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TMI Blog1973 (12) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... vided family his self acquired properties in the relevant assessment year and each of them purports to have thrown his self-acquired property into the common hotchpot of the Hindu undivided family with the intention of relinquishing his proprietary interest in the property thus thrown into the common hotchpot. These amounts of self-acquired property thrown into the common hotchpot have been treated by the Gift-tax Officer concerned at the relevant time as gifts made by the individual concerned to the Hindu undivided family. Each of these alleged gifts was made in the accounting period relevant to the assessment year 1964-65. In Special Civil Application No. 405 of 1972, some more amounts were also thrown into the common hotchpot in the assessment year 1966-67. In each of these six matters, at the time when the return for gift-tax purposes was filed, the learned advocate representing the petitioner concerned, had addressed a letter to the Gift-tax Officer in charge of the assessment pointing out that the Income-tax Appellate Tribunal, Hyderabad had held in the case of Goli Easwariah v. Commissioner of Gift-tax that when a separate property of a coparcener becomes impressed with a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court had held that impressing the character of joint Hindu family property on the self-acquired property owned by a coparcener did not amount to a transfer so as to attract the provisions of the Gift-tax Act, 1958. He said that the facts of the case of these six different petitioners in this group of special civil applications were identical and the ratio of the said Supreme Court judgment applied to their cases. Then the letter proceeded to submit: "The effect of the decision of their Lordships of the Supreme Court is that the levy of gift-tax on the property thrown into the hotchpot of the Hindu undivided family by a coparcener was, of no time, good. The levy was invalid and the orders made by the Gift-tax Officer were bad at their inception on the date they were made. In other words, the gift-tax collected from my clients is collected without the authority of law and they are entitled to get refund of the total amount so paid." A demand, on these submissions, was made in that letter that the Commissioner of Gift-tax might call for the gift-tax records of these different petitioners and on being satisfied about the genuineness of his submission, the Commissioner might direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us is whether the order of the Gift-tax Officer can be quashed and set aside by us, or, in the alternative, whether we can direct the Commissioner to entertain the revision applications on merits after condoning the delay. It must be pointed out that apart from writing to the Commissioner on September 13, 1971, no regular revision application had been addressed by any of these petitioners requesting the Commissioner of Gift-tax to review the decision of the Gift-tax Officer concerned. Apart from writing the initial letter of June 23, 1964, at the time of filing the return and lodging the protest, none of these six petitioners had taken any steps by way of appeal or any other proceeding to keep the matter alive as regards the question whether the transaction of throwing the self-acquired property into the common hotchpot by a coparcener amounts to a gift or not. Mr. Gandhi on behalf of the petitioners has pointed out that, under section 34 of the Gift-tax Act, provision has been made for rectification of mistakes when there was a mistake apparent from the record and, under sub-section (7), no amendment under the section can be made after the expiry of four years from the date of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn it. It is clear that if a suit were to be filed and could have been filed for refund of the Gift-tax paid by these six different petitioners, then the period of limitation would be three, years counted from the date when the mistake was discovered by the respective petitioner. We will treat the date May 5, 1970, the date of the decision of the Supreme Court in Goli Eswariah's case, as the date on which the mistake was discovered by the petitioners or with due diligence could have been discovered by these different petitioners; the special civil applications have been filed in this court within three years from that date. 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 Gift-tax Act, and no prosecution, suit or other legal proceeding can lie against the Government or any officer of the Government for anything in good faith done or intended to be done under the Act. A similar provision of the Bombay Sales Tax Act came up for consideration before the Supreme Court in Kamala Mills v. Bombay State B. According to the Supreme Court, section 20 of the Bombay Sales Tax Act, which was similar to section 42 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him when there was a provision in the statute similar to section 42 of the Gift-tax Act, but the question of jurisdiction of the High Court under article 226 was kept open. Subsequently, in Gill & Co. Private Ltd, v. Commercial Tax Officer , the Supreme Court held that the High Court could consider whether the amount of sales tax paid illegally could or could not be refunded. The earlier decision in State of Madhya Pradesh v. Bhailal Bhai was pointed out as the leading case on the point. In State of Madhya Pradesh v. Bhailal Bhai, the Supreme Court held that the High Courts have power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law. The special remedy provided in article 226 is, however, not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defences legitimately open in such actions. The power to give relief under article 226 is a discretionary power and this is specially true in the case of power to issue writs in the nature of mandamus. The Supreme Court also pointed out there that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its oservations in Bhailal Bhai's case in the context of that void piece of legislation. A similar case of a void order, that is, order void ab initio under which tax was collected, came up before the Bombay High Court in Arvind N. Mafatlal v. Union of India. In that case there was no provision in the Wealth-tax Act under which the wealth-tax was in fact collected and the tax illegally collected from the assessee was sought to be recovered back by approaching the High Court under article 226 of the Constitution. The fact in that case were that one N died in 1955 and in connection with the wealth-tax liability of the estate of N his executors were assessed and a claim for wealth-tax was made for the assessment year 1961-62. On appeal the tax payable was reduced and the executors finally paid Rs.1,30,845.40. Subsequently, in the case of Jamnadas v. Commissioner of Wealth-tax, the Bombay High Court held that there was no provision in the Wealth-tax Act for charging and assessing wealth-tax in respect of the net wealth of a deceased individual beyond the financial year in which such person died and that there was no further liability attached to the estate left by the deceased, indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the revenue that the petition should be dismissed on the ground of laches. On these facts Tulzapurkar J., sitting singly, held that the decision of the Appellate Tribunal rendered in 1961 became a nullity when the Supreme Court delivered its judgment in 1969 and the Appellate Tribunal was wrong in holding that its decision in 1961 was only a mistake apparent on the face of the record requiring rectification and the High Court held that the Tribunal should have set aside its previous order in exercise of its inherent powers and reheard the parties on the merits if it was found that the order passed in 1961 was not a nullity and the Bombay High Court in Khushalchand B. Daga's case directed the Tribunal to hear the petitioner's appeal of 1961-62 on merits and quashed and set aside the orders by which the Appellate Tribunal had declined to rehear the appeal of the petitioner. Thus, in spite of the long lapse of time between the original order dismissing the appeal in 1961 and the preferring of application under article 226 before the High Court, the High Court took notice of the fact that the initial order passed by the Tribunal in 1961 was in pursuance of rule 24 which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t account refunded, and that could only mean a request for rectification and that the High Court was right in making the order that it did. The Supreme Court pointed out that against the decision in Khatau Makanji Spinning and Weaving Co. Ltd. v. Commissioner of Income-tax, the matter had been carried in appeal by the revenue and in Commissioner of Income-tax v. Khatau Makanji Spinning & Weaving Co. Ltd., the Supreme Court had also held that levy of an additional tax on extra dividend was illegal and all that the Supreme Court held in that particular case was that no Income- tax Officer was entitled to refund tax which had been lawfully imposed and collected but rectification proceedings could be adopted and, therefore, the Supreme Court held that the Commissioner should be directed to refund the amount of tax which had been illegally collected from the assessee concerned. It must be pointed out that on the facts of that particular case the order was passed by the Income-tax Officer levying this additional tax on extra dividend on July 27, 1955, and the additional tax amounting to Rs. 33,348-8-0 had to be paid by the company in pursuance of that order. The application to the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of an importer, his right to obtain refund and the liability of the Panchayat to grant refund were not extinguished. In addition to the remedy of having recourse to the civil court, it was also open to the importer to approach the Panchayat itself (as distinguished from the sarpanch) for the purpose, because it is that body which had levied and collected the tax and out of whose funds the tax was to be refunded upon the proof of facts specified in rule 32. The Division Bench observed that the claimant had an alternative and effective remedy to approach the civil court. It did not avail of that remedy and instead it approached the State Government under section 305 of the Gujarat Panchayats Act. It was a misconceived remedy. In 1972, when the decision was given by the Division Bench, the civil suit was time-barred and it was, therefore, not available to the importer, and the Division Bench observed that injustice could not be perpetuated so as to deny refund to the importer. The Division Bench observed : " To dismiss these petitions on this technical ground and to leave Esso without any remedy whatsoever is to perpetuate injustice, to undermine public confidence in the administra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedure for refund etc., were made against this background of legislation regarding octroi. These observations made in the context of octroi legislation also cannot help the petitioners. There are three decisions of the Supreme Court, all delivered after November 22, 1968, which throw light on the question that survives for our determination, the question being what we have pointed our earlier. The first of these three decisions of the Supreme Court is in Tilokchand Motichand v.H. B. Munshi . The decision in that case was by majority. Out of the five judges, two judges, namely, Bachawat and Mitter JJ., took one view, two other judges, Sikri and Hedge JJ., took the opposite view and Hidayatullah C. J. took the same view as Bachawat and Mitter JJ. and hence the decision of the Supreme Court in Tilokchand Motichand's case, was by a majority of 3 : 2. The facts of that case were that the Sales Tax Officer on March 17, 1958, ordered a forfeiture under section 21(4) of the Bombay Sales Tax Act, 1953, which provision was similar to section 12A(4) of the Bombay Sales Tax Act, 1946. Tilokchand Motichand, the petitioner, applied by way of a writ petition before a single judge of the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery from him was unconstitutional. He set out a number of grounds but did not set out the ground on which ultimately in another case recovery was struck down by this court. That ground was that the provisions of the Act were unconstitutional. The question is : Can the petitioner in this case take advantage, after a lapse of a number of years, of the decision of this court ? He moved the High Court but did not come up in appeal to this court. His contention is that the ground on which his petition was dismissed was different and the ground on which the statute was struck down was not within his knowledge and, therefore, he did not know of it and pursue it in this court. To that I answer that law will presume that he knew the exact ground of unconstitutionality. Everybody is presumed to know the law. It was his duty to have brought the matter before this court for consideration. In any event, having set the machinery of law in motion he cannot abandon it to resume it after a number of years, because another person more adventurous than him in his turn got the statute declared unconstitutional, and got a favourable decision. If I were to hold otherwise, then the decision of the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and that the firm had agreed to the condition of refunding the amount received to its own customers under coercion even though in law the authorities were bound to refund without any such condition. The petitioners did not content themselves merely by opposing the claim of the sales tax authorities to forfeit the amount, but suited their action to their belief by presenting a writ petition to the Bombay High Court describing the order of forfeiture as without the authority of law and in violation of article 19(1)(g) and article 265 of the Constitution and praying for the necessary reliefs. They did not accept the decision of the learned single judge of the Bombay High Court under article 226 of the Constitution, but filed their appeal raising practically the same contentions as they have done in the present petition except that they did not state having discovered any mistake on a perusal of the decision of any court of law. The grounds of appeal to the Division Bench of the Bombay High Court are illustrative of the frame of mind and view-point of the petitioners then. They complained about the violation of their fundamental rights, the illegality of the order of forfeiture and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legality or the ultra vires nature of the order passed against him can immediately after payment formulate his cause of action as one of payment under coercion. " We have quoted extensively from the observations of the three learned judges who constituted the majority of the judges in Tilokchand Motichand's case because in the facts before us, a situation similar to the situation which arose before the Supreme Court is to be found. The petitioners knew even when they filed the gift-tax returns the legal position which ultimately was upheld by the Supreme Court in Goli Eswariah's case or the decisions of the two Benches of the Appellate Tribunal taking the view which was ultimately upheld by the Supreme Court in Goli Eswariah's case were actually stated in the letter when the gift-tax returns were filed without prejudice and under a sort of protest. Therefore, to use the language of Bachawat J. in Tilokchand Motichand's case, they were under no mistake whatsoever as regards the legal position. They knew what the law was, but knowing the law, they did not proceed or prosecute the remedies which were open to them. They abandoned all actions and having taken up the contention before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts the Supreme Court held that an opportunity of being heard was given to the assessee under section 33B of the Act of 1922. The Supreme Court held in that case that where an assessee gives no explanation in his writ petition against an order of the Commissioner under section 33B of the Income-tax Act, 1922, for not preferring an appeal under the act against the Commissioner's order and justifying his recourse to the special jurisdiction of the High Court under article 226 of the Constitution, the High Court would be justified in dismissing the writ petition in limine. Therefore, if there is no justification whatsoever the present writ petition could have been dismissed on the ground that the assessees, the different petitioners herein, had not given any explanation why they did not proceed in appeal against the order of the Gift-tax Officer when their legal contention that no gift-tax was payable was turned down and they were ordered to pay the gift-tax. In Champalal Binani v. Commissioner of Income-tax the appellant had been assessed for the assessment years 1953-54 to 1960-61. The period within which the assessment could be revised was to expire on November 15, 1963, under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court for claiming relief regarding tax paid under that illegal order. Our conclusion, therefore, regarding this group of special civil applications is that, in the first place, the very basis of the claim which the petitioners have put forward in their respective special civil application does not exist, namely, that there is no mistake of law. In view of the facts of this case as read in the context of Tilokchand Motichand's case and the observations of Hidayatullah C.J., Bachawat J. and Mitter J., which we have cited in extenso above, it is apparent that none of the present petitioners can be said to have suffered under a mistake of law or to have paid the amount of the gift-tax under a mistake of law. Each of these petitioners knew very well what the legal position was though that legal position was not finalised by a decision of the Supreme Court at the time when the orders of the Gift-tax Officer were passed in the month of February, 1965, and when one of the orders was passed in Special Civil Application No. 405 of 1972 in the month of July, 1966. It is, therefore, clear that in the light of the majority decision in Tilokchand Motichand's case the petitioners have no cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion so long as such revisional powers alter suo motu or on the application of the party affected are sought to be exercised in order to give effect to the legal position as explained by a decision of the Supreme Court since that decision is the final exposition of the law in the land. After all, as article 141 of the Constitution points out, the law declared by the Supreme Court shall be binding on all courts within the territory of India. The taxation authorities and particularly the Appellate Assistant Commissioner, the Commissioner and the Appellate Tribunal, are all quasi-judicial authorities and they must also recognise the law declared by the Supreme Court. We, therefore, recommend that in all such cases where in the light of a subsequent decision of the Supreme Court it is found that the order passed by way of the taxing authorities is not sustainable in law, revisional powers should be allowed to be exercised by them for the department and against the department without the bar of limitation. The measure that we recommend has this merit that it will reduce the number of further appeals which are to be filed merely to keep the matter alive and it will thus reduce a lot of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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