Jayantkumar Motichand Doshi vs Union of India and Others

J.M. Panchal, J.—The petitioner is being assessed as an individual under the provisions of the Indian IT Act, 1961 (the Act for short). The petitioner filed return of the income on 31st August, 1990 for the asst. yr. 1990-91 declaring total loss of Rs. 1,03,330. In response to the statutory notice issued by the Asstt. CIT (Inv.) (2), Rajkot, the petitioner appeared before him. The petitioner is the President of Shri Vitrag Co-op. Housing Society Ltd., Rajkot, the registered office of which is situated at New Ghee Kanta Road, Rajkot. The petitioner is carrying on business of developing lands and putting up construction, in the name and style of M/s. Reliable Construction Company. The developer and contractor of Shri Vitrag Co-op. Housing is M/s. Reliable Construction Company. Having regard to the statements of persons recorded during the course of assessment proceedings and also the past record, the Asstt. CIT (Inv.) observed that booking of houses, allotment of houses, and calculation of sale price were/are all in control of the petitioner. There is also another Housing Society, namely, Shri Naminath Co-op. Housing Society Ltd., Rajkot, having its registered office at Illa Villa, Ashapura, Rajkot in which close relatives of the petitioner are members.

In order to appreciate the controversy arising in this revision application, it would be worthwhile to ascertain as to what is done by the Asstt. CIT (Inv.).

From the documents submitted by the petitioner as well as the discussion with him and his authorised representative, the Asstt. CIT (Inv.) found out the modus operandi which was adopted by the petitioner in allotment of houses and collection of sale price. The Asstt. CIT (Inv.) has found, as a matter of fact, that without transferring the ownership, the deposit of the person who wanted to book a house was exhausted and there was no provision under which the purchaser/allottee was entitled to withdraw his money by handing over possession back to the society. This is quite clear from what is stated in Para-6 of the assessment order.

The Asstt. CIT (Inv.) found that during the financial year 1989-90, Shri Vitrag Co-Op. Housing Society Ltd. of which the petitioner was president, had handed over possession of the houses to 21 persons whose names have been mentioned in para 8 of the assessment order. In order to examine how much amount was recovered by the petitioner as president of the society, some of the purchasers/allottees who had supplied finance for the house to be purchased from the petitioner were examined and their statements were recorded on oath under s. 131 of the Act. The Asstt. CIT (Inv.) recorded the statements of (1) Shri Hasmukh H. Shah, (2) Shri Laljibhai Rathod, and (3) Shri K. D. Bhatt, who had supplied finance for the houses to be purchased. The persons whose statements were recorded were allowed to be cross-examined by the petitioner. Three gentlemen who were examined under s. 131 of the Act were cross-examined by Shri D. V. Lalchandani, authorised representative of the petitioner in presence of the petitioner. Thereafter, the Asstt. CIT (Inv.) issued notice dt. 5th March, 1993, calling upon the petitioner to show-cause as to why addition of certain amount should not be made to his income. The petitioner submitted his reply vide letter dt. 17th March, 1993. After taking into consideration the said reply as well as the submissions advanced on behalf of the petitioner, the Asstt. CIT (Inv.) came to the conclusion that the persons who were handed over possession of the houses had paid an extra unaccounted money which has been referred to by the Asstt. CIT (Inv.) as "on money" in his assessment order. The Asstt. CIT (Inv.) also verified the sources of payment made by the three gentlemen who were examined under s. 131 of the Act. After taking into consideration the relevant facts, the Asstt. CIT (Inv.) has taken a robust common sense view of the matter by holding that the petitioner had received "on money" at the rate of Rs. 35,000 in respect of each B-type house which had not been accounted. As stated earlier, it was found that during the relevant previous year, the petitioner had sold 21 B-type houses and thus the Asstt. CIT (Inv.) directed to add Rs. 7,35,000 to the total income of the petitioner on account of income from undisclosed sources. On the similar basis and logic, the Asstt. CIT (Inv.) further held that the assessee had received Rs. 21,000 as "on money" on account of sale of each C-type house. The amount of Rs. 21,000 was calculated on proportionate basis taking facts available for B-type house as base. It was found that during the year, the petitioner had sold three C-type houses and, therefore, the Asstt. CIT (Inv.) further directed an addition of Rs. 63,000 to the total income of the petitioner on account of income from undisclosed sources. Ultimately, by an assessment order dt. 26th March, 1993, the Asstt. CIT (Inv.) has assessed the total income of the petitioner at Rs. 6,89,860 under s. 143(3) of the Act and directed to issue necessary demand notice and challan. He has also directed to initiate appropriate proceedings for charging interest.

The petitioner has challenged the validity and legality of the said assessment order by instituting regular civil suit No. 1440 of 1993 in the Court of learned Civil Judge, (S.D.), Rajkot.

During the pendency of the suit, the petitioner applied for interim injunction restraining the defendants from implementing the said order of assessment. After considering the provisions of s. 293 of the Act, the learned civil Judge (S.D.), Rajkot, came to the conclusion that civil Court has no jurisdiction to entertain the suit. In that view of the matter, he dismissed the application by order dt. 29th December, 1993. Feeling aggrieved by the said order, the petitioner preferred Civil Misc. Appeal No. 197 of 1993 in the district Court, Rajkot and the learned 4th Extra Assistant Judge, Rajkot, who heard the appeal has dismissed the same by judgment and order dt. 9th February, 1994, giving rise to the present revision application.

Mr. Nanavati, learned counsel appearing for the petitioner submitted that the impugned assessment order has not been passed under the provisions of the Act and is passed de hors the Act and therefore, the civil Court has jurisdiction to entertain the suit filed by the petitioner. It was submitted that the record of some other proceeding was taken into consideration while passing the assessment order in the case of the petitioner for the asst. yr. 1990-91 and the same being violative of the principles of natural justice, the suit was maintainable. It was further submitted that relying upon the three statements, the impugned order of assessment could not have been passed by the Asstt. CIT (Inv.) and the said order being null and void, the suit was maintainable. Lastly, it was submitted that both the Courts below have found in favour of the petitioner that prima facie the petitioner has got a good case and, as the learned judges have failed to exercise jurisdiction vested in them, the present revision application should be entertained and necessary reliefs should be granted to the petitioner.

Before considering the question as to whether the suit filed by the petitioner is maintainable in the Civil Court or not, it would be relevant to refer to the provisions of s. 293 of the Act. The said Section reads as under :

"293. Bar of Suits in Civil Courts. - No suit shall be brought in any Civil Court to set aside or modify any proceedings taken or order made under this Act, and no prosecution, suit or other proceeding shall lie against the Government or any officer of the Government for anything in good faith done or intended to be done under this Act".

Section 9 of the CPC provides that the Courts shall have jurisdiction to try all suits of civil nature excepting suits of which their cognizance is either expressly or impliedly barred. It is not in dispute that the petitioner is being assessed under the provisions of the Act. It is also not in dispute that the Asstt. CIT (Inv.) has power to assess the income of the petitioner and to pass appropriate orders. Under the circumstances, prima, facie, there is nothing to indicate that the order is without jurisdiction or nullity. Unless and until it is pointed out that the order of assessment is nullity on its face, the suit challenging the assessment proceedings would not be maintainable. The points which are sought to be raised by the petitioner require investigation of facts and there is nothing on the face of the assessment order to indicate that the same is void ab initio or without jurisdiction. Under the circumstances, I am of the view that the bar created by s. 293 of the Act would squarely apply to the facts of the present case and the suit filed by the petitioner is not maintainable.

It is also an admitted position that the assessment order which has been passed by the original defendant No. 3 is not final under the provisions of the Act. In fact, as admitted by the petitioner, an appeal is filed before the Appropriate Authority. The fact that the appeal has been filed by the petitioner against the assessment order itself indicates that the said order is treated by the petitioner as having been passed under the Act and there is no substance in the say of the petitioner that the order is not passed under the provisions of the Act and/or is de hors the Act. In the case of State of Gujarat Vs. Mangal Traders, , while examining the scope of s. 9 of the CPC, in relation to the provisions of the Essential Commodities Act, 1955, this Court has held as under :

"In the present case, having regard to the express provisions and very categorical and clear words of s. 6E, there is no escape from the conclusion that no Court has any jurisdiction to make orders with regard to possession, delivery, disposal or distribution of any essential commodity in pursuance of Control order made under s. 3 of the Act and it is only the Collector or the Authority appointed under s. 6C who has such jurisdiction and this provision is made notwithstanding anything contrary to any law for the time being in force.

There could not have been more categorical and clearer and stronger statutory expression for coming to the conclusion regarding exclusion of jurisdiction of the Courts in the matters of seizure of essential commodities in pursuance of a Control order. In fact even less categorical, less clear and less stronger expression have been construed to exclude the jurisdiction of a Court by simply stating that the action or the order made by the Authority shall be final. In this provision the legislature has been extra careful, and forceful and cautious in making its intention and mandate absolutely clear. When the legislature has entrusted certain powers and functions to an authority, that authority must be allowed to exercise the same without any interference by outside authority or the Court except such other higher authorities provided in the legislation or in the Constitution. Just as all the authorities are required to respect and abide by any order of the Court or civil Court and to challenge the same only by way of appeals in the higher forum, similarly the civil Court has also to realise limitations of its jurisdiction and respect the authority and jurisdiction of the special forum created by the legislation.

I am in respectful agreement with the view expressed by this Court in the aforesaid judgment. The mandate contained in s. 293 of the Act is very clear, unambiguous and absolute. A suit cannot be brought in any civil Court to set aside any proceeding taken or order made under the Act. It may be mentioned that the IT Act, 1961 is a complete code in itself dealing with assessment of income of an assessee. The manner in which and the authorities before whom an order of assessment can be challenged is also elaborately provided therein. Having regard to the facts and circumstances of the case, the submission that both the Courts below have prima facie come to the conclusion that the petitioner has got a good case has also no substance.

The trial Court in para-16 of the order dt. 29th December, 1993 has held as under :

"Of course, as we discussed above, there is some substance in the say of Mr. Daftari, the learned advocate for the plaintiff that the order mark 4/1 is not a speaking order or the defendants have not followed the procedure, not given reasons that how the income of plaintiff is assessed accordingly. So, this may be ground for proving the fact that the plaintiff has got some prima facie case, but it fails on two counts that this Court has got no jurisdiction, as IT Act, 1961 has given complete machinery and the plaintiff has chosen the same and as appeal has been preferred before the CIT ...".

The Appellate Court, in para-16 of the order has held as under :

"In view of the above even if the allegations in the plant are accepted at their face value and entirely the civil Court is unable to grant any relief even assuming that the principles of natural justice are violated and the order is not a speaking order and it has been passed with mala fide exercise of powers and the provisions of IT Act are not complied with and the order is passed without any evidence, civil Court cannot grant relief because remedy lies elsewhere under the provisions of IT Act."

Thus, it becomes evident that though the Trial Court has come to the conclusion that the plaintiff has got some prima facie case, the Appellate Court has not recorded any such finding and the Appellate Court has made observations on assumption that even if averments made in the plaint are correct, the petitioner is not entitled to any relief in view of provisions of s. 293 of the Act. Without meaning any disrespect to the learned judge of the trial Court, I am of the opinion that the learned judge has failed to appreciate the import of the order passed by the Asstt. CIT (Inv.). The Asstt. CIT (Inv.) had recorded statements of three persons under s. 131 of the Act. The petitioner was given opportunity to cross-examine the persons whose statements were recorded. That opportunity was availed of by the petitioner. After considering relevant facts and circumstances, an addition of Rs. 7,35,000 and Rs. 63,000 to the total income of the petitioner on account of income from undisclosed sources is ordered by the Asstt. CIT (Inv.). Relevant and cogent reasons have been given by the Asstt. CIT (Inv.) before reaching the conclusion in question. It cannot be said that the assessment order is, in any manner, violative of the principles of natural justice or that the same is bad on the ground that no reasons have been assigned for reaching the conclusion in question. No material worth the name is produced on the record of the case to indicate that the order of assessment is passed mala fide. Having regard to the facts and circumstances of the case, a practical and robust commonsense view is taken by the Asstt. CIT (Inv.) and it cannot be said that any prima facie case is made out by the petitioner for challenging the said order on the ground that it is null and void ab initio or it is passed without jurisdiction. The Asstt. CIT (Inv.) has adopted permissible course open to him under the provisions of the Act and, therefore, the petitioner is not entitled to assail the same by instituting suit in the civil Court. The view taken by the Courts below is eminently just and legal one and does not deserve to be interfered with in the present revision application which is filed under s. 115 of the CPC. The revision application, therefore, fails and is summarily dismissed.

It is clarified that if there is no stay from the appellate authority constituted under the provisions of the Act, the respondents shall be entitled to recover the amount due from the petitioner as per the provisions of the Act.

At this stage, learned Counsel for the petitioner requests that the stay granted by the First Appellate Court should be directed to continue for a further period of 15 days so as to enable the petitioner to approach the Supreme Court. Both the Courts below have rightly come to the conclusion that the suit is not maintainable. In fact, interim relief should not have been granted by the Courts below in view of the numerous pronouncements of the Supreme Court and of this Court on this point. IT Department cannot be restrained from recovering the dues after the assessment order has been passed. Granting of such relief would amount to nullifying the provisions of the Act. Therefore, the same cannot be granted and it is hereby rejected.