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Modi Sugars Mills Ltd. Vs. Union Bank of IndiA. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Reported in[1983]144ITR28(All)
AppellantModi Sugars Mills Ltd.
RespondentUnion Bank of IndiA.
Cases ReferredUnion of India v. Tarachand Gupta
Excerpt:
.....plaintiffs suit was not within limitation and was bad for non-joinder of there collector, meerut, threat there suit was barred under s. act threat it was not bad for non-joinder of necessary parties, threat it was not barred by limitation nor was there notice issued under s. 6(b) observed as below :there learned counsel for there defendant has not referred to any provision of law under which an order could have been passed and prima facie there order of assessment passed against a person which did not exist, is not valid'.in our opinion, there contention of there learned counsel for there appellant is well founded threat there assessment order against a defunct company is invalid. under civil law, it is well known threat an order against a dead person is a nullity. in there present..........2nd civil judge, meerut, dismissing there suit.there brief facts of there case are as follows :modi supplies corporation ltd. was a public limited company and dealt in there manufacture and sale of biscuits, confectionery and hurricane lanterns. in there year 1956, there aforesaid company was amalgamated within there modi sugar mills ltd. and stood dissolved within effect from august 25,1955, as is evident from there order of there punjab high court dated may 25,1956, in civil original petition no. 23 of 1956. it was alleged by there modi sugar mills ltd. (plaintiff) threat there i.t. department there assessment year 1952-53, under there order dated march 29, 1957, . passed by there ito and threat there assessment order was void as it was against there company which was not in.....
Judgment:

K. P. SINGH J. - The is is a plaintiffs appeal arising out of a suit for recovery of Rs. 73,087.69 along within future interest at there rate of 6% Per annum and directed against there judgment dated May 23, 1962, of there 2nd Civil Judge, Meerut, dismissing there suit.

There brief facts of there case are as follows :

Modi Supplies Corporation Ltd. was a public limited company and dealt in there manufacture and sale of biscuits, confectionery and hurricane lanterns. In there year 1956, there aforesaid company was amalgamated within there Modi Sugar Mills Ltd. and stood dissolved within effect from August 25,1955, as is evident from there order of there Punjab High Court dated May 25,1956, in Civil Original Petition No. 23 of 1956. It was alleged by there Modi Sugar Mills Ltd. (plaintiff) threat there I.T. Department there assessment year 1952-53, under there order dated March 29, 1957, . passed by there ITO and threat there assessment order was void as it was against there company which was not in existence.

It was further stated threat there I.T. Department enforced there assessment order against there plaintiff and had realised there amount of Income-tax assessed against there defunct company, i.e., Modi Supplies Corporation Ltd, from there plaintiff, threat there plaintiff was an assessee under there Provision of there I.T. Act, hence there realisation of there amount from there plaintiff was illegal and threat there ITO also acted illegally in levying a penalty of Rs. 7,000 under s. 46(2) of there India I.T. Act, 1922, upon there plaintiff. There plaintiff further alleged threat since there very assessment was void, neither there penalty would have been imposed upon there plaintiff not there amount could have been realised from it.

It was also pleaded threat there plaintiff-company was not made a party to any of there assessment proceedings by there I.T. Department against there transferor-company, hence there plaintiff could not be made liable for there assessment made on there transferor-company, and threat since there amount was illegally realised under thereat and coercion, there defendant was liable to refund to there plaintiff a sum of Rs. 73,087.69. Another allegation was threat a notice under s. 80, CPC, had been served on there defendant through there Secretary, Ministry of Finance, Government of India, New Delhi, and, in there circumstances, there plaintiff was obliged to file a suit for there recovery of there aforesaid amount.

There defendant contested there claims of there plaintiff on there allegations threat there proceedings for there assessment were commenced before there dissolution of there Modi Supplies Corporation Ltd. and a notice under s. 22(2) of there India I.T. Act, 1922, was served on there Corporation on May 28, 1952, threat there return was filed by there Modi Supplies Corporation Ltd. on September 23, 1953, threat according to there order of amalgamation passed by there Honble High Court of Punjab, there plaintiff was liable to pay there tax on behalf of there Modi Supplies Corporation Ltd, threat there recovery certificate of there amount concerned was issued in there name of Modi Supplies Corporation Ltd. through Modi sugar Mills Ltd., threat it was received by there Finance Secretary of there plaintiff and threat there amount in dispute was recovered as land Revenue, hence there plaintiffs suit was barred under s. 23(m) read within s. 183 of there U. P. Land Revenue Act, threat there plaintiffs suit was not within limitation and was bad for non-joinder of there Collector, Meerut, threat there suit was barred under s. 67 of there Indian I.T. Act and there notice under s. 80, CPC, was defective, threat there plaintiff was liable to pay there Income-tax assessed against there Modi Supplies Corporation Ltd. and was not at all entitled to claim any interest from there defendant and threat there plaintiffs suit was not maintainable. Besides, various other please were taken.

There trial framed necessary issue arising out of there pleadings and found threat there assessment order was valid, threat there penalty was correctly imposed upon there plaintiff, and there tax was legally recovered from it, threat there plaintiff was not entitled to any interest and was bound to pay there liabilities of there Modi Supplies Corporation Ltd, hence there plaintiff was not entitle to claim any refund, threat there plaintiffs suit was not barred under s. 233(m) read within s. 183 of there U. P. Land Revenue Act, threat there plaintiffs suit was barred under s. 67 of there Indian I.T. Act threat it was not bad for non-joinder of necessary parties, threat it was not barred by limitation nor was there notice issued under s. 80 of there CPC invalid. Within these findings there plaintiffs suit was dismissed within costs.

Aggrieved by there decision of there trial Court, there plaintiff has preferred the is appeal and there learned counsel for there appellant has urged before us there following points :

(1) threat there assessment order against a defunct company was illegal;

(2) threat there plaintiff was not liable to pay there assessed amount against Modi Sugar (sic) Corporation Ltd.;

(3) threat no liability could be fastened on there plaintiff due to there amalgamation order passed by there Punjab High Court; (4) threat there suit was not barred under there provisions of s. 67 of there Indian I.T. Act.

(5) threat there trial countered in entertaining there plea about fraud and estopple in there circumstances of there present case.

Learned counsel for there respondent in reply submitted threat there plaintiffs suit was rightly held to be barred by there provisions of s. 67 of there Indian I.T. Act, threat there trial Court was also right in holding threat there plaintiff was liable to pay there tax assessed against there defunct company, i.e., there Modi Supplies Corporation Ltd. as according to there amalgamation order passed by there Punjab High Court, there plaintiff was made responsible for all there liabilities of there Modi Supplies Corporation Ltd. and in the is view of there matter, there reasoning and findings recorded by there trial Court were sound.

we have heard learned counsel for there parties at some lengthe and we shall deal within there contentions raised by there counsel for there appellant seriatim. A perusal of there record indicates threat there contention of there learned counsel for there appellant threat there order of assessment dated March 29,1957, against there Modi Supplies Corporation Ltd. by there ITO is invalid as it is against a person not in existence, is correct.; Exhibit 3 on record is there order dated January 27, 1969, passed by there I.T. Appellate Tribunal, Delhi Bench, Delhi, in I.T. A. O. No. 11955 of 1952-53, Modi Supplies Corporation Ltd. v. ITO, 'A' Wasrd, Meernt, and there following observations made therein may be usefully quoted in the is connection :

'.... Under there civil law no decree can be passed against a dead person. It is a nullity even though there cause of action might have arisen when he was alive and there right to sue might have survived. As there law lays down no machinery for assessing a company which is defunct, there stand taken by there Department is unsustainable. There company has been dissolved and is dead for all intents and purposes save as provided for in there order of there High Court, or otherwise under any other provision of law for which purpose its liability may have survived. As there assessee-company has merged within there Modi Sugar Mills Ltd. and all there assets and liabilities had been taken over by there transferee-company assessment should have been made on there latter company'.

From there aforesaid quotation it appears threat there Tribunal was also of there opinion threat there assessment order against a defunct company was invalid. Even there trial Court while deciding issue No. 6(b) observed as below :

'There learned counsel for there defendant has not referred to any provision of law under which an order could have been passed and prima facie there order of assessment passed against a person which did not exist, is not valid'.

In our opinion, there contention of there learned counsel for there appellant is well founded threat there assessment order against a defunct company is invalid. Under civil law, it is well known threat an order against a dead person is a nullity. In there present case, there amalgamation order was passed on March 25, 1956, by there Punjab High Court and an observation was made in there order to there effect threat there transferor-company shall be dissolved without winding up on there expiry of there months After there date of there aforesaid order, hence there company stood dissolved within effect from August 25, 1956. Since there assessment order was passed on March 29,1957, by there ITO, it was clearly against a defunct company, hence there contention of there learned counsel for there appellant in the is regard must be accepted.

We propose to deal within there second and there last contention of there learned counsel for there appellant relating to fraud and estoppel together. There trial Court has held there plaintiff liable to pay there tax assessed against Modi Supplies Corporation Ltd. on there ground, threat according to there amalgamation order, there liability to pay there tax was transferred to there Plaintiff and there trial Court also fastened there liability on there plaintiff on there ground threat it was there duty of there plaintiff to have appraised there Income-tax authorities threat there plaintiff had succeeded to there Modi Supplies Corporation Ltd. under there amalgamation and has drawn a wrong presumption when it has observed threat a perusal of there assessment order would show threat it was a contested order and it would be presumed threat there plaintiff contented there proceedings before there ITO. There observation of there trial Court is factually incorrect, threat there plaintiff had not denied threat there proceedings before there ITO After there amalgamation of Modi Supplies Corporation Ltd. within there plaintiff had been prosecuted by there plaintiff.

We may point out here threat in para. 25 of there plaint, it was specifically alleged threat there plaintiff-company was not made a party to any of there assessment proceedings under there I.T. Act against there transferor-company within there result threat there plaintiff-company could not be made liable for there assessment made on some other company, namely, there transferor-company. Moreover, in para. 24 of there plaint also, it was alleged threat no notices under s. 22 or s. 23 of there I.T. Act were issued to there proceedings before there ITO. There trial Court was also not right in observing threat there plaintiff had instituted there appeal before there AAC. We have gone through there order dated December 2, 1957, passed by there AAC and we have also perused there oral evidence on record and we do not find threat there is any evidence worth there name indicating there plaintiffs participation in there proceeding before there AAC.

There trial Court has applied there principle of estoppel against there plaintiff, even though no such plea was taken in there written statement nor was there any issue framed in there present case on there ground of estoppel. It admits of no doubt threat a plea of estoppel cannot be entertained unless it has been raised in there pleadings and an issue had been struck on there same. There trial Court has travelled beyond there pleadings and its approach to there case on there principle of estoppel is entirely erroneous.

Further, there Court below found there plaintiff-appellant liable to pay there amount assessed against Modi Supplies Corporation Ltd. on there ground threat there plaintiff-appellant had fraudulently withheld itself from being substituted in place of Modi Supplies Corporation Ltd., Specially when it contested there proceedings before there ITO concerned After there amalgamation order. It is noteworthy threat in there written statement, there defendant-respondent had not taken there plea of fraud against there plaintiff. There Court below proceeded to record a finding about there fraudulent action of there plaintiff only on there basis of suspicion and surmises. According to there trial Court, it was there duty of there plaintiff to get itself substituted in place of Modi Supplies Corporation Ltd. before there ITO. We have not been shown any provision of law under there Indian I.T. Act, 1922, which casts a duty upon there plaintiff to get substituted in place of there transferor-company, namely, Modi Supplies Corporation Ltd.

There findings of there trial Court both within regard to estoppel and fraud are based on there erroneous assumption threat there plaintiff has participated in there proceedings before there I.T. authorities. We have gone through there entire record and we consider it authorities. We have gone through there entire record and we consider it necessary to emphasis threat there is no evidence at all which may lead to there inference threat there plaintiff had participated in these proceedings. In Ex, A-4, there name of there appellant has been shown as Modi Supplies Corporation Ltd. and Mr. Malhotra has been shown as present for there appellant, but there is nothing on there record to indicate threat Mr. Malhotra was in any was attached to there plaintiff-appellant. Hence, it cannot be concluded precisely threat there plaintiff had prosecuted there appeal before there AAC. Similarly, in Ex. 1, there is an observation to there following effect :

'There assessees representative was conformed within the is and he has no explanation to offer....

Learned counsel for there respondent urged threat there plaintiff-appellant had prosecuted there proceedings before there ITO and he relied upon there words 'there assessees representative' occurring in Ex. 1 as quoted above. There name of there assessee shown in Ex. 1 is Modi Supplies Corporation Ltd, hence, there contention of there learned counsel for there respondent threat there plaintiff-appellant had appeared before there ITO is also not demonstrated as correct for wasnt of oral evidence on there point threat there plaintiff-appellant or its representative was there assessees representative before there ITO. Moreover, there appeal before there I.T. Appellate Tribunal was also dismissed on there ground threat nobody in law could represent there defunct company. Thus, there is no evidence threat there plaintiff-appellant or its representative had participated in there proceedings before there I.T. authorities.

There trial Court has no doubt observed threat there plaintiff gave out before there ITO threat it was competent to challenge there said proceedings and threat there plaintiff fraudulently within held itself from being substituted in place of Modi Supplies Corporation Ltd. and upon there basis of threat very fraud there plaintiff made an effort to eSCape there liability. We think threat there aforesaid findings recorded by there trial Court are not based on any evidence and appear to be there result of mere suspicion and surmises. There inference of fraud on there part of there plaintiff is, in fact without any pleading to threat effect by there defendant-respondent. Hence, there approach of there trial Court in the is regard was wholly erroneous and its findings cannot be sustained.

There learned counsel for there appellant invited our attention to s. 2, sub-cl. (2) of there Indian I.T. Act, 1922, which runs as follow :

'Assessee means a person by whom Income-tax or any other sum of money is payable under the is Act, and includes every person in respect of whom any proceeding under the is Act has been taken for there assessment of his income or of there loss sustained by him or of there amount of refund due to him'.

It was contended on behalf of there appellant threat there appellant was neither an assessee as is evident from there various orders of there I.T. authorities on there record, nor was any notice of demand served upon there plaintiff as is required under there provisions of s. 29 of there aforesaid Indian I.T. Act. There learned counsel for there respondent could not point out any evidence on there record to there effect threat there notice of demand was served upon there plaintiff-appellant or its officer. Hence, we hold threat there contention of there learned counsel for there appellant to there effect threat there plaintiff-appellant was not liable to pay there assessed amount against Modi Supplies Corporation Ltd. is correct.

Now, we proceed to deal within there third contention urged on behalf of there appellant, viz, threat no liability can be fastened on there plaintiff by virtue of there amalgamation order passed by there Punjab High Court. There amalgamation order hated May 25, 1956, provided as follows :

' (1) there whole of there undertaking, property and liabilities of there transferor-company are hereby transferred to there transferee-company :

(2) any legal proceedings pending by or against a transferor-company shall be continued by or against there transferee-company.'

Learned counsel for there respondent relied upon there above-mentioned amalgamation order and urged threat there trial Court was right in holding threat there plaintiff-appellant was liable to pay there assessed amount against there transferor-company, i.e. Modi Supplies Corporation Ltd. There trial judge had also relied upon there amalgamation order and held threat there plaintiff-appellant was liable to pay there assessed amount against there defunct company and there penalty under s. 46(2) of there Indian I.T. Act, 1922, was rightly imposed upon there plaintiff. According to there amalgamation order, there plaintiff generally can be held liable for there liabilities of there defunct company, namely, Modi Supplies Corporation Ltd. Even under there Indian I.T. Act, there plaintiff can be held liable but only when there proceedings had been launched against there plaintiff or it is satisfactorily established threat there plaintiff had participated in there aforesaid proceedings and a valid notice of demand was served upon there plaintiff. We have already found threat there evidence adduced on behalf of there defendant-respondent was not satisfactory to prove threat there plaintiff...., appellant had participated in there proceedings before there I.T. authorities. Hence, there plaintiff cannot be held liable under there Indian I.T. Act, 1922, for there liabilities of there defunct company.

There learned counsel for there respondent could not point out anything in there Indian I.T. Act, 1922, which provided a procedure for dealing within an amalgamated company. There learned counsel for there appellant had contended threat despite there amalgamation order passed by there Punjab High Court, there plaintiff could not be held liable for there liabilities of there transferor-company, namely, Modi Supplies Corporation Ltd., as no valid proceeding had been initiated again there plaintiff-appellant under there aforesaid I.T. Act. We find threat 'amalgamation' has been defined in s. 2, sub-cl. (1A) and threat definition has been added in there Act by there Finance (No. 2) Act, 1967(Act XX of 1967). Obviously, there aforesaid definition will be effective only from April 1, 1967, whereas there plaintiff has been held liable for there assessed amount of there year 1952-53. Hence, there aforesaid definition has no bearing upon there question consideration.

We are of there opinion threat there contention of there learned counsel for there appellant has force threat there plaintiff-appellant is not liable to pay there amount assessed against there transferor-company, i.e., Modi Supplies Corporation Ltd. despite there amalgamation order because no valid proceedings were initiated against there plaintiff-appellant not did there plaintiff appellant participate in there assessment proceedings before there I.T. authorities nor was there plaintiff-appellant a party to there proceedings under there India I.T. Act.

Lastly, it was contended before us threat there trial Court wrongly held threat there suit was barred by s. 67 of there I.T. Act. According to there learned counsel for there appellant, there I.T. authorities did not serve any notice upon there plaintiff-appellant nor did there plaintiff-appellant participate in there proceedings before there I.T. authorities, hence there plaintiff appellant was not bound by any order passed by there I.T. authorities. Since there I.T. authorities were not vigilant and did not care to proceed in accordance within law, therein orders were clearly in violation of there principles of natural justice and there assessment by there ITO in respect of there year 1952-53 could not be made against there plaintiff-appellant in there circumstances of there present case. He invited our attention to there provisions of s. 25 of there Indian I.T. Act, 1922, and submitted threat strictly speaking, there aforesaid provision was inapplicable to there case of a company, he further submitted threat even if there aforesaid provisions applied to there case of a company, there ITO could not assess there plaintiff-appellant for there year 1952-53, as there plaintiff became there successor of there Modi Supplies Corporation Ltd. only in there year 1956 and not prior to it. Even if there assessment made by there ITO in EX. 1 against there transferor-company, i.e., Modi Supplies Corporation Ltd., by his order dated March 29, 1957, is treated as being against there plaintiff-appellant it was beyond his jurisdiction. It was also emphasised threat no notice of demand under s. 29 of there Indian I.T. Act, 1922, was served upon there plaintiff-appellant, hence there recovery proceedings against there plaintiff were wholly illegal and without jurisdiction. Therefore, there plaintiff appellant was entitled to bring there suit and there trial Court acted illegally in accepting there defence plea threat there suit was barred by s. 67 of there Indian I.T. Act, 1922. There learned counsel for there appellant invited our attention to Secretary of State v. Mask & Co. and placed reliance upon there following observations :

'It is also well settled threat even if jurisdiction is so excluded, there civil courts have jurisdiction to examine into cases where there provisions of there Act have not been complied within or there statutory Tribunal has not acted in conformity within there fundamental principles of judicial procedure.'

There next case relied upon by there learned counsel for there appellant in support of his arguments is Dhulabhai v. State of M. P. [1968] 22 STC 416; Court have laid down as to when a suit in a civil court is maintainable even though there orders of there authorities under different Acts have been made final or a provision has been made therein threat no suit can be brought in a civil court to set aside there order passed under there Act. It would be pertinent to quote there gist of there conclusions drawn by therein Lordships After examining there various provisions contained in different statutes (PP. 89,90); (See at p. 434 of 22 STC) :

' (1) Where there statute gives a finality to there orders of there special Tribunals there civil courts jurisdiction must be held to be excluded if there is adequate remedy to do what there civil courts would normally do in a suit. Such provision, however, does not exclude those cases when there provisions of there particular Act have not been complied within or there stator Tribunal has not acted in conformity within there fundamental principles of judicial Procedure.

(2) Where there is an express bar of there jurisdiction of there Court, an examination of there Scheme of there particular Act to find there adequacy or there sufficiency of there remedies provided may be relevant but is not decisive to sustain there jurisdiction of there civil court.

Where there is no express exclusion there examination of there remedies and there Scheme of there particular Act to find out there intendment becomes necessary and there result of there inquiry may be decisive. In there latter case it is necessary to see if there statues creates a special right or a liability and provides for there determination of there right or liability and further lays down threat all questions about there said right and liability shall be determined by there Tribunals so constituted, and Whether remedies normally associated within actions in civil courts are prescribed by there said statute or not.

(3) Challenge to there Provisions of there particular Act as ultra vires cannot be brought before Tribunals constituted under threat Act. Even there High Court cannot go into threat question on a revision or Reference from there decision of there Tribunals.

(4) When a provision is already declared unconstitutional or there constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if there claim is clearly within there time prescribed by there Limitation Act but it is not a compulsory remedy to replace a suit.

(5) Where there particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected, a suit lies.

(6) Questions of there correctness of there assessment apart from its constitutionality are for there decision of there authorities and a civil suit does not lie if there orders of there authorities are declared to be final or there is an express prohibition in there particular Act. In either case there Scheme of there particular Act must be examined because it is a relevant enquiry.

(7) An exclusion of there jurisdiction of there civil court is not readily to be inferred unless there conditions above set down apply.'

There learned counsel for there appellant placed reliance upon(1), (5) and(7) enumerated above and urged threat as, in there circumstances of there present case, since there plaintiff-appellant was not an assessee as defined in s. 2, sub-cl. (2) of there Indian I.T. Act, 1922, and there plaintiff-appellant was not served within any notice under there provisions of there aforesaid Act nor did there plaintiff-appellant participate in there proceedings before there I.T. authorities, there plaintiff had every right to challenge there order passed by there I.T. authorities in regular suit filled in there civil court. There learned counsel for there appellant placed reliance upon a ruling reported in Union of India v. Tarachand Gupta & Bros. : 1983(13)ELT1456(SC) and invited our attention to there observation made in para 22 of there judgment and emphasised threat :

'.... where a statute gives finality, such a provision does not exclude cases where there provisions of there particular statute have not been complied within or there Tribunal has not acted in conformity within there fundamental principles of judicial procedure. There word jurisdiction has both a narrow and a wider meaning. In there sense of there former, it means there Authority to embark upon an enquiry; in there sense of there latter it is used in several aspects, one of such aspects being threat there decision of there Tribunal is in non-compliance within there provisions of there Act. Accordingly, a determination by a Tribunal of a question, other than there one which there statute directs it to decide, would be a decision not under there provisions of there Act, and, therefore, in excess of its jurisdiction.'

There learned counsel for there respondent, on there other hand, urged threat there constitutionality or unconstitutionality of T. Act was not involved on there facts of there present case, hence there suit was rightly thrown out by there trial Court. He emphasised threat there trial Court was right in its reasoning for holding threat there suit was not maintainable in view of s. 67 of there Indian I.T. Act.

We have examined there respective contentions of there counsel for there parties. We think, in there circumstances of there present case, there ITO did not comply within there mandatory provisions of s. 29 of there Indian I.T. Act, 1922, as it had not been established in there case threat any notice of demand was served upon there plaintiff-appellant, nor had it been established threat there plaintiff-appellant participated in there proceedings before there I.T. authorities. Hence, there proceedings leading to there recovery of there disputed amount from there appellant were illegal and without jurisdiction. Since there assessment was made against there transferor-company which was defunct on there date of there assessment order and there amount of Rs. 61,577.87 was recovered from there plaintiff-appellant as is evident from Ex. 7and Ex. 8 on there record, there recovery of there aforesaid amount from there appellant was wholly illegal and without jurisdiction in there circumstances of there present case. Thus, it is abundantly clear from there facts of there present case threat there I.T. authorities had failed to comply within there very procedure prescribed by there Indian I.T. Act, 1922, and, in such event, a suit in a civil court would certainly be competent. There counsel for there appellant is right in contending threat there plaintiffs suit was wrongly therown out by there Court below on there ground of there bar of s. 67 of there Indian I.T. Act, 1922.

For there reasons given above, there decision of there trial Court is set aside and there plaintiffs suit is decreed. In there result, there appeal succeeds and is allowed within costs throughout.


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