INDERCHAND Vs. SECRETARY OF STATE

JUDGEMENT

(1.) This appeal arises out of a suit brought by the plaintiff against the Secretary of State for India in Council for recovery of Rs. 5,163-4-0 on account of income- tax said to be refundable to the plaintiff together with interest. The plaintiff who is a trader, was assessed under Section 28(4), Income-tax Act, with Income-tax amounting to Rs. 86,924-5-0 for the year 1932-33. This amount was realised from him on 29 March 1933. On application to the Commissioner of Income-tax the assessment was cancelled by his order dated 18 February 1935, and he directed the Income-tax Officer to make a fresh assessment. Eventually on 31 March 1935 the Income-tax Officer assessed the income-tax at RS. 5,733 only. The plaintiff was accordingly entitled to a refund of Rs. 31,191-5-0. He had also deposited Rs. 100 when he moved the Commissioner of Income-tax for referring the matter to the High Court. In the meantime on 26 March 1935 the plaintiff was assessed with income-tax of Rs. 13,715-5-0 for the year 1934-35. The Income-tax Officer deducted this amount from the sum of Rs. 81,191-5-0 which was refundable to the plaintiff for the year 1932-83 so that the balance actually refundable was Rs. 17,476. On 9 April 1935 a notice was issued by the Income- tax Officer to the plaintiff intimating that he was entitled to a refund of Rs. 7,364- 13-0 on account of in-come-tax and Rs. 10,111-1-0" on account of super-tax. But on 18 April 1935, the plain, tiff received from the Income-tax Officer a refund voucher for RS. 10,111-13-0 on account of super-tax and a refund voucher of Rupees 3,939-13-0 only instead of Rs. 7,364-13-0 on account of income-tax. He accepted the refund voucher for Rs. 10,111-13-0 and obtained refund of this amount. But he returned the refund voucher for Rs. 8,939-18-0 and submitted a petition to the Income-tax Officer stating that this refund voucher was issued by mistake for Rs. 3,989-13-0 instead-of Rs. 7,864-18-0 and he requested the Income-tax Officer to rectify the mistake and issue a refund voucher for Rs. 7,364- 13-0. In reply to this the Income-tax Officer by his letter dated 28 May 1985, informed the plaintiff that the sum of Rs. 3,425 had been adjusted towards the dues for 1980-81 which had remained outstanding.

(2.) The plaintiff then filed a petition before the Income-tax Officer on 5 June 1935 requesting him to issue a refund voucher for Rs. 8,939-13-0 subject to his right to move the higher authorities for the balance. He also prayed for a refund of the sum of Rs. 10O which he had deposited with the Commissioner. But the Income-tax Officer paid no heed to his request. The plaintiff sent a registered notice on 7 February 1936 under Section 80, Civil P.C., to the Secretary of State for India in Council claiming refund of Rs. 7364-13-0 on account of income-tax and of Rs. 100 which had been deposited by him together with interest. The notice was served on the Collector of Shahabad. on 8 February 1936. Thereafter the Income-tax Officer issued a refund voucher for Rs. 3939-13-0 which the plaintiff accepted under protest on 10 February 1936. The plaintiff filed the present suit on 2l May, 1936 claiming refund) of the balance of Rs. 8425 on account of income-tax and of Rs. 100 which had been deposited by him with the Commissioner together with interest, the total claim being, Rs. 5162-4-0. In the plaint it was asserted that the plaintiff had no knowledge of any outstanding arrears of income-tax for 1930-31 and that even if Rs. 3425 was due for such arrears the amount was not legally recoverable from him and, therefore, the action of the Income-tax Officer in deducting this amount was illegal, arbitrary and without jurisdiction.

(3.) The defendant contested the suit alleging, inter alia, that the civil Court had no jurisdiction to entertain the suit and that the sum of Rs. 3425 remained due from the plaintiff on account of income-tax for the year 1930-31 and this amount was rightly deducted by the Income-tax Department from the sum of Rs. 7364-13- 0 which was refundable to the plaintiff on account of income-tax for the year 1932-33. In the written statement an account is given of how by mistake the sum of Rs. 3425 remained unrealized from the plaintiff on account of income-tax for the year 1930-31. The details of this account need not be stated, because it has been found by the learned Subordinate Judge, and it has not been disputed before us, that on account of some mistake in the entries in the demand and collection register of the Income-tax Department a sum of Rs. 3425 remained unrealized out of Rs. 13,862-14-0 which had been assessed as income-tax on the plaintiff for the year 1930-31. The learned Subordinate Judge has dismissed the suit holding that the Income-tax Officer had a right to deduct the sum of Rs. 3425 which remained outstanding on account of income-tax payable by the plaintiff for the year 1930-31 and that the civil Court has no jurisdiction to try the suit. Hence this appeal by the plaintiff. The first contention raised by Mr. P.R. Das for the appellant is that the Income-tax Officer had no right to deduct the sum of RS. 3425 which remained unrealized from the plaintiff on account of income-tax for the year 1930-31. The deduction was made by the Income-tax Officer under Section 49A, Income-tax Act, 1922, as it stood in 1935. The section ran as follows: Where under any of the provisions of this Act, a refund is found to be due to any person, the Income-tax Officer, Assistant Commissioner or Commissioner, as the ease may be, may in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, if any, remaining payable by the person to whom the refund is due.