TMI Blog2018 (4) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the order contained in Annexure-12 dated 23.10.2017 is hereby set aside. After closure scrutiny of the entire facts and circumstances of the case, we notice that neither the Income Tax Department nor the Mines Department has come out with any corrective measures to refund the excess amount or the amount deducted from the bank account of the petitioner and as such we hereby direct the Income Tax Department to forthwith return the amount recovered from the bank account of the petitioner as we are of the considered view that the action of the Department is illegal, arbitrary and totally unauthorized in the peculiar facts and circumstances, since amount was recovered by the respondent Income Tax Department therefore the Department is liable to pay the said amount with interest at the rate applied - We direct that after refund of the amount recovered from the bank account of the petitioner, the Income Tax Department may pursue the matter for recovery in accordance with law against the Mines and Geology Department and take all legal recourse which is admissible under the law including under Section 276B and 276BB. - Civil Writ Jurisdiction Case No. 16778 of 2017 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the ITO in purported exercise of power under Section 226(3) of the Income Tax Act and the petitioner was called upon to deposit a sum of 73,75,573 being the income tax liability of the of the respondent District Mining Office, Bhagalpur (TANPTND01610A). In the said notice it was indicated that the ITO proposes realization of the aforesaid tax dues by means of recovery of arrears of tax from the petitioner being a notice in default. The petitioner also received a notice dated 26.7.2017 whereby in addition to the aforesaid demand the ITO informed the petitioner about the attachment of the account of the respondent District Mining Officer, Bhagalpur till payment of the demanded amount. On 9.8.2017 the representative of the petitioner represented the ITO and assured the ITO that he shall be paying all the tax liability out of any instalment of settlement amount made to the District Mining Officer, Bhagalpur. This was due to innocence and ignorance of the representative of the petitioner. The representative of the petitioner approached the District Mining Officer to ensure that TDS of the income tax as paid by the petitioner along with the instalment be reflected in the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power. 8. Mr. Kejariwal referring to the change in the policy with regard to settlement of Sand Ghagts submitted that having regard to the Bihar Minor Mineral Rules, 2017 the petitioner has chosen to surrender his mining lease of sand mines at Bhagalpur vide letter dated 14.10.2017 and thereafter the State Government directed the Collector Bhagalpur to determine the liability of the petitioner on surrender of lease vide letter dated 20.10.2017 which means acceptance of surrender of lease. The petitioner thereafter paid the 3rd and last instalment to the District Mining Officer and then surrendered the mining lease and on calculation it was found that the petitioner has paid excess amount which is lying with the Mines and Geology Department. 9. Mr. Kejariwal submitted that the petitioner has filed representation to the Collector, Bhagalpur to arrange refund of the amount recovered by the Income Tax Department along with interest as the petitioner was not liable for payment of such amount. 10. This writ application was heard on different dates on 20th of November 2017 noticing the peculiar facts and circumstances of this case, this court issued notice to the Chief Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to steer clear of the entire issue by contending that it is the Income Tax Department which has collected the amount from the petitioner and therefore the petitioner seeks refund from the Income Tax Department. 13. On behalf of the Income Tax Department stand was taken that on 5.10.2012, notices were issued, demands were made under Section 201/201(1A) and thereafter proceedings were initiated under Section 226 (3) and it was after conducting all the formalities, action was taken against the present settlee, the petitioner, from whom the Mines Department, according to the Income Tax Department, has not collected the TCS. However, the Income Tax Department refers to an order dated 19.9.2017, Annexure-10 wherein it was indicated that certain amount has been collected from the petitioner and was to be deposited with the Income Tax Department. Since nothing was deposited in pursuance to Annexure-10, the Income Tax Department resorted to attaching the bank account and recovery of the tax liability of the Mines Department in exercise of jurisdiction under Section 226(3)(x) of the Income Tax Act, 1961. 14. Noticing the peculiar facts of the case the court directed the Principal Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re an arrears of tax due from him, in the manner provided in sections 222 to 225 and the notice shall have the same effect as an attachment of a debt by the Tax Recovery Officer in exercise of his powers under Section 222. 18. Mrs. Sinha submitted that primarily it was the responsibility of the Mining Department to deposit the TCS collected from the settlees of Sand Ghats and others settlee and licencee. Since the Mines and Geology Department failed to deposit the said amount, the Income Tax Department was justified in attaching the account of the petitioner being the debtor of the Mines and Geology Department. She submitted that from the account of Mines and Geology Department the tax liability was not satisfied and as such the Department has to resort to attaching the bank account of the petitioner and after due notice and opportunity the bank account of the petitioner was attached and the amount was recovered. She submitted that under the provisions of the Income Tax Act, the taxes are liable to be collected by the Mines Department from the settlees of the Sand Ghats and since the tax was not deposited by the Mines and Geology Department, the Department of Income Tax was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent came out with any corrective measures to refund the amount deducted arbitrarily from the bank account of the petitioner. 20. During the course of argument, we have enquired from the counsel appearing on behalf of the Income Tax Department whether an inquiry was conducted to determine the liability of the petitioner as debtor, Mrs. Sinha submitted that under the Income Tax Act particularly Section 226(3)(x) opportunity was provided to the petitioner and thereafter the bank account was seized and amount was recovered. 21. From the pleading of this case and submissions of the parties following admitted facts emerges: (i) petitioner has in fact paid all its liability in connection with settlement of Sand Ghat. (ii) Tax liability of TCS was of the Mining Department as the Mining Department failed to deposit TCS. (iii) ITO (TDS) attached the Bank account of Mining Department, Bhagalpur on 4.2.2016 and released the same vide letter dated 18.3.2016. (iv) No action was taken by Income Tax Department against Mining Department for failure to deposit TCS under Section 276B and 276BB. (v) petitioner surrendered lease on 14.10.2017. (vi) State Government ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion contained in Annexure-12 was taken on 23.10.2017 without noticing the development of surrender of lease on 14.10.2017 and its acceptance by State Government on 20.10.2017. 25. In the peculiar facts of the case when we noticed that there is failure on the part of the Mines and Geology Department in not collecting the TCS/TDS and failure to deposit the collected amount to the Income Tax Department whether for the failure of the Mines Department, the law-abiding innocent taxpayer can be fastened with any accountability by Income Tax by Income Tax Department as well as Mines Department. It is useful to refer to paras 9 to 11 of the Counter Affidavit of Mines Department which is acknowledgment of the lapse of the officers of Mining Department. Paras 9 to 11 of the Counter affidavit of Mining Department is quoted below for ready reference. 9. That it is humbly submitted that the matter essentially relates to non-payment of tax collected at Source (TCS) on the royalty paid by the settlees. Prima facie, it appears that the three Mining Officers were responsible for this lapses, who should have initiated steps to recover the said TCS from all the previous settlee and moreover th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as debtor we are of the considered view that if no tax is due to be payable by the petitioner against any head to the Mines Department in the absence of exclusive determination that settlement amount to the Mines Department was only due against the petitioner how the petitioner can be declared exclusive debtor as in the entire counter affidavit there is no statement that settlement amount or tax liability was exclusively due against the petitioner and not other settlees as we have noticed the fact that the petitioner kept on requesting the authorities in the matter of payment of tax under Section 226(3)(x) of the Income Tax Act, the Mining Department has not issued any guideline rather insisted upon payment of the 3rd instalment of settlement amount and coerced the petitioner as petitioner cannot run the business of excavation of Sand. 28. We have also gone through the statutory provision under the Income Tax Act particularly, Section 226(3)(x) and we do not find that the said provision confer such arbitrary power to the Income Tax Department to recover the amount from the innocent petitioner after surrender of settlement. The tax was the liability of the Mines and Geology Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner, (b) on 14.10.2017 the petitioner has surrendered the settlement of Mining lease and the State Government vide letter dated 20.10.2017 directed calculation of outstanding and as such on 23.10.2017 while passing order declaring assessee in default under Section 226(3)(x) the aforesaid development was not considered. Accordingly, the order contained in Annexure-12 dated 23.10.2017 is hereby set aside. 31. After closure scrutiny of the entire facts and circumstances of the case, we notice that neither the Income Tax Department nor the Mines Department has come out with any corrective measures to refund the excess amount or the amount deducted from the bank account of the petitioner and as such we hereby direct the Income Tax Department to forthwith return the amount recovered from the bank account of the petitioner as we are of the considered view that the action of the Department is illegal, arbitrary and totally unauthorized in the peculiar facts and circumstances, since amount was recovered by the respondent Income Tax Department therefore the Department is liable to pay the said amount with interest at the rate applied by the Income Tax Department while calculating the du ..... X X X X Extracts X X X X X X X X Extracts X X X X
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