TMI Blog2021 (5) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... x Department, the action of the 3rd respondent, which is per se illegal and in violation of Section 245 of the Income Tax Act, 1961, does not get validated. It would be a travesty of justice to allow the plan of respondent No.s 1 to 3 to somehow or other ensure that petitioner gets the tag of a defaulter in payment of Service Tax dues, to succeed. The petitioner shall be deemed to have made payment of ₹ 18,91,37,548/- determined under Form No.SVLDRS-3 dt.28.01.2020 before 30.06.2020; the respondents are restrained from declaring that the petitioner had committed a default under the SVLDRS Scheme 2019 and also restrained from taking any coercive action against the Directors, officials of the petitioner or against the petitioner; the respondents 1 and 2 are directed to release to the petitioner the amount of ₹ 12,01,23,118/- out of the Income Tax refund amount of ₹ 30,92,60,666/- payable to it within four (4) weeks; the 3rd respondent shall pay petitioner interest on the sum of ₹ 30,92,60,666/- from 21.5.2020 ( the date of expiry of the 3 month period as per Section 243 (1) (b) of the Income Tax Act,1961) till 24.11.2020 at 15% per annum within four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied the same on 21.08.2019. 5. Petitioner filed application under the Scheme on 30.10.2019 and petitioner s application for settlement of dues under the SVLDRS was accepted by the Designated Committee of the Tax Department. The Committee reviewed petitioner s application and issued its approval vide Form No.SVLDRS-3 dt.28.01.2020 and the petitioner was asked to remit an amount of ₹ 18,91,37,548/- as against the original liability of ₹ 59,20,19,079/-. 6. As per the SVLDRS, payment of amount mentioned in Form No.SVLDRS-3 should be made as per timelines prescribed (and extended from time to time), failing which the order of the Designated Committee would be deemed to be automatically cancelled. The final date for making the above payment was 30.06.2020. 7. Petitioner contends that because of the COVID-19 Pandemic situation and its own financial difficulties, the only way the petitioner could discharge its liability as per Form No.SVLDRS-3 was by utilizing the Income tax refund of ₹ 34,65,92,300/- which it was held entitled to. But, on account of the Garnishee Notice issued by the GST authorities to C.I.T. (C.P.C.), Bengaluru and Principal C.I.T. (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent nos.1 and 2 from taking any coercive or punitive actions against petitioner-Company s officials and directors. Events after filing of the Writ Petition: 13. On 01.10.2020, this Court issued Notice Before Admission and Sri B. Narasimha Sarma, learned Senior Counsel for Central Taxes, took notice on behalf of respondent nos.1 and 2. 14. Time was again granted to the counsel for respondent nos.1 and 2 on 03.11.2020 to file counter-affidavit and the matter was directed to be listed on 14.12.2020. The First Counter affidavit filed by respondent no.s 1 and 2 in November,2020 15. Thereafter, counter-affidavit was filed by respondent nos.1 and 2 on 16.11.2020. 16. In the counter-affidavit, the respondent nos.1 and 2 admitted that petitioner opted for SVLDRS and Form No.SVLDRS-3 dt.28.01.2020 was issued for ₹ 18,91,37,548/- which petitioner was required to pay in (30) days and that the time for payment was later extended to 30.06.2020 by the Government. They however, took a stand that the petitioner itself through its Managing Director had given a letter dt.04.04.2018 to the Senior Intelligence Officer, DGGI, Hyderabad that it has no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Affidavit and also additional material papers. I.A.No.4 of 2020 the Application to amnd the prayer in the writ Petition 19. The petitioner also filed I.A.No.4 of 2020 seeking amendment of the prayer in the Writ Petition challenging the action of respondent nos.1 and 2 in taking ₹ 30,92,60,666/- from the Income Tax Department and appropriating it towards liability determined under Form No.SVLDRS-3 dt.28.01.2020 of ₹ 18,91,37,548/-; to direct the respondents to pay to the petitioner ₹ 12,01,23,118/-; and not to declare the petitioner as a defaulter under the SVLDRS scheme 2019 or to take coercive action against itself, its directors and officials. 20. These two applications were allowed on 17.12.2020. The interim order dt.17.12.2020 in W.P.No.17002 of 2020 21. On that day, the following order was also passed in Writ Petition No.17002 of 2020 : Since it is not in dispute that a refund of ₹ 30.92 crores which the petitioner had got from the Income Tax Department pursuant to refund order passed on 20.02.2020 was appropriate towards Service Tax dues of the petitioner on 24.11.2020 by the respondents, and thus a substantial po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55/-, and directing the Income Tax Department to credit to the GST Department the refund amount under the Income Tax Act, 1961, payable to the petitioner invoking Section 73(1B) read with Section 87 of the Finance Act, 1994 . This is the first Garnishee order. 31. The 3rd respondent states that on account of the said Garnishee Order, the Income Tax Department could not make the refund to the petitioner. 32. Admittedly, the Sabka Vikas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) was introduced under the Finance Act, 2019 and the petitioner made application under the said Scheme for settlement of Service Tax Dues on 30.10.2019; petitioner s application was accepted by the Designated Committee and Form No.SVLDRS-3 dt.28.01.2020 was issued asking the petitioner to remit ₹ 18,91,37,548/- as against the original liability of ₹ 59,20,19,079/-. This amount was payable in four weeks but the time was extended up to 30.06.2020. 33. There is no dispute that the petitioner wrote letters dt.05.08.2019, dt.03.02.2020 and dt.14.02.2020 to the respondents 1 and 2 to modify the Garnishee Notice dt.22.3.2019 and restricting it to ₹ 18,91,37,548/- to enable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned above. There was no legal impediment to modify the Garnishee notice dt.22.3.2019 37. In para 3 of the counter affidavit initially filed in November, 2020, respondents 1 and 2 took a stand that there is no legal provision to withdraw any such Garnishee order dt.22.3.2019 issued till the amounts are recovered; and the Garnishee Order cannot be revised till the subject issues are settled by way of adjudication of the Show cause Notice dt.16.9.2019 issued to the petitioner. It is stated that it was issued by the 1st respondent for recovery of tax dues admitted by the petitioner during the course of investigation and to safeguard the revenue. 38. We do not agree with the said contention of respondents 1 and 2 for the following reasons. 39. There is no dispute that the SVLDRS Scheme was introduced by Finance (No.2) Act, 2019 and notified in the Gazette of India Extra-ordinary on 01.08.2019. It was a one-time measure to free a large segment of tax payers from their pending disputes with the Tax Administration, unload the baggage and allow businesses to move on. It provides both dispute resolution and amnesty in regard to past disputes of Central Excise, Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes forward for payment of arrears after issuance of Garnishee Notice to the persons from whom money is due to the assessee and that under Section 21 of the General Clauses Act, 1897, the power to issue an order includes power to add, amend, vary or rescind the order, and that an interpretation that a Garnishee Notice cannot be amended or rescinded would make the provisions unworkable provided the interests of the revenue is suitably safeguarded. The said Circular also permitted recovery of arrears in installments. 45. In our opinion, the circumstance mentioned in the Circular under which the Garnishee notices can be modified or withdrawn or amended cannot be taken as exhaustive and is merely illustrative; and if like in the instant case, there is a reduction of liability of Service Tax dues determined under a scheme like SVLDRS, the authority issuing the Garnishee notice not only has a power to withdraw or modify it, but it is his bounden duty to do so. Such a construction will advance the cause of justice and the object of schemes like the SVLDRS scheme. 46. We therefore hold that it was the duty of the respondents 1 and 2 to (a) take note of the coming into force of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt available with the said Office, if a Garnishee Notice is to be issued to it; and following it up by the Assistant Commissioner of Income Tax, Circle-3(1), Hyderabad, writing another letter on 03.11.2020 to the Principal Commissioner, Central Tax, Hyderabad Central Commissionerate(2nd respondent), asking the latter who issued a fresh Garnishee Notice. 53. This was done by the Income Tax Authorities knowing fully well that the petitioner had filed a grievance petition on 28.04.2020 under Section 119(1)(a) of the Income Tax Act, 1961 to the CBDT to issue a direction to the CPC, Bangalore to process its refund of ₹ 34,65,92,300/- as per intimation dt.20.02.2020 issued under Section 143(1) of the Income Tax Act, 1961. 54. We fail to understand the anxiety of the Income Tax Department in attempting to deny refund of Income Tax to the petitioner and going out of its way to cooperate with the Service Tax Department by even soliciting from the latter, a fresh Garnishee Notice in order to see that the petitioner does not get the income tax refund, (which was payable as per the intimation issued to the petitioner under Section 143(1) of the Act on 20.02.2020, and by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... envisages that where a refund is due to the assessee in pursuance of an order passed under Section 240 of the Act, and the assessing officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee a simple interest of 15% per annum on the amount of refund due from the date immediately following the expiry of the period of three months as aforesaid to the date on which the refund is granted. 30. .. Interest payment is a statutory obligation and nondiscretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244-A is drafted and enacted. The language employed in Section 244-A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 1-4-1989, albeit with clarity of application as contained in Section 244-A. 31. .A general right (sic duty) exists in the State to refund any tax collected for its purpose, and a corresponding right exists to refund to individuals any sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64. We shall now consider whether this act of the Income Tax department is valid as per law. 65. Such power to Set Off is conferred on the Income Tax authorities by Section 245 of the Income Tax Act, 1961. It states: 245. Set off of refunds against tax remaining payable .- Where under any of the provisions of this Act a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), 1[Principal Commissioner or Commissioner] (Appeals) or 2[Principal Chief Commissioner or Chief Commissioner] or 1[Principal Commissioner or Commissioner], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section. (emphasis supplied) 66. Thus a set off is permitted to be made by an Assessing Officer of the income tax refund due to an assessee only as against sum, if any, remaining payable under this Act . Thus the Assessing Officer can adjust the Income Tax refund due to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Letter dt.4.4.2018 given by petitioner does not operate as estoppel against petitioner 72. The Respondents 1 and 2 have taken a stand that petitioner itself through it s Managing Director had given Letter dt.4.4.2018 and an affidavit to the Commissioner of Income Tax, CPC, Bangalore that the later can pay to the Central Excise Department the Service Tax to be determined out of the refund issued for Asst. Year 2018-19 and so the petitioner is estopped from now challenging the setting off of the Income Tax refund against the Service Tax dues. 73. In our opinion, this plea is without any merit because there is no estoppel against a statute. ( Sri Hari Krishna Mandir trust v. State of Maharashtra (2020) 9 SCC 356 , Taparia Tools v. CIT (2015) 7 SCC 540 ). 74. When Section 245 of the Income Tax Act,1961 permits a set off only as against the Income Tax dues, merely because the petitioner gave such a letter or an affidavit, the 3rd respondent cannot pay the Income Tax refund due to the petitioner to the Service Tax Department towards the Service Tax dues. 75. Assuming for the sake of argument without conceding that the Income Tax Department was entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable to the petitioner on account of the intimation dt.20.2.2020 issued to it under Section 143 (1) of the Act. 80. This inaction on the part of the Income Tax Department in not paying to the petitioner interest @ 15% p.a on the refund from 20.5.2020 ( the date of expiry of the 3 month period as per Section 243 (1) (b) of the Income Tax Act,1961) which it is entitled to get on account of the delay in making payment of refund, is arbitrary, illegal and violates Art.14, 300A of the Constitution of India and also Section 243(1) (b) of the Income Tax Act,1961. 81. We do not agree with the plea of the respondents 1 and 2 that the petitioner had time from 28.01.2020 (the date when Form No.SVLDRS-3 was issued) till 30.06.2020 (the last date for payment of the amount determined under the said Form by the Designated Committee) and that the petitioner did not utilize this time and is falsely trying to portray that it was deliberately deprived of the opportunity to pay the dues determined under Form No.SVLDRS-3. 82. The further contention of the respondents 1 and 2 that the petitioner is expected to pay the amounts determined under the SVLDRS Scheme as per Sub-Section (5) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such proceedings ought to have been initiated within six months under the Army Act, 1950. Referring to the above maxim, this Court held that the accused could not take undue advantage of his own wrong. Considering the relevant provisions of the Act, the Court held that presence of the accused was an essential condition for the commencement of trial and when the accused did not make himself available, he could not be allowed to raise a contention that proceedings were time-barred. This Court (at SCC p. 142, para 28) referred to Broom s Legal Maxims (10th Edn.), p. 191 wherein it was stated: It is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure. 16. It is settled principle of law that a man cannot be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned. To put it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice Tax Department, a fresh Garnishee Notice in order to see that the petitioner does not get the income tax refund, (which was payable as per the intimation issued to the petitioner under Section 143(1) of the Act on 20.02.2020, and by continuing to retain the income tax refund amounts till November, 2020 without any valid reason), is not bonafide and indicates a prejudice against the petitioner. (v) the payment made on 24.11.2020 by the 3rd respondent of ₹ 30,92,60,666/- to the respondents 1 and 2 towards Service Tax dues of the petitioner is contrary to Section 245 of the Income Tax Act, 1961. (vi) When Section 245 of the Income Tax Act,1961 permits a set off only as against the Income Tax dues, merely because the petitioner gave a letter dt.04.04.2018 or an affidavit, the 3rd respondent cannot pay the Income Tax refund due to the petitioner to the Service Tax Department towards the Service Tax dues. (vii) Nothing prevented the 3rd respondent from transferring to the respondents 1 and 2 the amount of ₹ 18,19,37,548/- from out of the Income Tax refund of ₹ 30,92,60,666/- before 30.06.2020 and transfer the balance with interest under Section 243(1)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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