Case Laws

Income Tax - Penalty u/s 271(1)(c) is a civil liability - Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C - Section 11AC of Central Excise Act and Rules 96ZQ and 96ZO have no scope for any discretion - Wilful concealment is not an essential ingredient for imposing penalty thereunder

2
2008 - BOMBAY HIGH COURT

CHANDRAKANT KANTILAL SHAH AND ANOTHER Versus S.K. LAL AND OTHER

Income Tax - Purchase of immovable property - appropriate authority failed to consider the merits and demerits of the case pointed out by the petitioners. In these circumstances, it is difficult to hold that the sale instances relied upon by the Appropriate Authority were comparable and consequently, it is difficult to hold that the flat in question sought to be purchased by the petitioners has been undervalued by 15% or more than the fair market value - order of pre-emptive purchase is invalid

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2008 GUJARAT HIGH COURT

HARIKRISHNA FAMILY TRUST Versus COMMISSIONER OF INCOME-TAX

Income Tax - Taxability of rental income from sub-lessee - assessee-trust lesee of property had sub-let the property - assessee trust at no point of time indulged in any systematic business activity, hence income is not taxable as "Income from Business".- assessee is not a owner of property, so income is not assessable as "Income from House Property" - income is liable to be taxed as "Income from other Sources" and not as "Income from House Property" or "Income from Business"

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2008 BOMBAY HIGH COURT

SHAMIM BANO G. RATHI AND ANOTHER Versus ORIENTAL BANK OF COMMERCE LTD. AND OTHERS

Income Tax - Recovery of tax - Attachment and sale - dept. ordered that sale of properly was fraudulent - Held that in the absence of a declaration by a civil court the order declaring the sale deed, as null and void, was an order without jurisdiction and consequently had to be set aside - Consequently the order of attachment dated is quashed and set aside - As the sale is legal and valid, respondent no.1 was bound to issue the TDS certificate in favour of the petitioners from 30.7.2002 onwards

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2008 KERALA HIGH COURT

COMMISSIONER OF INCOME-TAX Versus SOUTHERN TUBES

Whether the penalty under Section 271 (1) (c) of the Income Tax Act, 1961 (in short the `Act') can be levied if the returned income is a loss?

Honorable Supreme court ( in Commr. of Income Tax-I, Ahmedabad Versus Gold Coin Health Food Pvt. Ltd. reported 2008 -TMI - 30245 - SUPREME COURT)  held that Penalty can be levied even if returned income is a loss after amendment to section 271(1) by Finance Act, 2002 w.e.f. 1.3.2003 with retrospective effect.

Honorable Supreme court further held that Explanation 4 to Section 271(1)(c) is clarificatory and not substantive. But, on the issue of retrospectivity of the above amendment, apex court observed that,

        "This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. (p. 388) The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right."

Therefore, as per the decision, the amendment relating to penalty under the amended provision in case of loss return has retrospective effect.

Accordingly, the decision in the matter of VIRTUAL SOFT SYSTEMS LTD. Versus COMMISSIONER OF INCOME-TAX reported in 2008 -TMI - 2873 - SUPREME COURT OF INDIA overruled.

In the matter of Virtual Soft System Ltd. (supra), division bench of Apex Court held that:

     "it is held that prior to its amendment by Finance Act, 2002 in the absence of any positive income and no tax being levied, penalty for concealment of income could not be levied."

Capital Gain - exemption under section 54F
Nipun Mehrotra Vs. Asst C.I.T. 29/03/2007
[2008] 297 ITR (AT) 110 Bangalore

Issue:- Taxability of Goodwill
Alankar Business Corporation Ltd., v. DCIT, Company Circle I(3)Chennai
{105 ITD 629(Chennai)}
The company entered into agreement to sell goodwill on 28-2-1999 and received the consideration. However it was shown as advance payment in view of the fact that other business was sold by agreement dated 27-7-1999 and the same was confirmed by the appropriate authority later on. Hence "A" offered the capital gain on sale of goodwill in the A.Y.2002-2003. The Dept did not accept the contention and taxed it in the year of receipt of amount. The Tribunal ruled that substance of the agreement needs to be looked into and not the form of agreement. The advance receipt of amount was crystallized once other assets were sold hence assessee has rightly offered the income in the year in which other assets were sold.

Issue: Deductibility of expenses u/s14A
ACIT v. Tamil Nadu Silk Producers Federation Ltd.{105
ITD 623(Chennai)}
The Tribunal held that department can not deny deduction of expenses incurred on income which is eligible for deduction under chapter VI-A (Section 80A to 80U) in as much as such income goes in to computation of total income thereafter deduction under chapter VIA is allowed. Whereas Section 14A speaks about restriction of expenses incurred in relation to exempt income that does not go into the computation of total Income.

Issue: Maintainability of order u/s 263
Colorcraft Kashimira Ceramic Compound v.ITO ward-4(4) Thane{105 ITD 599(Mum)} In this case , the Tribunal observed that if CIT issued show cause notice to invoke section 263 for any order being erroneous and prejudicial to the interest of the revenue, he ought to have passed order on the points covered in the show cause notice. If he deviates from the show cause notice and passes order on different issues, that order is not sustainable under law.
However Tribunal endorsed the view of dept. that mere supply of information by assessee would not debar CIT for not exercising the provision of section 263 of the Act. If A.O. did not make enquiry on the materials furnished before him by the assessee in order to assess as to whether the claim of the assessee is correct or not. The CIT is empowered to pass order u/s 263 of the Act.

Issue: Rejection of books of Accounts u/s145 of the Act
ITO, Ward 2(5),Rajkot v. Girish M. Mehta {105 ITD 585 (Rajkot)}
In his case, Tribunal held that before rejecting books of accounts, depatment has to prove that accounts are unreliable, incorrect or incomplete. When accounts are regularly maintained in the ordinary course of business, duly audited under the provisions of the Act and free from any qualification from auditors , should be taken as correct . If depatment needs to enhance the gross profit margin , first it should need to satisfy the conditions of section 145 with regard to specific defects in the accounts . In the absence of any proof of the falsity or defects in the accounts, department. can not make addition on account of lower G.P. Margin declared by the assessee.

Issue: Slump Sale u/s 50B, Disallowance of Interest u/s14A
Zuari Industirs Ltd., v. ACIT, Circle-2, Margao{105 ITD 569(Mum)}

The Tribunal decided that net worth of undertaking in case of slump sale can either be positive or nil in case of liabilities exceeds depreciable values and book value of other assets. The Members did not accept the contention of department that negative net worth ought to be added in the sale consideration in case of slump sale of undertaking.
As regards disallowance of interest in view of investment made in shares whose dividend income thereof is tax free. The Tribunal held that onus is on the department. to prove that any expenditure was incurred for earning tax free income. If department can not prove by identifying the nexus between the borrowed fund and investment thereof in investment which generates tax free income, the same can not disallowed u/s14A of the Act.

Issue: Deemed Dividend u/s 2(22)(e) of the Act.
ACIT. Circle I(1), Trichur v. Smt. Lakshmikutty Naryan
{105 ITD 558(Cochin)}

The tribunal observed that if there is an outflow of money from the company to shares holders who holds more than 10% shares therein, and merely book entry is passed and debited his accounts. In this event, there is no tax liability with regard to deemed dividend u/s2 (22)(e) of the Act.

Issue: Speculation loss u/s73
ACIT, circle 4(3) Mumbai v. Sucham Fin.&Investment(I)
Ltd.{105 ITD 353(Mum)}

    The judgement follows an appeal by the revenue department against an order of the Commissioner of Income Tax (appeals) on the tax liability in respect of the property of a Delhi-based company. The CIT had turned down a revised assessment of the tax liability of the company's property by the assessment officer.

    Challenging the order of the CIT, the revenue department said that certain modifications and alterations were done in the assessed property and hence its value required an applicability of the revised taxation rates. It was submitted that no revision of the rent received was made, and hence it should be revised as according to the relevant provisions of the Delhi Rent Control Act.

    The tribunal bench said that the apex court had ruled that if the standard rent of the property is not fixed or revised by the rent controller, the assessing authority was at liberty to arrive at its own figure of standard rent by applying the principles laid down in the Delhi Rent Control Act. The determination of the annual value is to be made at a sum for which the property might be reasonably expected to let from year to year and the same is to be compared with the actual rent received. If the rent so received or receivable is higher than the amount at which it would be reasonably expected to let from year to year, then the actual rent received will be adopted as an annual value, the tribunal order said.

The apex court, in its landmark judgment in the Morgan Stanley (reported in 292 ITR 416) case, laid down the position in law that no profits will be required to be attributed to a foreign enterprise where an associated enterprise that constitutes a permanent establishment (PE) is remunerated on an arm's length basis, taking into account all the risk-taking functions of the enterprise. This judicial pronouncement has been a topic of conversation i n tax circles, both in India as well as internationally.
Board circular

However, a fact that is not so well-known is that the Central Board of Direct Taxes (CBDT) had laid down a similar principle way back in 1969. In its Circular No. 23 dated July 23, 1969, the CBDT clarified various issues in relation to a non-resident's liability to tax by virtue of a business connection in India. This concept of a business connection is akin to the concept of a PE under tax treaties.

In the Circular, the example of a non-resident selling goods to Indian customers through the services of an Indian agent has been discussed. The Circular clarifies that India can tax only the quantum of profits attributable to the agent's services, provided certain conditions are satisfied, namely, (i) the non-resident's business activities in India are wholly channelled through the agent, (ii) the sale contracts are made outside India, and (iii) the sales are made on a principal-to-principal basis. The Circular further clarifies that the agent's commission would be tax deductible in determining the profits of the non-resident. The CBDT has concluded that if the agent's commission fully represents the value of the profit attributable to his service, this should prima facie extinguish the assessment.

Numerically speaking, if the profit attributable to the agent's services is five and the commission in turn paid to the agent is five then the income of the non-resident seller chargeable to tax in India would be nil (5-5).
Binding on the taxman

It is a well-settled principle in law that CBDT Circulars are binding on the income-tax authorities -- this has been amplified time and again by various courts, including the Supreme Court in the landmark judgment in the UCO Bank case (reported in 237 ITR 889). Accordingly, from the perspective of applying the CBDT Circular of 1969, the Circular can be said to have the backing of the Supreme Court.

The CBDT Circular of 1969 was recently applied by the Delhi Tribunal in the Amadeus case, a Computerised Reservation Services (CRS) company. The Tribunal upheld the applicability of CBDT Circular No. 23 of 1969 and held that as the remuneration paid to the marketing agent consumes the entire income of Amadeus, no further income is taxable in the hands of Amadeus. A similar view has also been expressed by the Delhi Tribunal in the Galileo case, another CRS company.

To conclude, the CBDT had shown great foresight and wisdom in laying down the above position in law in 1969 -- the very same principle has now been formally recognised and approved by the Supreme Court.

Supreme Court: Assessee obtains FC loan and pays finance charges - Income Tax disallows as manufacturing failed to commence in FY - Since commitment charges were paid for borrowed funds for business , it's allowable u/s 36(1)(iii)

Supreme Court: Assessee obtains FC loan and pays finance charges - Income Tax disallows as manufacturing failed to commence in FY - Since commitment charges were paid for borrowed funds for business , it's allowable u/s 36(1)(iii)

THE two major questions before the Apex Court were,

1) Whether "commitment charges" can be allowed as deduction under Section 36(1)(iii) of the Income-tax Act, 1961?

(2) Whether "charges" paid to COFACE is similar to payment of interest under Section 36(1)(iii) of the Income-tax Act, 1961 and, therefore, has to be allowed as deduction?

Factual matrix of the case :

The ssessee had borrowed Rs 30 Crores from IDBI which in turn was refinanced by COFACE which foreign company had charged interest, commitment charges and insurance charges payable by the assessee. The said "commitment charges" was upfront payment. The Revenue disallowed the same but the Tribunal allowed the claim under Sec 37 of the I-T Act. The HC confirmed the Tribunal decision and thus the case came before the Apex Court.

Having examined the contract between IDBI and the assessee and perused the decision of the Apex Court in the case of Addl. Commr. of Income-tax v. Akkamamba Textiles Ltd. (1997) 227 ITR 464, where it was held that commission paid by the assessee to the banker and the insurance company was admissible deduction under Section 37, the Bench simply allowed the first question in favour of the assessee and against the Revenue. The Bench also clarified that the earlier SC decision allowed deduction u/s 37 and not u/s 36(1)(vii), and in this case the Tribunal had allowed the claim u/s 37 and not only u/s 36(1)(iii).

Before the second question is taken up, let's take a quick look at some facts :

The assessee established phosphoric Acid Project as an extension to its present business activities and for that purpose obtained foreign currency loan from IDBI which in turn was refinanced by COFACE subject to the assessee paying finance charges which according to the assessee was similar to payment of interest. The Revenue disallowed the same on the ground that finance charges paid to COFACE on foreign currency loan was in the nature of interest and commitment charges and since the charges have been paid in relation to the project of manufacturing phosphoric acid which did not commence production during the assessment year under consideration, the expenses incurred were capital in nature. The Department also placed reliance in this connection on Explanation 8 to Section 43(1) of the Income-tax Act, 1961.

Having perused the documents, the Bench observed that on facts and circumstances of this case, once the Department equated the charges payable to COFACE with interest, our judgment in the case of Dy. Commr. of Income Tax, Ahmedabad v. M/s. Core Health Care Ltd. (2008-TIOL-17-SC-IT) comes in. Accordingly, the second question is also answered in favour of the assessee.

Cash credits: Share-application money - Confirmations from applicants
The assessee had received certain sums as share-application money from various subscribers. Their confirmations, PAN (GIR) were filed. The money was received through cheques. The AO on enquiries received a report from the Inspector that the said applicants were not found at the addresses given in their confirmations. The said report of the Inspector was given to the assessee on 22 February 2000 and assessment was found on the very next day i.e. 23 February 2000. Thus no opportunity was given to give a response to the Inspector's report. Before, the CIT (Appeals), the assessee also filed additional evidence as affidavits from applicants with complete addresses. Most of the applicants were companies. No addition as unexplained cash credits could be made.

High Court of Delhi

CIT vs Dwarikadhish Investment (P) Ltd.

Income-Tax Appeal Nos. 5 and 8 of 2007

Madan B. Lokur and S. Muralidhar, JJ

30 October 2007

Prem Lata Bansal for the Appellant
Kavita Jha for the Respondent

ORDER

1. In these appeals under section 260A of the Income-tax Act, 1961 ('the Act'), the revenue is aggrieved by the order dated 7-4-2006 passed by the Income-tax Appellate Tribunal ('Tribunal') in ITA Nos. 2549/Del./2002 and 2550/Del./2002 relevant for the assessment year 1997-98.

2. Both the assessee companies are engaged in the business of financing and trading in shares. For the assessment year in question, the assessees declared a loss but were assessed at a positive income after making additions on account of unexplained share application money to the extent of Rs. 17.35 lakh in respect of the assessee-company in ITA No. 2549 of 2002 and Rs. 36.22 lakhs in respect of the assessee-company in ITA No. 2550 of 2002.

3. The Assessing Officer required the assessees to furnish details and documents. The assessees produced copies of sale and purchase bills of the share brokers through whom the transactions took place and photocopies of confirmations of persons who had contributed the fresh share application money. The assessees furnished the PAN (GIR) numbers of the applicants, the details of the cheque numbers and dates. The assessees contended that letters sent to the shareholders had not been responded to.

4. The Assessing Officer required the assessee to furnish bank statement to substantiate the money availability with the assessee and also to prove the genuineness of the transactions. This not having been done, the Assessing Officer got enquiries made through an Income-tax Inspector who found that none of the applicants were found to exist at the address given in the confirmations. However, the report of the Income-tax Inspector was furnished to the assessees on 22-2-2000 and the assessment order was passed on the very next day, that is, 23-2-2000 giving the assessees no time to respond.

5. Before the CIT(A) the assessees furnished additional evidence, copies of which were sent by the CIT(A) to the Assessing Officer for comments. Despite reminders, no response was received from the Assessing Officer by the CIT(A) on the additional evidence. The CIT(A) then admitted the additional evidence. After examining the entire record, the CIT(A) deleted the addition on account of the unexplained share application money for the following reasons:

(ii) The applicants confirmed the payment of monies to the appellant for purpose of shares.

(iii) The transactions in question were by cheques.

(iv) The affidavits of the subscribers were filed indicating their full address, details of deposits made with the appellant and the source wherefrom money was obtained to make the deposits. Copies of Bank a/cs were furnished. These affidavits were notarized. There was no ground for disbelieving the contents of the affidavits.

(v) If the Assessing Officer entertained any doubts regarding genuineness of the credits in respect of share application money, he could have issued summons to the subscribers or could have asked the assessee to produce them. This was not done.

(vi) Most of the subscribers were companies incorporated with the Registrar of Companies. Proper enquiries would have revealed the true facts of the case. The appellant cannot be faulted if there was no time to give them an opportunity to rebut the Inspector's report made at the back of the appellant.

(vii) The deposit were not of an order that could not be believed."

6. In the appeal by the revenue, the Tribunal found that the facts of the case were not different from those in the case of the group company of the present assessee namely M/s. Dwarikadhish Financial Services. In the said case the Tribunal had deleted the addition made by the Assessing Officer on account of unexplained share application money. The said decision was upheld by this Court in its order in CIT v. Dwarkadhish Financial Services [2005] 148 Taxman 54.

7. That apart, the Tribunal again examined the documents giving the details of each of the applicants. It noted that "the above documents were available on the file of the Assessing Officer." Accordingly it dismissed the revenue's appeals.

8. Learned counsel for the revenue sought to distinguish this Court's decision in the case of the group company of the assessees, on the ground that the facts there were different. However, we find that the findings of the CIT(A) as extracted hereinabove are sufficient to show that the additions made by the Assessing Officer were not justified. The reasoning and conclusions arrived at concurrently by the CIT(A) and the Tribunal suffer from no perversity and are consistent with the law as explained by this Court in CIT v. Divine Leasing and Finance Ltd. [2007] 158 Taxman 440 (Delhi) which reads thus :

(1) the identity of the creditor/subscriber;

(2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels;

(3) the creditworthiness or financial strength of the creditor/subscriber;

(4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc., it would constitute acceptable proof or acceptable explanation by the assessee;

(5) The department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices;

(6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee;

(7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." (p. 453)

IN THE HIGH COURT OF DELHI AT NEW DELHI

ITA No. 1129 of 2005

Judgment reserved on: March 20, 2008
Judgment delivered on: March 25, 2008

Commissioner of Income Tax Delhi XVII New Delhi Appellant
Through Mr. R.D. Jolly, Advocate
Versus
M/s Mitsubishi Corporation
Vijaya, 2nd Floor, 17, Barakhamba Road New Delhi Respondent

Through Mr. M.S. Syali, Sr. Advocate with
Ms. Mahua C. Kalra, Advocate

Coram: MR. JUSTICE MADAN B. LOKUR and  MR. JUSTICE V.B. GUPTA

The State cannot recover or hold back any tax except in accordance with law for otherwise it would be unjustly enriching itself, which is clearly impermissible. The Revenue having received and accepted the amount paid by the Assessee for the relevant financial years that we are concerned with, it was under an obligation to give credit to the Assessee for the payments already made or appropriated against those very financial years.

J U D G M E N T
MADAN B. LOKUR, J.

1. The Revenue is aggrieved by an order dated 3rd May, 2005 passed by the Income Tax Appellate Tribunal, Delhi Bench G in ITA No.5059, 5060 and 5061/Del/04 relevant for the financial years 1995-96 to 1997-98.

2. The Assessee is a non-resident company incorporated in Japan. It has a liaison office in Delhi which employs local staff as well as expatriate employees deputed from the parent company in Japan. In so far as the local staff is concerned, the Assessee deducts tax at source in respect of payment of salaries paid to them and there is no dispute in this regard. In so far as expatriate employees are concerned, they receive salary both in India as well as in Japan. In respect of the salary paid in India, the Assessee deducts tax at source. There was some dispute with regard to deduction of tax on the salaries paid and benefits given to the expatriate employees in Japan and also the method of calculation. This has also been resolved and we are not directly concerned with this, except to the extent of the fall-out of the resolution.

3. On 24th January, 1998, a survey under Section 133A of the Income Tax Act, 1961 (the Act) was carried out in the office premises of the Assessee in Delhi. As a result thereof, it was found that the Assessee was not deducting tax at source in respect of certain payments made to the expatriate employees. The Assessee gave its explanation, but in any event, it suo motu agreed to pay taxes and interest thereon without any demand being raised by the Revenue.

4. In December, 1998 the Assessee paid to the Revenue an amount of Rs.52,79,76,749/- towards payment of tax and interest thereon for a period of ten years, that is, for the financial years 1988-89 to 1997-98. The dispute in the present appeal pertains only to the financial years 1995-96 to 1997-98. The Assessee gave its calculations for the year-wise appropriations.

5. Even after the payment was made, the Assessee was asked, from time to time, to file necessary details not only with regard to the payments made to the expatriate employees but also with regard to the computation. At one point of time, proceedings under Section 271-C of the Act were sought to be initiated against the Assessee for the purposes of levying penalty on account of short deduction of tax but these proceedings were dropped.

6. Be that as it may, by an order dated 30th March, 2000, the Deputy Commissioner of Income Tax (DCIT) worked out the liability of the Assessee for the ten financial years under Sections 201 and 201(1A) of the Act. The tax liability worked out by him was Rs.41,03,49,352/- and the interest liability was worked out at Rs.33,39,27,546/- making a total of about Rs.75 crores. After adjusting the tax and interest already paid by the Assessee of Rs.52,79,76,749/- , the tax liability for the ten financial years was worked out at Rs.8,02,78,168/- and the interest liability was worked out at Rs.15,00,91,350/- making a total of roughly Rs.23 crores.

7. Feeling aggrieved by the order passed by the DCIT, the Assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)] who dismissed the appeal of the Assessee and upheld the liability.

8. The Assessee then preferred a second appeal before the Income Tax Appellate Tribunal (the Tribunal) which passed an order on 29th November, 2002. The Tribunal arrived at two important conclusions, namely, that the demand pertaining to the financial years 1988-89 to 1994-95 was barred by time having been made beyond a reasonable period of four years. This conclusion has since become final. The second important conclusion arrived at by the Tribunal was that the method of grossing up adopted by the Revenue was erroneous and, therefore, the tax and interest liability was required to be recomputed correctly and in accordance with law. Accordingly, the orders passed under Sections 201 and 201(1A) of the Act pertaining to the financial years 1988-89 to 1994-95 were held to be illegal and were quashed and for the financial years 1995-96 to 1997-98, the matter was remitted back to the file of the Assessing Officer for making a re-computation in accordance with law.

9. After the matter was remitted back to the file of the DCIT for re- computing the tax and interest liability, he held that the Assessee was liable to pay tax of Rs.11,30,99,420/- and interest of Rs.13,98,93,597/- for the three financial years. As regards the financial years 1988-89 to 1994-95, the Assessing Officer held that the Assessee was not entitled to any refund whether of principal or of interest for these years and, therefore, rejected the claim of the Assessee for refund. We are not concerned with the refund issue.

10. The Assessee then preferred an appeal before the CIT (A) which was dismissed by him by an order dated 27th August, 2004

11. Feeling aggrieved, the Assessee then preferred an appeal before the Tribunal which was allowed by the order which is now under challenge under Section 260-A of the Act.

12. After noting the facts of the case, the Tribunal framed two questions for its consideration. These two questions read as follows:- i) Whether the appellant is entitled to a refund of taxes and interest paid as a person responsible for deduction of [tax] on salary paid to his employees. This issue arises for consideration in FY 88-89 to 94-95. ii) Whether the demand for tax and interest at Rs.25,29,93,017/- made for the FY 95-96 to 97-98 without giving credit to taxes and interest already paid for a sum of Rs. 14.88 crores, which is part of the sum of Rs.52.79 crores paid by the appellant and which was appropriated towards tax and interest due for FY 95-96 to 97-98 is proper. The second issue arises for consideration in FY 95-96 to 97-98 only.

13. In so far as the first question is concerned, the Tribunal declined to answer it since an identical question is already pending for determination in this Court.

14. In so far as the second question is concerned, the Tribunal decided the issue in favour of the Assessee and we agree with the views expressed by the Tribunal and are of the opinion that no substantial question of law arises for consideration in this regard.

15. What we are required to really consider is whether the Assessee is entitled to be given credit for the taxes and interest already paid, that is, Rs.14,88,61,518/- for the financial years 1995-96 to 1997-98. This amount is a part of the amount of Rs.52.79 crores paid by the Assessee in December, 1998. The additional demand made by the Revenue, as determined on re-computation by the Assessing Officer, was Rs.25,29,93,017/- and if the Assessee is given credit of the amount of Rs.14.88 crores already paid by it in December, 1998, its tax and interest liability would be reduced to that extent. This adjustment or credit has been denied to the Assessee by the Assessing Officer and the CIT (A).

16. Before we deal with the merits of the case, we may mention a preliminary objection raised by learned counsel for the Revenue, which was also raised before the Tribunal. The objection is to the maintainability of the appeal before the Tribunal on the ground that the grounds of appeal have been signed by Mr. Hiroshi Yashino, General Manager of the New Delhi office of the Assessee. He had filed the appeal on the basis of a Power of Attorney dated 5th March, 2003 executed by the Assessee, represented for the purpose of the Power of Attorney by Mr. Hidetoshi Kamezaki, a representative Director and Executive Vice President of the Assessee. The Power of Attorney was duly notarised in Japan as per the Japanese law by the Ministry of Foreign Affairs. The Indian Consular in Tokyo had authenticated the signatures of the competent authority in the Ministry of Foreign Affairs in Japan.

17. The notarial certificate authenticating the Power of Attorney certifies that Mr. Kayoko Gingawa stated in his presence that Mr. Hidetoshi Kamezaki had signed the Power of Attorney. The objection raised is that Mr. Hidetoshi Kamezaki did not himself appear before the notary and, therefore, the Power of Attorney was not valid and consequently the authorization given to Mr. Hiroshi Yashino was also not valid making the appeal filed by him incompetent.

18. We are not at all impressed by this preliminary objection for the reason that the Power of Attorney appears to have been executed in accordance with the laws of Japan and there is nothing to show that under the Japanese law Mr. Kayoko Gingawa could not have made the statement that he did or that it was absolutely necessary for Mr. Hidetoshi Kamezaki to be personally present before the notary. No such objection was raised by anybody before the Indian Consular in our Embassy in Tokyo, Japan and it is now too late for the Revenue to raise such an objection.

19. Apart from the above, we are of the opinion that whether the appeal was filed by a competent person or not, is a finding of fact arrived at by the Tribunal and we do not see any reason to disturb this finding unless it is perverse, in any manner, which it does not appear to be. We are, therefore, of the opinion that no substantial question of law has been made out in this regard by the Revenue.

20. In this context, we may refer to Madras Port Trust v. Hymanshu International, (1979) 4 SCC 176. In that case, the Supreme Court made a very telling observation (though in the context of the rights of citizens), which we think is worth quoting in extenso: The plea of limitation based on this section is one which the court always looks upon with disfavour and it is unfortunate that a public authority like the Port Trust should, in all morality and justice, take up such a plea to defeat a just claim of the citizen. It is high time that governments and public authorities adopt the practice of not relying upon technical pleas for the purpose of defeating legitimate claims of citizens and do what is fair and just to the citizens. Of course, if a government or a public authority takes up a technical plea, the Court has to decide it and if the plea is well-founded, it has to be upheld by the court, but what we feel is that such a plea should not ordinarily be taken up by a government or a public authority, unless of course the claim is not well-founded and by reason of delay in filing it, the evidence for the purpose of resisting such a claim has become unavailable. Here, it is obvious that the claim of the respondent was a just claim supported as it was by the recommendation of the Assistant Collector of Customs and hence in the exercise of our discretion under Article 136 of the Constitution, we do not see any reason why we should proceed to hear this appeal and adjudicate upon the plea of the appellant based on Section 110 of the Madras Port Trust Act (II of 1905). We accordingly revoke the special leave granted to the appellant, and direct that the appellant do pay the cost of the respondents. (Emphasis given)

21. We are mentioning this decision only to bring home the fact that the State should not raise technical pleas for the sake of it and to defeat a just claim. In the present case, we feel that the Revenue has raised a plea of maintainability only to obfuscate the real issue and to deny to the Assessee what is legitimately due to it. This is unfortunate, but we leave it at that.

22. On the merits of the case, the Tribunal has noted that after the Assessing Officer re-computed the tax and interest at Rs.25,29,93,017/- for the financial years 1995-96 to 1997-98, the Assessee was entitled to be given credit for the amount that it had already paid towards tax and interest for these very financial years, the payment having been made in December, 1998. There is absolutely no reason why the Assessee cannot be given credit for the total payment made by it of Rs.14,88,61,518/-. There is no dispute that the Assessee had paid this amount towards tax and interest thereon. All that was required was for the Assessing Officer to make a simple adjustment of the amount paid against the amount due and re-calculate the tax liability of the Assessee. The Tribunal has noted that the CIT (A) rejected the plea of the Assessee for adjustment of the amount on three grounds. These have been summarized as follows:- i) The appropriation made by the appellant in its letter dt 21.12.98 did not have any legal sanctity when it was found that the tax and interest paid were less than what was actually due to proceedings determining tax and interest u/s 201(1) and 201(1A) were initiated by the AO. ii) The payment of Rs.52.79 crores by the appellant in Dec 98 was an on account payment for a period of time and the appropriation of such payment in its order dt 30.3.200 shall be taken as satisfaction or applicant s liability in the chronological order of FY s involved viz 88-89 to 94-95. iii) The appropriation by the appellant, even assuming there was one, did no longer survive in view of the quashing of the order u/s 201(1) and 201(1A) dt 30.3.2000 for FY 88-89 to 94-95.

23. We are of the opinion that the view expressed by the CIT (A) hardly provides any basis for denying credit for tax and interest paid by the Assessee. The CIT (A) failed to appreciate that the appropriation made by the Assessee in December, 1998 was not disputed at any stage and it was now too late to dispute the manner of appropriation. Moreover, the CIT (A) needlessly mixed up the tax chargeable for the period 1988-89 to 1994-95, the demand for which was held to be barred by time by the Tribunal. The State cannot recover or hold back any tax except in accordance with law for otherwise it would be unjustly enriching itself, which is clearly impermissible. The Revenue having received and accepted the amount paid by the Assessee for the relevant financial years that we are concerned with, it was under an obligation to give credit to the Assessee for the payments already made or appropriated against those very financial years. Otherwise the liability of the Assessee would be unreasonably increased and the Assessee would be required to pay tax and interest twice over (or at least a part thereof) which is clearly unconscionable.

24. In our opinion, the Tribunal did not at all err in directing the Revenue to grant to the Assessee adjustment or credit of the amount of Rs.14,88,61,518/- already paid by it in December, 1998 towards tax and interest thereon for the financial years 1995-96 to 1997-98.

25. No substantial question of law arises for consideration. In view of the decision of the Supreme Court in Madras Port Trust the appeal is dismissed with costs. Counsel s fee is assessed at Rs.10,000/-. The Revenue will deposit this amount in the registry of this Court by a crossed cheque drawn in favour of the Registrar General within four weeks from today.

26. List for compliance on 3rd May, 2008.

The Bench said that "indisputably, the provisions of the Cr.P.C. would be applicable to the proceedings pending before the courts for trial of offences under the NI Act." The Bench said that in such a situation a settlement could be arrived at between the complainant and the accused.

It said: "While a settlement is arrived at, it is not necessary under the provisions of the NI Act and/or Cr.P.C. to file any affidavit affirmed by the complainant or the accused. By reason of the authority granted by a litigant in favour of his advocate which, inter alia, empowers the latter to enter into a settlement, any settlement arrived at, on behalf of a party to a lis [dispute] would be binding on the parties thereto."

In the instant case, appellant R. Rajeswari had filed a complaint against the respondent H.N. Jagdish alleging that a cheque issued by him was dishonoured. The trial court in Bangalore found him guilty for an offence under Section 138 of the NI Act and sentenced him to undergo one month imprisonment and to pay a fine of Rs.2 lakh. After the Sessions Court dismissed his appeal, he preferred a revision in the Karnataka High Court.
During the course of hearing, a settlement was arrived at by counsel for the parties and the respondent agreed to pay the cheque amount of Rs.1 lakh, besides a fine of Rs. 5,000. Since he had already deposited Rs. 75,000, he was asked to pay Rs.30,000. As the matter was settled, the sentence of imprisonment was set aside.