Raja Ram Kumar Bhargava (dead) by Lrs. v. Union of India
VENKATACHALIAH, J. This appeal, by special leave, by the
legal representatives of Raja Ram Kumar Bhargava, the unsuccessful
l plaintiff, is directed against the Judgment and decre~, dated, 14.2.1980
,- of the ~igh Court of Delhi in First Appeal (O.S.) No. 17 of 1972 on its
file, affirming the judgment and decree of dismissal dated, 28.7 .1972
in Suit no. 372 of 1969 entered by the learned Single Judge of the High
Court.
A Plaintiff sued for recovery of interest on certain refunds of
Income-tax and Excess Profit Tax claimed to be statutorily due and
payable to him under Section 66(7) of the Income tax Act 1922 (here
inafter referred to as the '1922 Act') on the refunds of the taxes. The
suit claim comprised of a sum of Rs. l, 17 ,358.87 sought by way of
interest on the refund of income-tax; and Rs.12,282.11 claimed as
B representing interest on the refund of Excess Profit Tax. The assess-
ments were made under the Income Tax Act ( 1922 Act) and the Excess )-
Profit Tax Act 1940 respectively.
2. The necessary and material facts may briefly be stated: )
Raja Ram Kumar Bhargava was assessed in the capacity of
Kartha of a Hindu Undivided Family for Income and Excess
Profit Taxes for the assessment year 1947-48. It would appear,
pursuant to the order of assessment dated, 23.9.1951 made by
the Income Tax Officer, as modified by the appellate orders
dated 15.5.1952 and 27.3.1957 of the Appellate Assistant Com
missioner and the Income-Tax Appellate Tribunal, respectively,
a sum of Rs.2,57,383.87 was recovered from him on 27.3.1957
under threat of coercive process. It was plaintiff-asscssee's case
that he met this obligation by raising funds from t!le Central
Bank of India Ltd. on the mortgage of his properties incurring
heavy liability towards interest on the mortgage loans.
3. However, the q1.1antum of both the taxes came to be substan
tially reduced pursuant to the consequential orders, dated, 16.9.1966
made under Section 66(5) of the 1922 Act and under Section 66(5)
read with Section 21 of Excess Profit Tax Act 1940 respectively giving
effect to the orders of the High Court in certain references under
F Section 66(1) of the Act. A sum of Rs.2,01,146.62 and a sum of
Rs.19,126.16 became refundable by way of income-tax and Excess
Profit Tax, respectively, on such recomputation of the income. The
said sum of Rs.2,01,146.62 was refunded on 17.12.1966; and the sum
of Rs.19, 126.16 towards Excess Profit Tax refunded on 9.12.1967. The
question that yet remained was whether plaintiff-assessee was entitled
<5 to the· payment of interest on the said refunds under Section 66(7) of
the 1922 Act.
4. In the meanwhile, on 1.4.1962, the· Income-Tax Act (1961
Act) had come into force. Under Section 297(1) of the '1961 Act'
repealed the '1922 Act'. Under the 1922 Act and the Excess Profit Tax
H Act 1940, appellant was entitled to claim interest on the refund of
RAJA RAM KUMAR v. U.0.1. [VENKATACHALIAH, J.) 357
taxes under circumstances contemplated by Section 66(7) of the '1922
Act'. But Section 297(2)(i) provided that:
"(i) where, in respect of any assessment completed before
the commencement of this Act, a refund falls due after such
commencement or default is made after such commence
ment in the payment of any sum due under such completed
assessment, the provisions of this Act relating to interest
payable by the Central Government on refunds and in
terest payable by the assessee for default shall apply."
Accordingly, the claim of the plaintiff-assessee for payment of
interest on the refunds came to be considered by the authorities under
the provisions of 1961 Act and no claim for interest was held to
survive.
5. Plaintiff-assessee thereafter, instituted the present suit
against the Union of India for recovery of the interest under Section
66(7) of the 1922 Act alleging that the assessment in the present case
must be held to have been "completed" before the commencement of
the 1961 Act-according to the assessee the assessment was completed
the moment the income-tax officer made the order dated, 28.3.1951-
and that, therefore, the claim for interest squarely fell within Section
66(7) of the 1922 Act read with, and saved by, Section 297(2)(a) of the
1961 Act.
The defendant resisted the suit contending first, that the suit was
not maintainable; secondly, that it was statute-barred and that,
thirdly, at all events, the view taken by the authorities that the matter
was governed by the Section297(2)(i) of the 1961 Act was correct.
6. The High Court framed the necessary and relevant issues
stemming from the pleadings. Having regard to the questions agitated
in this appeal, the following two issues-issues nos. 4 & 6-require to
be noticed:
4. Whether this Court has jurisdiction to try this suit?
6. Whether the claim of the plaintiffs in the suit is governed by
the provisions oflncome-Tax Act, 1922?
The Learned Single Judge of the High Court who tried the suit
recorded findings against plaintiff-assessee on issue 4 and in his favour
on issue no: 6. On issue no, 6, the learned Judge held:
358
A.
SUPREME COURT REPORTS [ 1988] 2 S.C.R.
" .... In my judgment, the present case is governed by the
provisions of the old Act ... "
" . . . . . In the present case, the reference was pending
when the present Act came into force. The rights of the
parties will, therefore, be governed by the provisions of the
old Act and it cannot be said that the assessment had been
completed. As observed by the Supreme Court in Kalawati
Devi Harlalka v. Commissioner of Income Tax, West Ben
gal and Others, (66 ITR 680), the word "assessment" can
bear a very comprehensive meaning; it can comprehend the
whole procedure for ascertaining and imposing liability
upon the tax-payer ... "
" .... On a reading of the provisions of Section 297 with
the Removal of Difficulties Order, it seems to me that the
intention of the Legislature was that in a case of assessment
such as the present one the provisions of the old Act should
apply .... "
" .... I, therefore, hold that the claim of the plaintiffs is
governed by the provisions of the Income Tax Act 1922
"
E On issue no. 4, however, learned Judge held:
" .... The remedy of a civil suit, it seems to me, is miscon
ceived, for the Civil Court has no jurisdiction to substitute
its discretion to grant interest in place of the discretion
vested in the Commissioner. Section 66(7) of the Act pro
vides that the amount over-paid shall be refunded to the
assessee "with such interest as the Commissioner may
allow." Now, rate of interest may be anything between one
percent and six percent. In view of this statutory provision,
the discretion is vested in the public functionary created by
the Statute and the Civil Court in this suit has no power to
over-ride him, and grant interest ..... "
Accordingly, the suit came to be dismissed. In the appeal before
the Division Bench of the High-Court, the finding of the learned
Single Judge on issue no. 6 was reversed. It was held that the Provi
sions of the 1922 Act did not govern the' claim. As this appellate-
H finding was sufficient to support and sustain the decree of dismissal,
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RAJA RAM KUMAR v. U.0.1. [VENKATACHALIAH, J.) 359
the appellate-Bench did not record any finding of its own on issue. 4.
The Legal representatives of the deceased-plaintiff have come-up
with this appeal. ·
7. Shri Nariman, learned Senior Counsel, appearing in support
of the appeal, urged that the correct view which should commend itself
for acceptance is that for purposes of 297(2){i) the assessment must be
held to be "completed" not when the ITO made the initial order of
assessment, but only when the assessment assumes finality in appeal.
Implicit in the idea of a completed assessment, says learned Counsel,
is the element of its finality and the requirements and concomitants of
the idea of a "completed assessment" would, accordingly be satisfied only
when all proceedings including those in appeal come to an end and the
assessment thus assumes finality under the Act. Shri Nariman relied
upon some authorities including the one in CIT Bombay, Presidency &
Aden v. Khemchand Ramdas, (6 ITR 414) to explain what the concept
of a completed assessment or a final assessment connotes in law.
Learned Counsel referred to the scheme of the 1961 Act in this behalf
and to the provisions of the Removal of Difficulties Order 1962 to
suggest that the expression "assessment completed before the comm
encement of this Act" in the Section 297(2)(i) should not be so con
strued as to render the provisions in the 1922 Act relating to the
payment of interest on refunds nugatory and deprive an assessee of a
right vesting in him under the '1922 Act'. Learned Counsel urged that
if the expression "assessment completed" in section 297{2)(i) is con
strued in a manner so as to advance justice, then, it should not be
limited to cases where only the original assessment by ITO had come to be
made. A proper construction would require that a case of the present
kind was kept outside the mischief of 297{2)(i) and brought within the
benignity of Section 297{2)(a)-a construction which would promote
and preserve the vested rights under Section 66(7) of the '1922 Act'. It
was urged that no provision under the 1961 Act envisaged payment of
interest in a case of the present kind and any construction which brings
the case under 297{2)(i) and not 297{2)(a) would not promote justice.
Shri Nariman in fairness brought to our notice the pronouncement of
this court in 0. RM. M. SP. SV. P. Panchanatham Chettiar v. Com
missioner of Income-Tax, Madras, (99 ITR 579) but he urged, how
ever, that we should prefer a broader view of the matter consistent
with justice and fairness.
8. Shri Manchanda, learned Senior Counsel for the respondent,
maintained that the point raised in the appeal is no longer res-integra,
360 SUPREME COURT REPORTS [ 1988] 2 S.C.R.
having been the subject of an earlier, definitive pronouncement of this
court on the very question and that, therefore, the contention urged
for the appellant is untenable. We think Shri Manchanda is right in this
submission.
In Panchanatham Chettiar's case, a similar question havmg ari
sen, this court held that an assessment would be a 'completed assess
ment' within Section 279(2)(i) if the ITO had passed the order of
assessment prior to the coming into force of the 1961 Act. In view of
this pronouncement, it is not possible to accept the contention that the
matter fell within Section 297(2)(a) and not Section 297(2)(i) of the
1961 Act. It is not disputed that, in the present case, if the matter fell
under 297(2)(i) the claim for interest on the refund of income-tax
becomes wholly-insupportable. The view taken by the Division Bench
of the Hi.gh Court on the point must, therefore, be held to be correct
and does not call for interference in appeal.
Accordingly, the first part of the claim in so far as it pertains to
D Rs. l, 17,358.87 must be held to have been rightly rejected by the High
Court.
9. But the claim of Rs.12,282.11 said to represent interest on
the refund of Excess Profit Tax does pot admit of such an easy exit.
Shri N ariman urged that this claim rested on an altogether different
E and surer legal footing. Learned Counsel said that Section 21 of the
Excess Profit Tax 1940 incorporated and assimilated into itself as a
part of its own legislative-scheme, inter-alia, Section 66 of the 1922 Act
and the provisions so built into Section 21 by the legislative expedient
of incorporation-and not merely of reference-continue to be opera
tive notwithstanding the repeal of the 1922 Act and that, therefore, the
F claim for interest based on Section 21 of the Excess Profit Act 1940
pre-eminently survives. Learned Counsel submitted that the claim for
interest has been negatived by the High Court without examining the
scheme of Excess Profit Act 1940 and merely as a corollary of the
untenability of the claim of interest on the refund of the income-tax.
G The distinctive nature of this part of the suit claim pertaining to <
the interest on Excess Profit Tax has not been specifically dealt with by
the High Court. Section 66(7) of the 1922 Act which, by virtue of ~-
Section 21 of the Excess Profit Tax Act 1940, is attracted to cases of
refunds of Excess Profit Taxes stipulates that notwithstanding that a
reference has been made to the High Court, tax shall be payable in
H accordance with the assessment made in the case provided that if the
)
RAJA RAM KUMAR v. U.O.l. [VENKATACHALIAH, J.} 361
amount of assessment is reduced as a result of such reference, the
amount over-paid shall be refunded "with such interest as the commis
sioner may allow". Several High-Courts have taken the view that the
provision mandates the grant of interest, the discretion of the Commis
sioner being in the area of the rate of such interest (See Liquidators of
Pursa Ltd, v. Commissioner of Income-Tax, Bihar & Ors., 32 ITR 603;
Khushalchand Daga v. N.M. Joshi, 3rd Income-tax Officer A-1 Ward,
Bombay & Ors, 130 ITR 180).
But then, even if the right to claim interest on the refunds of
Excess Profit Tax could be said to have been preserved, the question
yet remains whether a suit for its recovery is at all maintainable. The
question turns on the scope of the exclusionary clause in the statute. C
The effect of clauses excluding the civil courts' jurisdiction are con
sidered in several pronouncements of the judicial committee and of
this Court (See Secretary of State v. Mask & Co., AIR 1940 P.C. 105;
K.S. Venkataraman & Co. v. State of Madras, [1966] 2 SCR 299;
Dhulabhai & Ors. v. The State of Madhya Pradesh & Anr, [ 1968] 3
SCR 662. The Premier Automobilies Ltd. v. Kamlakar Shantaram Wadke D
& Ors., AIR 1975 SC 2238). Generally speaking, the broad guiding
considerations are that wherever a right, not pre-existing in common
law, is created by a statute and that statute itself provided a machinery
for the enforcement of the right, both the right and the remedy having
been created ·uno-flatu and a finality is intended to the result of the
statutory proceedings, then, even in the absence of an exclusionary E
provision the civil courts' jurisdiction is impliedly barred. If, howev!!r,
a right pre-existing in common-law is recognised by the statute and a
new statutor; remedy for its enforcement provided, without expressly
excluding the civil courts' jurisdiction, then both the common-law and
the statutory remedies might become concurrent remedies leaving
open on element of election to the persons of inherence. To what F
extent, and on what areas and under what circumstances and condi
tions, the civil courts' jurisdiction is preserved even where there is an
express clause excl•1ding their jurisdiction, are considered in
Dhulabhai's case.
10. It was suggested for the revenue that a civil-suit is clearly barred G
and that the remedy of an assessee who has been denied interest by the
Commissioner under Section 66(7) of the 1922 Act would be a re
course to proceedings under Article 226 of the Constitution, where if
the assessee succeeds the remedy is limited to the issue of a direction
to the repository of the statutory power to consider and dispose of the
matter afresh in accordance with law and that, even then, the court, H
could not itself, grant the relief in terms of its own quantification of the
interest. These contentions, of course, are eminently arguable. The
Division-Bench of the High Court did not keep the qualitati11e distinc
tion between the two refunds distinguished; but treated the second
claim stemming from the Excess Profit Taxes not with reference to the
particularities characterising it but purely on its assumed similarity
with that of the first.
11. This is an old litigation which has vexed the parties for over
two decades. It appears to us somewhat unjust to expose the parties to
a fresh round of litigation. Even if the contention of the respondent as
to the non-maintainability of a civil-suit is upheld, appellants could yet
have recourse to proceedings under Article 226 if they can satisfy the
High Court as to the delay in approaching it and seek an appropriate
Mandamus to the Commissioner who would then have to reconsider
the claim for interest under this head. Interest claimed is at 6% per
annuli". In the particular and special circumstances of this case, we
thought-and put it to the learned counsel-whether the interests of
D justice would not be served by granting relief in these proceedings
itself without going into the technicalities of procedure and without a
pronouncement on the question of the maintainability of th.e suit.
Learned counsel, in all fairness, left the matter to the court. We think
that with a view to doing full and complete justice between the parties,
a sum of Rs.12,282.11 representing interest on the refund of the
E Excess Profit Taxes should be ordered to be paid to the appellants.
This direction we give without pronouncing on issue no. 4.
12. In the result, while the judgment and decree under appeal,
in sc. far as they pertain to the dismissal of the suit concerning the claim
ot Rs,1,17,358.87 is left undisturbed, this appeal is, however, allowed
F in part to the extent it pertains to the claim of Rs.12,282.11 claimed by
way of interest on the refund of excess profit tax; and in reversal of
th<1t part of the judgment and decree of the High Court pertaining to
this claim of Rs.12,282.11, the suit is decreed directin~ the res
pondent-defendant to pay to the appellant-plaintiffs the aforesaid
sum of Rs.12,282.11 together with pendente-lite and further interest at
G 6% p.a. from the date of institution of the suit till realisation.
The appellants shall be entitled to costs in proportion to their
success in the suit. Respondent, however is left to bear and pay its own
costs throughout. The appeal is disposed of accordingly.
N.V.K. Appeal al.lowed partly.
J