THE DEPUTY COMMISSIONER OF INCOME TAX vs. VIPIN GANDHI LEGAL HEIR OF JAGDISH GANDHI (SINCE DECEASED)

SPMA/17/2022HC BombayHCBM06000019202223 March 2023Author: HON'BLE SHRI JUSTICE N. J. JAMADAR3 pages

AI SummaryPartly Allowed

What did the High Court hold?

The Special Court disposed of the application and the Custodian's report. The Court accepted the Custodian's report and made it absolute in terms of prayer clauses (a) and (b). This implies that the Court allowed the release of funds as proposed by the Custodian, which was Rs. 2.85 Crore to the Income Tax Department. The reasoning appears to be based on the Custodian's assessment of available assets versus total liabilities and the need to retain a portion for expenses. The Court did not explicitly decide on the full demand of Rs. 10,34,40,612/- but rather on the amount the Custodian deemed appropriate for release. The application filed by the Income Tax Department was also disposed of. No issue was expressly left undecided.

What were the facts?

The Income Tax Department (Applicant) sought a direction from the Special Court to the Custodian (Respondent No. 2) to release funds towards outstanding principal income tax demands of Rs. 2,31,06,448/- for AY 1992-1993 and Rs. 8,03,34,164/- for AY 1993-1994, totaling Rs. 10,34,40,612/-, for Mr. Jagdish Gandhi (Respondent No. 1), a Notified Party. Mr. Jagdish Gandhi has passed away, and Mr. Vipin Gandhi is his legal representative. The Custodian reported that Rs. 3,39,87,304.77 had already been released towards income tax liability. The Custodian's report indicated that out of total liabilities of Rs. 36.168 Crore, the Notified Party's assets were Rs. 13.82 Crore. Of these assets, Rs. 2.91 Crore were in accounts, and the Custodian proposed releasing Rs. 2.85 Crore to the Income Tax Department, retaining the balance for expenses.

What were the issues?

1. Whether the Special Court should direct the Custodian to release Rs. 10,34,40,612/- towards the outstanding principal income tax demand of the deceased Notified Party, Mr. Jagdish Gandhi, for AYs 1992-1993 and 1993-1994, considering the available assets and liabilities of the Notified Party. Assessee's Contentions: The Income Tax Department contended that it is entitled to the release of Rs. 10,34,40,612/- towards the outstanding principal income tax demand for the priority period. They sought directions to the Custodian to release this amount from the assets of the Notified Party. Revenue's Contentions: The Custodian, in its report, asserted that as against total liabilities of Rs. 36.168 Crore, the Notified Party's assets are Rs. 13.82 Crore. Out of the available assets, Rs. 2.91 Crore are in accounts, and the Custodian proposed releasing Rs. 2.85 Crore to the Income Tax Department, retaining the balance for expenses. The Custodian also noted that Rs. 3,39,87,304.77 had already been released towards income tax liability.

Which sections of the Income-tax Act were involved?

Section 11(2)(a)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

10-SPMA17-2022.DOC Santosh IN THE SPECIAL COURT AT BOMBAY Constituted under the Special Court [Trial of Offences Relating to Transactions in Securities] Act, 1992 MISC. APPLICATION NO. 17 OF 2022 The Deputy Commissioner of Income Tax ...Applicant Versus Vipin Gandhi and Anr. …Respondents WITH CUSTODIAN REPORT NO. 4 OF 2023 Mr. B. M. Chatterjee, Senior Advocate, a/w Ms. Kavita Singh and Mr. Udyan Mukherjee, i/b Ranit Basu, for the Applicant. Mr. Gandhar Raikar, i/b Ms. Shilpa Bhate, for the Custodian. CORAM: N. J. JAMADAR, J. Judge, Special Court DATED : 24th MARCH, 2023

Oral Order:-

The Income Tax Department has preferred this application seeking direction to the Custodian – respondent No.2 to release amount towards outstanding principal Income Tax Demand of Rs.2,31,06,448/- for AY-1992-1993 and Rs.8,03,34,164/- for AY 1993-1994 aggregating to principal Income Tax Demand for the priority period to Rs.10,34,40,612/- in respect of Mr. Jagdish Gandhi, respondent No.1, a Notified Party. 1/3 SANTOSH SUBHASH KULKARNI SANTOSH SUBHASH KULKARNI Date: 2023.03.28 14:35:22 +0530

10-SPMA17-2022.DOC

Mr. Jagdish Gandhi has passed away. Mr. Vipin Gandhi has been impleaded as a legal representative of the deceased Notified Party Mr. Jagdish Gandhi.

Respondent No.2 – the Custodian has filed an affidavit-in- reply. It is contended that as of date a sum of Rs.3,39,87,304.77 has been released towards the income tax liability under Section 11(2)(a) of the Special Court [Trial of Offences Relating to Transactions in Securities] Act, 1992. 4. The Custodian has also filed a report being Report No.4 of 2023. 5. In the report it is, inter alia, asserted that as against the total liabilities of Rs.36.168 Crore the assets of the Notified Partiy are Rs.13.82 Crore. Out of the said assets Rs.2.91 Crore are available in the accounts of the Notified Party i.e. current and fixed deposits accounts. The Custodian has thus stated that a sum of Rs.2.85 Crore can be released to the Income Tax Department as the balance amount is required to be retained for incurring the expenses for maintaining the Demat account etc.

By an order dated 17th March, 2023, the Custodian was directed to serve a copy of the report on the legal representative of the Notified Party and file report of service. 2/3

10-SPMA17-2022.DOC

Today the Custodian has submitted a report to the effect that Mr. Vipin Gandhi, the legal representative of deceased Notified Party, has been served.

None appears for the legal representative of the Notified Party.

Considering the report of the Custodian and the position of the assets of the Notified Party, the application and report can be disposed of by allowing the report in terms of prayer Clauses (a) and (b).

10.

Hence, Custodian’s Report is made absolute in terms of prayer Clauses (a) and (b).

11.

The application also stands disposed. [N. J. JAMADAR, J.] 3/3

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