TaxTMI 
TaxTMI 
2017 (11) TMI 743
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.... of incriminating documents including the cash of Rs. 34,69,00,000/- was seized. The Judgment Debtor is a partnership firm formed by Sh. Lokeshwar Dev and his wife Smt. Priyanka Saraswat Dev and is the flagship concern of the SGI Group, was carrying on systematic business but not reflecting the correct income in its books of accounts as required under the Income Tax Act, 1961. 3. The seized amount since has to be appropriated towards tax demand in terms of Section 132B of the Income Tax Act,1961 on determination of the tax liability of the Judgment Debtor pursuant to the assessment of its undisclosed income determined on completion of the assessment proceeding. 4. It is alleged that the judgment debtor was accepting deposit from the public and offering return on the deposits. The group has claimed that they had the expertise in stock and commodity market and the deposits collected were used by the group for trading in equity and commodity market, speculative business, FDR and investment in real estate. SGI had several plans which they offered to the investors. The deposits were collected from the investors through agents. These Investors /agents were allowed to refer and introduc....
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....execution proceedings to recover the amount lying attached under the orders of the Income Tax Department would be against the bar of Section 293 of the Income Tax Act. 9. In support of his submission the learned counsel for Income Tax Department has relied upon Rakesh Kumar Agarwal V. Bansal Commodities (2013) 39 Taxmann.com 136 (Delhi) which read as under:- 22. As noticed, the facts are that duly authorized Income Tax Officers carried out search and seizure operations at the residential and business premises of M/s. Bansal Commodities on 27th April, 1989. During these, seven Pay Orders for Rs. 50.40 lakhs, prepared from the accounts on 26th April, 1989 were found. The Income Tax officials, on 28th April, 1989 issued a deemed seizure order with respect to the 7 pay orders for Rs. 50.40 lakhs and served it upon the Manager, Punjab National Bank. The original pay orders were in the control and possession of the plaintiffs, M/s. Bansal Commodities. The plaintiffs, resultantly did not present the pay orders for payment and approached Income Tax Authorities with respect the same. Income tax proceedings then onward rambled on. Finally, the plaintiff's efforts at securing release from t....
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....6. As in this case, the Revenue may not adjudicate on the question of liability of Mr. Agrawal to Bansal Commodities, just as in Parmeshwari, the Supreme Court held that: "[i]t (was) not the case of the Revenue that Income Tax Authority can grant decree for partition." Neither is it true that such a construction of Section 293 leaves third parties without a remedy. Section 132(11) provides the third person, (in this case M/s. Bansal Commodities), with the necessary opportunity to present its case or claim that it is the real and true owner or the beneficial owner of the proceeds (or amounts) under the seven pay orders, before the Income Tax authorities. That was, in fact, done in this case. The result of the present suit being held to be maintainable and the judgment of the Learned Single Judge allowed to operate, would be, in the words of the Supreme Court: "the direct effect of getting that order of the Income-tax Officer under Section 132(5) of the Act set aside or modified to that extent. This Section 293 does not permit..." Equally, the Supreme Court noted that: "Section 293 is quite specific and does not admit of any ambiguity if ultimately a suit is to result in a decr....
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....aving attained finality in terms of the procedure within that provision being complied with, Section 293 mandates that the jurisdiction of the civil court with respect to the present suit is barred. 10. Hence it is argued by learned counsel for the Income Tax Department that this money belong to the revenue and the decree holder has no right to recover the money attached/seized by the revenue. 11. I disagree with the submission of the learned counsel for the department. Section 293 of the Income Tax Act perhaps has no applicability in the present proceedings. It bars the filing of the suit in a civil court to set aside or modify any proceedings taken and / or made under the Income Tax Act. The Decree Holder has not filed any suit in any civil court against the revenue authorities challenging/setting aside/modifying any proceedings taken and/or made under this Act. The Decree Holder rather had filed a civil suit for recovery of his own money of Rs. 1,60,00,000/- with pendetelite and further interest based on two post dated cheques issued by the Judgment Debtors. The suit was filed by the decree holder on the premise that the Judgment Debtors had cheated the Decree Holder and had c....
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.... said money belong to the decree holder and need to be returned by the judgment debtors. It is argued such money of decree holder is held by the judgment debtors in trust and the decree holder has a proprietary interest in the amount so seized to the extent of his decree. 15. Section 86 of the Indian Trusts Act, 1882 is relevant in this regard: "86. Transfer pursuant to rescindable contract.- Where property is transferred in pursuance of contract which is liable to rescission, or induced by fraud or mistake, the transferee must, on receiving notice to that effect, hold the property for the benefit of the transferor, subject to repayment by the latter of the consideration actually paid." 16. Per above, if the money was transferred in pursuance of a contract induced by fraud or mistake, as proved by the decree holder and so noted in judgment dated 16.08.2012 in CS(OS) No.2866/2011, the judgment debtor on receiving the notice of rescission ought to have held the money in trust for the benefit of the decree holder. 17. In The National Crime Agency V. Gary John (2014) EWHC 4384 (CH) the Court held as under: 40. I consider that each of the lead claimants has a proprietary claim to p....
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....see generally the discussion in Goff & Jones, The Law of Unjust Enrichment (8th ed) paras. 37-07 to 37-24 on the limits of proprietary relief for unjust enrichment. Whatever may be the position in other cases, fraud is special. As Lord Bingham said in HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6 at paragraph [15]: "... fraud is a thing apart. This is not a mere slogan. It reflects an old legal rule that fraud unravels all: fraus omnia corrumpit. It also reflects the practical basis of commercial intercourse. Once fraud is proved, 'it vitiates judgments, contracts and all transactions whatsoever': Lazarus Estates Ltd v Beasley [1956] 1 All ER 341 at 345, [1956] 1 QB 702 at 712 per Denning LJ." 51. I consider that there are good policy reasons for enabling a victim of fraud, which supervenes in a transaction, to set aside the transaction so as to pursue a proprietary claim even though that will have priority over other unsecured creditors of the fraudster or of any other person who has received traceable proceeds. xxx 18. Taking clue from the judgment above, where the judgment debtor had received the money by fraud then at best he shall be ho....