Vivek Jain vs. Assistant Commissioner of Income Tax

IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA RFA No. 271 of 2007 along with RFA No. 186 of 2007 Reserved on : 16

th May, 2017. Decided on : 26

th May, 2017.

Coram: The Hon’ble Mr. Justice Sureshwar Thakur, Judge. Whether approved for reporting?1 Yes For the Appellant(s): Mr. T.S. Chauhan, Advocate in RFA No. 271 of 2007. Mr. Lovneesh Thakur, Advocate, vice counsel in RFA No. 186 of 2007. For respondent No.1: Mr. Lovneesh Thakur, vice counsel in RFA No.271 of 2007. 1 Whether reporters of the local papers may be allowed to see the judgment?

Mr. T.S. Chauhan, Advocate, for in RFA No. 186 of 2007. For respondent No.2, 3 and 6: Mr. V.S. Chauhan, Addl. A.G., with Mr. Vivek Singh Attri, Dy. .A.G., in both appeals. For respondent No.4: Mr. Ashwani K. Sharma, Sr. Advocate with Mr. Jeewaj Kumar, Advocate. For respondent No.5: Mr. Lovneesh Thakur, Advocate in both appeals.

Sureshwar Thakur, Judge. Since, both these appeals arise out of a verdict pronounced by the learned District Judge, Una, H.P., in Civil Suit No. 5 of 2002, hence, both are liable to be disposed off by a common verdict. 2. The plaintiff instituted a suit against the defendants claiming therein a decree for damages in a sum of Rs.6,24,000/- with future interest @ 18% per annum being pronounced upon defendant No.1 Pawan Kumar also he claimed a decree for permanent prohibitory injunction, restraining defendants No.2, 3 and 6 from recovering from his special road tax in respect of bus bearing No. HP-20-1213 as also restraining …2…

defendants No. 4 and 5 from recovering from the plaintiff the installments in respect to the period 25.08.2000 to 13.12.2001. The suit of the plaintiff was partly decreed in a sum of Rs.1,06,890/-, decretal sum whereof was ordered to be realizable against defendant No.1. The aforesaid decretal amount was ordered to carry interest @6% from the date of decree till the realization of the decretal amount. However, the relief of the plaintiff qua defendants No.2, 3 and 6 for theirs being restrained from recovering special road tax in respect to bus bearing No. HP-20-1213 besides the relief of the plaintiff qua defendants No.4 and 5 standing to be restrained from recovering from the plaintiff the installments in respect to the bus for the period 25.8.2000 to 13.12.2001 was refused. 3. On standing aggrieved by the verdict of the learned trial Court, both the plaintiff as well as defendant …3…

No.1 concert to assail it by preferring therefrom the instant appeals. 4.

The plaintiff's case in brief is that he is owner of bus No. HP-20—1213 which was got financed by him from Lal Hari Kishan (defendant No.5). On August 25, 2000, an agreement to sell the bus for a consideration of Rs.4 lacs was entered into between the plaintiff and defendant No.1. At the time of execution of the agreement, the said defendant paid to the plaintiff Rs.50,000/- as earnest money. One of the stipulation in the agreement was that the vendee shall pay the outstanding taxes and the amount payable to Lal Hari Krishan (defendant No.5) within a period of one month. The balance of sale consideration (i.e. Rs.3,50,000/- minus the outstanding taxes and the amount payable to defendant No.5) was covenanted to be paid to the plaintiff within the next following month. It was also agreed that the liability to pay the taxes, the amount of …4…

challan and the compensation amount in respect of Motor Accident Claim, if any, after the execution of the agreement shall be of the vendee. In view of the agreement, the plaintiff handed over the bus to defendant No.1 on the same day, and the latter started plying it on the basis of the same permit as was issued in favour of the plaintiff. On June, 2001, the bus, however, met with an accident and a case under sections 279 and 337, IPC was registered against the driver thereof at Police Station, Una, vide FIR No. 299/2001. The investigator took the bus into possession. Claiming ownership of the bus on the basis of agreement dated August 25, 2000, defendant No.1 moved an application before the Chief Judicial Magistrate, Una, for the release thereof. The plaintiff also moved a similar application. He sought release of the bus in his favour on the plea that defendant No.1 was not entitled to possession thereof, for he had failed to perform his part of the agreement. …5…

His claim, however, did not find favour with the Court, and the bus was ordered to be released in favour of defendant No.1 vide order dated June, 21, 2001 of the learned Additional Chief Judicial Magistrate, Una. Aggrieved, the plaintiff preferred before this Court a revision petition which was allowed on December, 13, 2001. On the basis of this order, he took possession of the bus on December 21, 2001. Claiming the route of the bus to be highly profitable, the plaintiff averred that the net income derived from the bus was Rs.40,000/- per month, and that he was entitled to recover from defendant No.1 Rs.6,24,000/- for the period the bus remained in his custody. Alleging that defendant No.1 had failed to pay the road tax for the period the bus remained in his custody, the plaintiff further averred that a notice dated December, 18, 2001 requiring him to pay the said tax stood issued by defendant No.3, and that defendant No.4 also sought recovery of the insurance amount for …6…

the period, August 25, 2000 to December, 13, 2001. Defendant No.5, according to the plaintiff, also threatened to recover from him the outstanding amount. Hence the suit. 5. The defendants contested the suit and filed separate written statements. Defendant No.1 in his written statement admitted the fact of an agreement to sell standing executed inter se him and the plaintiff. He averred that on account of non-payment of taxes, the bus was impounded by the Regional Transport Authority concerned. He requested the plaintiff to get the bus released after paying the outstanding tax amounting to Rs.25,835/-. He then got the bus repaired by spending Rs.35,000/- and paid Rs.7,600/- in respect of challans. Besides, he paid Special Road Tax amount to Rs.8,410/- for the period w.e.f. 1.8.2000 to 30.09.2000. ON May 25, 2001, he paid to defendant No.5 Rs. 25,000/- He also paid to the Insurance charges amounting to Rs.8,418/- …7…

for the period from 26.08.2000 to 25.08.2001. On September 26, 2000, a sum of Rs. 10,000/-, according to him, was paid to the Excise Department as passenger tax. Besides, he paid to the plaintiff certain amount totaling Rs.52,200/-, on various occasions. It has been further averred that the contract was frustrated on account of the omission and commissions of the plaintiff. In the last week of June, 2001, the financer took away the bus from his possession and retained the same upto December 21, 2001. Refuting the plaintiff's claim as to the income derived from the bus, defendant No.1 further averred that the bus being an old model of 1992 was not in a good condition and that no benefit could be derived therefrom. 6. Defendants No.2, 3 and 6 in their joint written statement averred that the certificate of registration supplied to them showed the bus to have been held by the plaintiff under a hire purchase agreement with …8…

Mehatpuru Branch of Punjab National Bank, and that they were not informed to any agreement having been executed between the plaintiff and defendant No.1. The vehicle continued to be plied in the name of the plaintiff, and the liability to pay the Special Road Tax is therefore his. It has been averred that the plaintiff failed to pay special road tax for the periods; 1.6.2001 to 31.07.2001 and 1.11.2001 to 31.07.2002. It has been further pleaded that he was also liable to pay passenger tax amounting to Rs.1,20,300/- and interest amounting to Rs.57,383/- for the period from 6.4.1992 to 30.06.2002 under the H.P. Passenger Goods Tax. 7. Defendant No.4 in its written statement averred that defendant No.1 was an utter stranger to it and that the insurer of the vehicle was entitled to recover the premium of the policy from the plaintiff. It was also averred that the plaintiff did not have any enforceable cause of action against the insurer. …9…

The plaintiff filed replication to the written statement of the defendant(s), wherein, he denied the contents of the written statement and re-affirmed and re- asserted the averments, made in the plaint. …10…

10.

On the pleadings of the parties, the learned trial Court struck the following issues inter-se the parties at contest:- 1. Whether the plaintiff is entitled for the recovery of the suit amount, as alleged?OPP. 2. Whether the suit is bad for non- joinder and mis-joinder of parties? OPD 3. Whether the suit is not maintainable? OPD 4. Whether the plaintiff has no cause of action?OPD 5. Whether this court has no jurisdiction to try the suit?OPD. 6. Whether the suit is liable to be

dismissed for non-compliance of the provisions of Section 80 CPC?OPD. 7. Whether the plaintiff is estopped by his act and conduct from filing the suit? OPD. 8. Relief. 11. On an appraisal of evidence, adduced before the learned trial Court, it proceeded to party decree the suit of the plaintiff. …11…

defendant No.1 taking possession of the relevant bus, on the day of execution of Ex.PW2/A. Recitals also occur therein that in case, the plaintiff refuses to perform his part of the contract, embodied in Ex.PW2/A, his being liable to pay Rs.1,00,000/- to defendant No.1 also a recital occurs therein that in case defendants No.1 refuses to perform his part of the obligation(s) constituted therein, thereupon, the earnest money paid by him to the plaintiff being liable to be forfeited by the latter. 13. Be that as it may, a studied and careful perusal of the oral as well as documentary evidence on record, is reflective of defendant No.1 not evidently complying with his part of the obligations cast upon him under Ex.PW2/A, non-compliance whereof is comprised in his not defraying to one Lala Harik Krishan, the financer, of the relevant bus, a sum of Rs. 3, 50,000/- within one month from the date of execution of Ex. PW2/A, nor also …13…

his tendering before the authorities concerned, the relevant taxes assessed by them qua the relevant bus, hence, in consonance with the mandate of the penal clause enshrined therein the forfeiture of earnest money held in a sum of Rs.50,000/- by the plaintiff was legally apt. Since,in consonance with the apt penal clause held in Ex.PW2/A, the forfeiture of earnest money comprised in a sum of Rs.50,000/- accrued vis-a-vis the plaintiff, thereupon, the learned trial Court in proceeding to deduct the aforesaid amount of earnest money from the total quantum of damages assessed in favour of the plaintiff, comprised in a sum of Rs.2,21,520/-, is grossly untenable. The aforesaid amount of Rs.50,000/-, as such, is required to be added to the principal decretal amount. 14. Be that as it may, the claim of the plaintiff that the learned trial Court under assessed the quantum of mesne profits, claim whereof is anvilled on the learned trial Court irrevering the quantum of moneys, comprised …14…

in the levy of taxes made upon the relevant vehicle by the Assessing Authorities concerned, conspicuously when levy thereof holds commensuration with the passenger capacity/occupancy of the bus also hence its also marking the factum of the passenger occupancy of the relevant bus being in a numerical strength higher than the reckoning by the learned trial Court of profits earned by the relevant bus, profits whereof stood pegged in a sum of Rs.12,000/- per month, concomitantly, hence, enjoined the learned trial Court to assess mesne profit in a sum higher than Rs.12,000/- per month. However, when Ex.PW5/A makes a disclosure, with respect to assessment of Special Road Tax being made for the period commencing from June, 2001 to July, 2002, by the Assessing Authority Concerned, upon the relevant bus, and it being comprised in a sum of Rs.3,705/- also with Ex.PW5/A also disclosing that the Special Road Tax qua the period pertaining to August, September and October, …15…

2001 standing paid besides its also disclosing that Special Road Tax w.e.f. January, 2000 to May, 2001 also standing paid by the owner of the relevant bus, however, with its not making any disclosure qua liquidation occurring qua the assessment, if any, of Special Road Tax made with respect to the relevant bus for the period June, 2001, July, 2001 and from November, 2001 to July, 2002, preponderantly, also with the levy upon the relevant bus of special road tax in the aforesaid sum by the assessing authority, is not based upon the numerical strength of passengers occupying the bus for the aforesaid period, rather is always in a fixed sum, hence, any reliance thereupon for computing mesne profits is inapt. The plaintiff has failed to adduce into evidence, any relevant record reflective of the fact that the Authorities concerned, had levied tax other than Special Road Tax on the relevant vehicle, levying whereof holding commensuration with the numerical strength of …16…

passengers occupying the bus for the period aforesaid. The adduction of the aforesaid material, was vital for gauging the numerical strength of passengers occupying the relevant bus for the aforesaid period, especially when levying of special road tax holds no relation with the numerical strength of the passenger occupying the bus rather when the numerical strength of passengers occupying the relevant bus, is fathomable only from assessment/levy upon the relevant bus by the authority concerned, of a tax other than special road tax, besides its relating to or being in commensuration with the numerical strength of passengers occupying the bus for the aforesaid period, evidence of levy whereof upon the relevant bus remains unadduced. Consequently, the relevant Assessing Authority in making assessment of special road tax, in a sum of Rs.3,705/- per month respectively, cannot also give any impetus to any conclusion that the passenger strength of the vehicle was …17…

numerically higher nor any conclusion can be formed that the relevant bus yielded higher profits “ than Rs.12,000/- pr month unless” potent evidence in respect thereof stood adduced, comprised in the relevant record aforesaid maintained by the authority concerned. However, with no evidence standing adduced by the plaintiff in respect thereto, hence, it cannot be accepted that either the assessment of special road tax made upon the relevant bus, was based on the passenger strength of the bus for the aforesaid period nor it can be concluded that given the absence of evidence with respect to escalated rate(s) of apposite taxes appertaining to theirs holding commensuration with the passengers strength, taxes whereof stood levied by the authority concerned, with respect to the plying of the relevant bus, it concomitantly earned a higher profit also it cannot be concluded that the sum of mesne profits assessed by the learned trial Court, warranting any interference. …18…

Predominantly, also when the income tax returns, if any, filed by defendant No.1 before the income tax authority, reflective of the income earned by him from the relevant bus, stood also not adduced in evidence. 15. The learned counsel appearing for the appellant/plaintiff contends that the bus bearing No. HP- 20-1213 met with an accident on 11.06.2001, in sequel whereto FIR No. 299/2001 under Section 279 and 337 of the IPC stood lodged with the Police Station concerned. Both the plaintiff and defendant No.1 instituted their applications before the learned Chief Judicial Magistrate, Una, wherein they sought the relief, that the bus be released in their favour. However, the application of defendant No.1 stood allowed, whereas, the application of the plaintiff stood dismissed. Defendant No.1 retained possession of the relevant bus since the making of the order by the learned Chief Judicial Magistrate on 21.06.2001 upto the decision recorded by the learned …19…

Sessions Judge on Criminal Revision Petition on 13th June, 2001, petition whereof stood instituted before it, by the aggrieved plaintiff. However, assessment of mesne profits with respect to the aforesaid period of time whereto defendant No.1 held possession of the bus under the orders pronounced by the learned trial Magistrate, stood included by the learned trial Court in its making a computation of the total quantum of mesne profits payable by defendant No.1 to the plaintiff, with respect to his plying the relevant bus, computation occurred with evidently, defendant No.1 not performing his part of the contractual obligations, comprised in his defraying to the financer of the bus, the entire outstanding sale consideration of Rs.3,50,000/-. Since, defendant No.1, though was bestowed with a right under a pronouncement made by the learned C.J.M. concerned, to hold possession of the relevant vehicle, yet thereupon, he cannot escape from the consequences enshrined in the …20…

relevant agreement, consequences whereof evidently arose, on his not performing his part of the contractual obligations constituted in Ex.PW2/A, omission whereof is comprised in the fact of his not, within the stipulated period, defraying the outstanding sale consideration of Rs. 3,50,000/- to the financer of the relevant bus, whereupon, ensued the sequel of the agreement standing canceled. The rigor of the apt penal consequence(s) embodied in the relevant agreement arising from his not begetting compliance with all the recitals occurring therein, cannot to the mind of this Court be construed to stand overcome by the learned Chief Judicial Magistrate, recording an order for releasing the relevant bus qua defendant No.1, “more so”, when the aforesaid orders stood set aside by the Revisional Court. Reiteratedly, the preeminence of the mandate of the relevant agreement also the preeminence of attraction of the apt penal clause(s) upon defendant …21…

No.1, on his evidently not begetting compliance with the apposite recitals occurring therein, cannot be either whittled nor undermined by the order pronounced by the learned C.J.M., concerned, whereby, he permitted defendant No.1 to hold possession of the relevant vehicle. Significantly, the further ensuing effect of the aforesaid inference, is that defendant No.1, cannot escape his liability to liquidate vis-a-vis the plaintiff mesne profits, assessed upon him by the learned trial Court, mesne profits whereof appertain to the period commencing from the date of the order pronounced by the learned C.J.M., upto the date of the order pronounced by the learned Revisional Court. 16. The learned trial Court has tenably dispelled the vigour of Ex. DW1/A, exhibit whereof makes a disclosure therein qua defendant No.1 expending a sum of Rs.35,000/- towards the repair of the bus after his receiving possession thereof, from the plaintiff. Since, …22…

defendant No.1 received the possession of the relevant bus, with his holding knowledge qua its condition, as also, qua its road worthiness, hence, when he, after its purchase, proceeded to expend money for effecting repairs thereof, whereby, it became roadworthy, cannot bestow any right in him to claim deduction of Rs.35,000/-, amount whereof stood expended by him towards the repairs of the relevant bus, from the quantum of mesne profits assessed by the learned trial Court in favour of the plaintiff. Moreover, the exclusion by the learned trial Court of the aforesaid amount from the mesne profit does not suffer from any gross infirmity. 17. The learned counsel appearing for defendant No.1/appellant in RFA No. 186 of 2007 submits that defendant has paid a sum of Rs.7800/- towards challans, Rs.25,000/- to Lala Hari Kishan and Rs. 10,000/- was paid to Excise Department, as such, the aforesaid amounts are liable to be deducted from the total sum of mesne …23…

profits assessed in favour of the plaintiff. The aforesaid submission addressed before this Court by the learned counsel appearing for defendant No.1 has no force, as no evidence exists on record, reflective of the fact that the purported liquidation by defendant No.1 of the aforesaid amounts was within the domain of the relevant contract nor any best evidence exists on record with respect to liquidation thereof by defendant No.1. Consequently, non-deduction of the aforesaid amounts by the learned trial Court from the total sum of mesne profits, does not suffer from any gross infirmity. 18. Be that as it may, the refusal by the learned trial Court to pronounce a decree of permanent prohibitory injunction against defendants No.2 to 6, for restraining them from recovering the levy of apposite taxes from him besides its refusing to restrain defendant No.4 from recovering the premium of insurance besides its refusing to restrain defendant No.5 from recovering …24…

the loan installments, does not necessitate any interference. The reason being that with the plaintiff evidently holding the registered ownership with respect to the relevant bus, he was enjoined to liquidate all the taxes levied by the authorities concerned with respect thereto, dehors any contractual stipulation held in respect thereto in the relevant agreement, stipulation whereof could be enforced against defendant No.1, by after his defraying them, his instituting against defendant No.1 an apposite suit for their recovery. Relieteratedly, with the plaintiff being the registered owner of the relevant vehicle, he holds the enjoined obligation to defray all the taxes levied thereon to the defendants concerned. Also the defendants concerned hold the duty under law to recover them from the plaintiff, the registered owner of the relevant bus than from defendant No.1. …25…