1973 (12) TMI 10 - HC - Income Tax

Whether the Government or the taxation authorities can retain with themselves amount of tax collected by them when the very basis of that collection has been subsequently held by the highest tribunal in the land to be without any legal basis or without any foundation in law - In the instant case we have based our decision on Tilokchand Motichand s case and the other two decisions of the Supreme Court in Gila Devi Aggarwal s case and Champalal Binani s case . Hence it cannot be said that the question needs to be decided by the Supreme Court. Though one requirement namely of clause (a) is satisfied the other requirement of clause (b) of article 133(1) as it stands after the 30th Amendment is not satisfied Under these circumstances we regret that we cannot certify that this is a case which needs to be decided by the Supreme Court. We therefore reject the oral application made on behalf of the petitioner

Issues Involved:
1. Whether the unilateral declaration of a Hindu coparcener, whereby he throws his self-acquired property into the common stock of joint family property, amounts to a gift under the Gift-tax Act, 1958.
2. Whether the orders of the Gift-tax Officer can be quashed and set aside by the High Court under Article 226 of the Constitution.
3. Whether the High Court can direct the Commissioner to entertain revision applications on merits after condoning the delay.
4. Whether the petitioners can claim a refund of the gift-tax paid on the ground of mistake of law.

Detailed Analysis:

1. Unilateral Declaration as a Gift:
The petitioners, coparceners of a Hindu undivided family, threw their self-acquired properties into the common hotchpot of the family. The Gift-tax Officer treated these transactions as gifts under the Gift-tax Act, 1958. However, the Supreme Court in Goli Eswariah v. Commissioner of Gift-tax held that such unilateral declarations do not amount to a transfer or disposition and thus do not attract the provisions of the Gift-tax Act. The High Court acknowledged that the orders passed by the Gift-tax Officers were bad and liable to be set aside.

2. Quashing Orders under Article 226:
The petitioners sought to quash the Gift-tax Officer's orders under Article 226 of the Constitution. The High Court examined whether it could exercise its jurisdiction to set aside the orders. It noted that under section 42 of the Gift-tax Act, no suit can lie in any civil court to set aside or modify any assessment made under the Act. The Supreme Court's decision in Kamala Mills v. Bombay State indicated that even erroneous assessments are protected from civil suits. However, the High Court's jurisdiction under Article 226 was kept open for consideration.

3. Entertaining Revision Applications:
The petitioners had not filed regular revision applications but only addressed letters to the Commissioner. The High Court noted that under section 34 of the Gift-tax Act, rectification of mistakes must be sought within four years, and no application for rectification was filed within this period. Under section 24, the Commissioner could revise orders within one year or a further period if sufficient cause was shown. Since the petitioners did not utilize these remedies, the High Court found no basis to direct the Commissioner to entertain the revision applications.

4. Claim for Refund on Grounds of Mistake of Law:
The High Court considered whether the petitioners could claim a refund of the gift-tax paid on the ground of mistake of law. The petitioners argued that the tax was collected without authority of law, citing the Supreme Court's decision in Goli Eswariah. However, the High Court referred to the Supreme Court's decision in Tilokchand Motichand v. H. B. Munshi, which held that payments made under a known legal position cannot be claimed as a mistake of law. The petitioners knew the legal position when they paid the tax and did not pursue available remedies. Thus, the High Court concluded that the payments were not made under a mistake of law.

Conclusion:
The High Court dismissed the special civil applications on two grounds. First, the petitioners did not suffer from a mistake of law as they were aware of the legal position when they paid the tax. Second, the petitioners did not exhaust their remedies under the Gift-tax Act and thus could not invoke the High Court's discretionary jurisdiction under Article 226. The rule was discharged in each matter, and no costs were awarded. The High Court also recommended legislative amendments to allow for refunds in light of subsequent Supreme Court decisions, irrespective of the limitation period. An oral application for leave to appeal to the Supreme Court was rejected as the case did not meet the requirements of Article 133(1)(b) of the Constitution.

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