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Sunil Kumar Versus M/s. Stock Guru India Ltd. & Anr.

2017 (11) TMI 743 - DELHI HIGH COURT

Recovery of income tax with interest recoverable from the judgment debtor - seized amount appropriation towards tax demand in terms of Section 132B on determination of the tax liability of the Judgment Debtor pursuant to the assessment of its undisclosed income determined on completion of the assessment proceeding - Held that:- As refer to Section 226 of the Income Tax Act, 1961 which relate to other modes of recovery. Under Section 226 Rule 4 the assessing officer may apply to the Court in whos .....

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be adjusted against tax liability of the assessee. - Further the plea of revenue that the decree holder ought to have applied u/s 132(11) per Rakesh Kumar Aggarwal (2013 (9) TMI 1194 - DELHI HIGH COURT) is also not sustainable, per Section 132(11) stands omitted by the Finance Act of 2002 w.e.f. 01.06.2002 and hence decree holder could not have availed of such provision in any case. - Lastly the plea of the Income Tax Department that it being a secured creditor, would not be of any bene .....

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hrough: Mr. Sanjiv Rajpal, Adv. for Income Tax Dept. Ms. Kawaljit Kaur, Adv. for JD-1 & 2 Ms. Romila Joshi, Advocate for HDFC Bank. YOGESH KHANNA, J. EX.APPL.(OS) 290/2014 1. This application is moved by the Deputy Commissioner of Income Tax, Central Circle-3, New Delhi under section 226(4) of the Income Tax Act, 1961 for recovery of income tax with interest, recoverable from the judgment debtor for the A.Y. 2010-2011 & 2011-2012 pursuant to assessment orders and the demand notices for a .....

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h. Lokeshwar Dev and his wife Smt. Priyanka Saraswat Dev and is the flagship concern of the SGI Group, was carrying on systematic business but not reflecting the correct income in its books of accounts as required under the Income Tax Act, 1961. 3. The seized amount since has to be appropriated towards tax demand in terms of Section 132B of the Income Tax Act,1961 on determination of the tax liability of the Judgment Debtor pursuant to the assessment of its undisclosed income determined on compl .....

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ents. These Investors /agents were allowed to refer and introduced any other person to be an investor/agent in the firm under their downline as they would receive referral commission on the investment of the said new referred person. 5. The decree holder who has been one of the investors of the Judgment Debtor filed the suit for recovery against the judgment debtors on the premise he has been defrauded by the judgment debtors and a money decree of ₹ 1.60 crore was passed by this Court on 1 .....

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terms of the post search enquiry has been completed on 06.11.2013 and in terms thereof the demand has been raised on them. The assessment orders of Judgment Debtor for the assessment years 2010-2011 and 2011-2012 alone determined its tax liability for these 2 years at ₹ 345,97,46,885/-.The copy of the demand notices issued u/s 156 (2) of the Income Tax Act, 1961 are attached. 7. It is averred the applicant has put the bank accounts of the Judgment Debtors under attachment u/s 226 of the I .....

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e judgment debtor deposited by it in the HDFC Bank, Dwarka Branch, New Delhi has been freezed for meeting the tax liability arisen against it. 8. It is submitted by the learned counsel for the Income Tax Department that if the Decree Holder has any grievance against the attachment, the appropriate provision would be under Section 193(11) of the Income Tax Act, 1961 where he could have applied to get a favourable order but since no such application was filed, the execution proceedings to recover .....

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modities on 27th April, 1989. During these, seven Pay Orders for ₹ 50.40 lakhs, prepared from the accounts on 26th April, 1989 were found. The Income Tax officials, on 28th April, 1989 issued a deemed seizure order with respect to the 7 pay orders for ₹ 50.40 lakhs and served it upon the Manager, Punjab National Bank. The original pay orders were in the control and possession of the plaintiffs, M/s. Bansal Commodities. The plaintiffs, resultantly did not present the pay orders for pa .....

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edies by way of a suit, through a consent order. The suit, filed later, was decreed in full, by the impugned judgment. The first objection to the impugned judgment is that it was barred by Section 293 of the Income Tax Act; the second argument of the appellants is that the learned Single Judge should not have entertained the suit since no ground to give the benefit of Section 14 of the Limitation Act, had been made out. 23. The issue presented before the Court is whether the present proceedings .....

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dings under Section 132 - along with the objections presented under Section 132 (10), which were considered and rejected under Section 123 (12) - were carried out is clear in this case. The Section 132 proceedings and the deemed seizure of the seven pay orders (and the representative amount) as against Mr. Kumar s tax dues were conducted and finalized in accordance with the procedure under that provision, and to that action, there is no dispute in this case. The question, then, is whether the pr .....

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der Section 132 - can be subject matter of the present suit. xxx 26. As in this case, the Revenue may not adjudicate on the question of liability of Mr. Agrawal to Bansal Commodities, just as in Parmeshwari, the Supreme Court held that: [i]t (was) not the case of the Revenue that Income Tax Authority can grant decree for partition. Neither is it true that such a construction of Section 293 leaves third parties without a remedy. Section 132(11) provides the third person, (in this case M/s. Bansal .....

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under Section 132(5) of the Act set aside or modified to that extent. This Section 293 does not permit... Equally, the Supreme Court noted that: Section 293 is quite specific and does not admit of any ambiguity if ultimately a suit is to result in a decree or order which sets aside or modifies any proceeding taken or order made under the Act, that suit would not be maintainable. We are not concerned with the frame of the suit as such but to see the ultimate result to which the suit as such but .....

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aintiff had suffered as a result of loss of interest on the maturity value of the financial assets seized. In that proceeding, the Single Judge Court dismissed the suit given the provisions of Section 293, and on appeal, the Court noted that where a specific remedy is available under Section 132 (in that case the remedy lay in the provisions on payment of interest under Section 132B), the jurisdiction of the Civil Court remains barred. In this case, M/s. Bansal Commodities clearly had recourse t .....

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Leave Petition before the Supreme Court. Therefore, the effect of the present suit - with the form not being determination, but rather the substance of the relief claimed - would be that the order under Section 132 would necessarily be required to be modified, and thus, Section 293 prohibits the present action. The impugned judgment of the Learned Single Judge - that the ownership of the seven pay orders lies with M/s. Bansal Commodities - and the order of the CIT, i.e. that the seven pay orders .....

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ecover the money attached/seized by the revenue. 11. I disagree with the submission of the learned counsel for the department. Section 293 of the Income Tax Act perhaps has no applicability in the present proceedings. It bars the filing of the suit in a civil court to set aside or modify any proceedings taken and / or made under the Income Tax Act. The Decree Holder has not filed any suit in any civil court against the revenue authorities challenging/setting aside/modifying any proceedings taken .....

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he never received any return on his investments with the defendants and when he tried to approach the defendants at their Delhi office, he found that the office was closed and the telephone numbers of the defendants were also not available. It then transpired that the defendants had been working under a pre-planned conspiracy to cheat public-atlarge and had aired their advertisements on internet, and through periodically conducted seminars, so as to gain the trust of public-at-large. Plaintiff a .....

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gal notice on the defendants, terminating the agreement on account of fraud committed by the defendants and called upon the defendants to pay to the plaintiff the assured monthly return and the principal sum invested. 12. The Court then in para 7 of its judgment returned the finding:- 7. In view of the aforesaid, the suit of the plaintiff is decreed in favour of the plaintiff and against the defendants Nos.1 and 2. The defendants are held jointly and severally liable to pay to the plaintiff a su .....

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t of course can seize the money/properties which belong to the assessee/the judgment debtors but of none other. Now in this case the decree holder has alleged his money being ₹ 1,60,00,000/- was received by the judgment debtors by cheating him and the said money belong to the decree holder and need to be returned by the judgment debtors. It is argued such money of decree holder is held by the judgment debtors in trust and the decree holder has a proprietary interest in the amount so seized .....

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rsuance of a contract induced by fraud or mistake, as proved by the decree holder and so noted in judgment dated 16.08.2012 in CS(OS) No.2866/2011, the judgment debtor on receiving the notice of rescission ought to have held the money in trust for the benefit of the decree holder. 17. In The National Crime Agency V. Gary John (2014) EWHC 4384 (CH) the Court held as under: 40. I consider that each of the lead claimants has a proprietary claim to part of the Fund on ordinary principles of law and .....

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b and AGA held the payments by the lead claimants or their traceable proceeds on constructive trust for the lead claimants ("the fraud constructive trust"). The second is that, from the time when the lead claimants claimed the return of their payments, that is to say, at the latest, when they joined the present proceedings, their transactions were rescinded and their payments or their traceable proceeds were held on trust for them ("the rescission trust"). 41.The fraud constr .....

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le and traceable in equity. Thus, an infant who has obtained property by fraud is bound in equity to restore it: Stocks v. Wilson [1913] 2 K.B. 235, 244; R. Leslie Ltd. v. Sheill[1914] 3 K.B. 607. Moneys stolen from a bank account can be traced in equity: Bankers Trust Co. v. Shapira [1980] 1 W.L.R. 1274, 1282C-E: see also McCormick v. Grogan (1869) L.R. 4 H.L. 82, 97". xxx 50. Contrary to some scholarly analysis (see Burrows', "The Law of Restitution" (3rd ed) pp. 174-179 and .....

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he limits of proprietary relief for unjust enrichment. Whatever may be the position in other cases, fraud is special. As Lord Bingham said in HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6 at paragraph [15]: "… fraud is a thing apart. This is not a mere slogan. It reflects an old legal rule that fraud unravels all: fraus omnia corrumpit. It also reflects the practical basis of commercial intercourse. Once fraud is proved, 'it vitiates judgments, con .....

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he judgment above, where the judgment debtor had received the money by fraud then at best he shall be holding the money in constructive trust for the decree holder, even if the fraud had subsequently been committed. Though here the learned counsel for the revenue referred to Section 292(C) of the Income Tax Act, 1961 to take benefit of presumption attached to the amount seized viz:- 292C (1) Where by books of account, other documents, money, bullion, jewellery or other valuable article or thing .....

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nfirmed ₹ 1.6 crores was received by the judgment debtor by fraud. Now, here Rule 9 of the Second Schedule of the Income Tax Act would become relevant and it read: Schedule II Rule 9 General bar to jurisdiction of civil courts, save where fraud alleged. xxx xxx xxx Provided that a suit may be brought in a civil court in respect of any such question upon the ground of fraud. 19. Rule 9 confirms my view qua a leverage to be given to the plaintiff if he brings a suit on grounds of fraud. This .....

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