovery of costs from the Managing Director. The Court extensively analyzed the scope of review jurisdiction under Order 47 Rule 1 CPC and relevant Supreme Court precedents. It reiterated that review is a limited remedy available only on grounds of discovery of new evidence, mistake or error apparent on the face of the record, or any other sufficient reason analogous thereto.

The Court emphasized that review cannot be used as an appeal in disguise to reargue or re-examine settled issues. It held that the grounds raised in the review petition did not disclose any error apparent on the face of the record or any new fact that was previously unavailable despite due diligence. The Managing Director was a party to the original writ petition and the review petition, having filed counter affidavits and participated in the proceedings.

The Court noted that the review petitioner's contention that the Managing Director was not a party was factually incorrect. The review petition was thus dismissed for lack of grounds under the limited scope of review jurisdiction.

Significant Holdings

"Any unjust retention of money or property of another shall be against the fundamental principles of justice, equity and good conscience. The unauthorized deductions from the running bills of the petitioner-Firm are patently illegal. Such deductions caused losses to the petitioner-Firm which filed its Income Tax returns but was deprived of Rs. 2,90,32,000/- and thereby suffered business or at least interest losses. On the other hand, the JBVNL was unjustly enriched and need to restitute the petitioner-Firm. The refund of Rs. 2,90,32,000/- must therefore carry interest as a matter of course."

"The imposition of cost on the party which started litigation without any just cause or took false and frivolous defences is necessary to discourage the dishonest litigant and to this end, the Court is required to impose such cost that would make the litigant think twice before putting up any speculative claim or defence."

"The litigation file that has been produced in the Court reveals that a decision in the context of the order dated 14th March 2024 passed by this Court has been taken at the highest level of the Managing Director of JBVNL. Therefore, we are of the definite opinion that the JBVNL must be saddled with cost of Rs. 5 Lacs which shall be recovered from the Managing Director."

"The public exchequer should not be made to suffer on account of laches or arbitrary decisions of public servants. Officers responsible for illegal decisions or unauthorized benefits must be held personally accountable to reimburse the exchequer."

"Review proceedings are not by way of appeal and have to be strictly confined to the scope and ambit of Order 47 Rule 1 CPC. Power of review may be exercised when some mistake or error apparent on the face of record is found. But error on the face of record must be such an error which must strike one on mere looking at the record and would not require any long-drawn process of reasoning on the points where there may conceivably be two opinions."

"If the Managing Director was not a party and when the Managing Director has been saddled with cost of Rs. 5 lakh, then it is his individual liability and nobody can be allowed to question the individual liability rather the same can only be questioned by the Managing Director by directly approaching to the Court."

Conclusions

The Court concluded that the JBVNL's deduction and retention of Rs. 2,90,32,000/- without depositing it with the Income Tax Department or issuing TDS certificates was illegal and unjustified. The petitioner-Firm was entitled to refund of the amount along with interest as per the applicable regulatory provisions.

The imposition of costs of Rs. 5 lakhs on JBVNL was justified to discourage frivolous and dishonest litigation tactics. The costs were rightly directed to be recovered from the Managing Director personally, given his conscious involvement and ultimate authority over the decision to withhold the amount.

The review petition challenging the recovery of costs from the Managing Director was dismissed as it did not disclose any error apparent on the face of the record or new evidence warranting review. The Managing Director was a party to the original proceedings and had full knowledge of the case.

The judgment reaffirmed the principle that public servants must be held personally accountable for illegal or unauthorized actions causing loss to the public exchequer, and that review jurisdiction is narrowly circumscribed to prevent re-litigation of settled issues.