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Saturday, June 1, 2013

ELECTION CASE = DISQUALIFICATION FOR HAVING MORE THAN TWO ISSUES = Birth of third child on or after incorporation of sec. 19 (3) fasten the person with disqualification irrespective of the death of a child after birth = it is settled law that the burden of proving an exception to a rule is on the person who wants the benefit of the exception; if the 4th respondent's case is that the fourth child born to him is dead, the burden of proving the said fact should have been placed on him and not on 6th respondent (he relied upon the decision in B. Kantha Reddy v. Mandal Development Officer-cum-Additional District Election Authority, Manopad Mandal, Mahabubnagar District and others2 in this regard); the mere act of procreation of more children than permitted after the relevant date for seeking elected office under the Act creates a disqualification as held by this Court in B.K. Parthasarathi and others v. Govt. of A.P., Panchayat Raj Dept. and others3 and Are Gangadhar v. Zilla Praja Parishad, Karimnagar and others4; that in Javed and others v. State of Haryana and others5, the Supreme Court had held that the disqualification is attracted no sooner the third child is born; in the A.P. Panchayat Raj Act,1994 there is no specific provision like in Haryana Panchayat Raj Act, 1994 and Haryana Municipal Act, 1973 that the additional child should also be alive; therefore, whether the fourth child of the 4th respondent was alive or dead is unnecessary to be gone into; this principle of law has also been ignored by the election tribunal; in any event, the order of the election tribunal is perverse and is unsustainable.= whether by death of the 4th child of 4th respondent his disqualification is erased? For the above reasons, the writ petition is allowed with costs and the order dt.22.07.2003 in O.P.No.5 of 2001 on the file of the Election Tribunal- cum- Principal Junior Civil Judge, Hyderabad (East and North), Ranga Reddy District, is quashed and it is declared that the 4th respondent has incurred the disqualification u/S.19(3) of the Act disentitling him from contesting for any post in the Grampanchayat of Bata Singaram Village, Hayath Nagar Mandal, Ranga Reddy District under the Act.

reported in / published in http://judis.nic.in/judis_andhra/filename=9881

THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO          

W.P.No.23648 of 2003

29.04.2013

A.Yadagiri                                                                      ...PETITIONER

The Chief Election Commissioner, Hyderabad and others   ...RESPONDENTS  

<GIST:

>HEAD NOTE:  

Counsel for the Petitioner      : Sri S.Ramachandra Rao
representing Sri K.R.Prabhakar.

Counsel for the respondents 2 and 3: G.P. for Panchayat Raj and Rural
Development
Counsel for the respondent 4: Sri Vedula Venkata Ramana

?Cases referred:
1 (1969) 1 SCC 408
2 2005 (5)ALD 742
3 1999(5) ALT 715 (D.B.)
4 1999 (5) ALD 585
5 2003 8 SCC 369
6 2004 1 SCC 287
7 2009 (1) ALD 570
8 2003 (5) ALT 1 (D.B.)
9 (2004) 8 SCC 1
10 AIR 1964 SC 477
11(2003) 6 SCC 675
12(1990) 2 SCC 378
13 (2004) 13 SCC 524
14 (2009)13 SCC 131
15 2010 10 SCC 677

ORDER:
        Heard Sri S. Ramachandra Rao-learned counsel representing Sri K.R.
Prabhakar for the petitioner; the learned Government Pleader for Panchayat Raj
and Rural Development for respondent Nos.2 to 3; and Sri Vedula Venkata Ramana
for the 4th respondent
2.      This writ petition is filed to call for the records relating to order
dt.21.07.2003 in O.P.No.5 of 2001 passed by the Election Tribunal-cum- Principal
Junior Civil Judge, Hyderabad (East and North), Ranga Reddy District (for short
"the Election Tribunal) and to quash the same by issuing a Writ of Certiorari
and consequentially to set aside the election of the 4th respondent as Sarpanch
of Bata Singaram Village, Hayath Nagar Mandal, Ranga Reddy District.
3.      The petitioner and respondent Nos.4 to 6 had contested for the post of
Sarpanch of the said Gram Panchayat which was notified on 01.08.2001.  The
election was to take place on 14.8.2001.
4.      After the election notification was issued on 01.08.2001 for the said
post, nominations were filed by all contestants. As required by law they also
filed sworn affidavits stating that the contents mentioned in the nomination
form were true and correct.
5.      The nomination forms were put to scrutiny on 05.08.2001.  The 3rd
respondent was the election officer and he scrutinized the nomination forms.
On
05.08.2001 through one R. Jangaiah, 6th respondent got filed an objection
petition stating that  4th respondent had three female children 
by date of issuance of election notification, that a 3rd female child was born to the wife of the 4th respondent by name Smt.N. Jayasree on 11.8.1996 in  APSRTC Hospital,  Tarnaka, as this occurred after coming into force of the A.P.Panchayat Raj Act,1994 (for short "the Act") in view of S.19 (3) of the said Act he is disqualified to contest the election.
He enclosed a certificate issued by the
said Hospital apart from a birth certificate issued by the Municipal Corporation
of Hyderabad in proof of the said fact and prayed that the nomination of  4th
respondent be rejected.
The 3rd respondent however rejected the objections and
accepted the nomination of 4th respondent. In the election which took place on
14.8.2001, 4th respondent was the successful candidate as he secured highest
votes among the contestants.  He was accordingly declared as elected for the
said post.
6.      On 16.08.2001, 6th respondent approached the 1st respondent/Chief Election
Commissioner and again submitted objections that the 4th respondent incurred
disqualification u/s.19 (3) of the Act.
The 1st respondent advised 6th respondent to approach the Election Tribunal.
Thereafter, 6th respondent filed
O.P.No.5 of 2001, before the Election tribunal u/S.233 of the Act to declare the
election of 4th respondent to the office of Sarpanch of Bata Singaram Village,
Hayath Nagar Mandal, Ranga Reddy District as null and void and consequently to
declare himself (i.e the 6th respondent) as the duly elected candidate.  
The
writ petitioner herein was arrayed as 5th respondent in the said O.P.
 7.     On 17.08.2001, a written complaint was lodged before the Mandal Revenue
Officer, Hayath Nagar Mandal saying that  4th respondent had obtained a false
certificate mentioning that his third child was born on 12.02.1994 though she
was born actually on 11.08.1996.
Basing upon the said complaint, the Mandal
Revenue Officer, Hayathnagar Mandal, conducted an enquiry and submitted his
report to the 2nd respondent/District Collector, Ranga Reddy, recommending
initiation of  action against  4th respondent.
After receipt of the report from
Mandal Revenue Officer, the 2nd respondent referred the matter to the District
Level Scrutiny Committee to submit a finding after conducting a detailed probe
into the matter.
The Committee after conducing a detailed inquiry, came to a
conclusion that the Mandal Revenue Officer had issued the said date of birth
certificate on 30.05.2001 stating that the third child was born to 4th
respondent on 12.02.1994 basing upon a report of Village Administrative Officer
and the affidavits of two gazetted officers and as such, the same is invalid and
felt that it should be cancelled.
In the mean time, 4th respondent made an
application to Revenue Divisional Officer, Nalgonda, stating that the birth of
his third child was not entered in the birth register of Municipality, Nalgonda,
and requested to direct the Commissioner of the Municipality to incorporate the
same in the birth register, basing upon an affidavit duly notarized.
Accordingly, the Revenue Divisional Officer, Nalgonda, recommended to the
Municipal Commissioner, Nalgonda by proceedings dt.17.04.2002 to initiate
necessary action as per the Rules.  On the said date, a certificate of birth was
issued by the Commissioner, Municipal Administration.  After obtaining the same,
4th respondent gave a reply to the show cause notice issued by 2nd respondent.
While so, a complaint dt.12.09.2002 was made to 2nd respondent stating that  4th
respondent had obtained a birth certificate while swearing to a false affidavit.
The said complaint was forwarded to the Revenue Divisional Officer, directing
him to take necessary action.  Subsequently, after detailed enquiry, the birth
certificate dated 17.04.2002 issued by the Municipal Commissioner, Nalgonda, was
directed to be cancelled by the Revenue Divisional Officer, Nalgonda, through
proceedings dt.11.11.2002.  Thereafter, on completion of detailed enquiry, the
Collector vide proceedings dt.04.12.2002  cancelled the certificate issued by
the Mandal Revenue Officer, Hayath Nagar Mandal, Ranga Reddy District.
Subsequently, the Commissioner, Nalgonda Municipality also cancelled the date of
birth certificate dt.17.04.2002 issued in favour of  4th respondent by
proceedings dt.15.02.2003 and the same was communicated to 2nd respondent.  
Aggrieved by orders of the District Collector, Ranga Reddy, dt.04.12.2002, 4th
respondent filed a revision before the Government.  While the said Revision was
pending, the Government vide letter dt.13.2.2003 directed 4th respondent to
produce the death certificate of his deceased daughter.  However, 4th respondent
failed to produce it before the Revisional Authority.  Subsequently, the
Revision was dismissed by order dt.13.03.2003.  Aggrieved by the said order of
the Government passed in  Revision,  4th respondent filed W.P.No.5160 of 2003 on
the file of this Court and the same was disposed of by an order dt.26.03.2003
directing the Revisional Authority to decide the case afresh after affording an
opportunity to the parties within a period of four weeks.  The Revisional
Authority after conducting a detailed enquiry and obtaining reports from the
Authorities concerned, dismissed the Revision petition filed by  4th respondent
vide G.O.Rt.No.930 dt.21.05.2003.  Aggrieved by the said order of the Revisional
Authority, 4th respondent filed W.P.No.10493 of 2003 before this Court. On
7.12.2011 this Court directed the Election Tribunal to decide the case
independently without being influenced in any manner by the date of birth
certificate issued by the Mandal Revenue Officer and the orders passed by the
District Collector, Ranga Reddy, dt.04.12.2002.
8.      Before the Election Tribunal, 6th respondent examined PWs.1 to 4 and
marked Exs.A.1 to A.8; 4th respondent examined DWs.1 to 4 and marked Exs.B.1 to  
B.19; certain documents were also marked as Exs.C.1 to C.6 by PW.3-the Senior
Medical Officer in the APSRTC Hospital, Tarnaka.
9.      By order dt.21.07.2003, the Election Tribunal dismissed the O.P.  It held
that the 4th respondent had got three children and one of those children was
born on 11.08.1996; since the 4th respondent contended that all his three
children were born prior to 22.04.1995, the burden is on the 6th respondent to
prove that 4th respondent was having three children by 22.04.1995 and that he
incurred disqualification for having more than two children by date of election
notification and is disqualified from holding the post of a Sarpanch; that there
is no clinching evidence  as to who among the three daughters of  4th respondent
was born on 11.08.1996 in view of inconsistency between Ex.B.1 and A.5; the
evidence of PW.3-Senior Civil Surgeon working in  APSRTC Hospital, Tarnaka, who
produced the hospital records about the delivery of a female child on 11.08.1996
by  wife of  4th respondent is shaky as she was not the doctor who was on duty
at the time of delivery of the female child of the 4th respondent on that day;
it is the contention of  4th respondent that the female child born to his wife
on 11.08.1996 died 15 days later due to vomiting and loose motions; it is
unnatural for a parent to come forward to speak falsehood with regard to  death
of his/her child for whatever reasons; if really a third child was born and
living, the 4th respondent would not come forward and speak falsehood that the
child is dead; burden is on  6th respondent to prove that the child born on
11.08.1996 is surviving or living;  6th respondent failed to prove the
correctness of  dates of birth given by  4th respondent in respect of his three
daughters; two of his daughters were born before 1995 and the third daughter was
born on 22.04.1995 as per Ex.B.9 to 12; Ex.B.4 cannot be considered by the
Election Tribunal in view of an order dt.27.06.2003 in W.P.M.P.No.13167 of 2003
in W.P.No.10493/2003 ; and therefore, the 6th respondent is not entitled to any
relief in the OP.
10.     Challenging the said order, 6th respondent filed W.P.No.19127 of 2003
while petitioner filed the present writ petition.
11.      W.P.No.19127 of 2003 and the present writ petition were both listed for
hearing on 07.09.2007 before a learned single Judge of this Court.  There was no
representation on behalf of counsel for the petitioners in both writ petitions
on that day. So both writ petitions were dismissed as infructuous by separate
orders dt.07.09.2007 on the ground that the writ petitions relate to elections
held in 2001 and as fresh elections were held in 2006, they became infructuous.
12.     The petitioner herein filed a review petition W.P.M.P.No.25018 of 2010 to
review the order dt.07.09.2007 passed in the present writ petition.  In the said
review petition he contended that the disqualification incurred by 4th
respondent is in the nature of a permanent disability in the event the
allegation made against him being upheld in the writ petition and would
disqualify 4th respondent from holding any office under the Act for life.  By
order dt.25.03.2013, the review petition was allowed by a learned single judge
of this court relying on the judgment of the Supreme Court in Sheo Sadan Singh
v. Mohan Lal Gautam1 wherein the Supreme Court held that allegations made
against an elected candidate about corrupt practices during the election if
found true, would result not only in the declaration of his election as void but
would also render him liable for certain electoral disqualifications and that
merely because there is a dissolution of the Assembly, it does not put an end to
the election petition.  This Court held that the said principle would apply and
the writ petition would not become infructuous as held in the order
dt.07.09.2007 passed and that it is a mistake apparent on the face of record. It
allowed the review petition and restored the writ petition to the file of this
Court.  Here, it is pertinent to note that the 6th respondent who had filed the
election petition O.P.No.5 of 2001 and  W.P.No.19127 of 2003 in this Court
against the order therein which was also dismissed on 07.09.2007, did not chose
to file any review petition and the dismissal of his writ petition attained
finality.
13.     It is the contention of the counsel for the petitioner that  4th
respondent had admitted in his evidence ( as RW.2 in the OP) that he had four
children- three daughters by name Mounika, Harshika and Rushika were born on
22.01.1990, 23.01.1993 and 12.02.1994 and that a 4th daughter was born on
11.08.1996 at the APSRTC Hospital, Tarnaka; in the revision petition filed by
4th respondent before the State Government (challenging the order dt.04.12.2002
passed by  2nd respondent holding that  4th respondent had obtained an
integrated community, nativity and date of birth certificate dt.30.05.2001 in
respect of his daughter Kumari Rushika Netha mentioning the date of birth as
12.02.1994 instead of 11.08.1996) also, 4th respondent  admitted that he had a
fourth daughter who was born on 11.08.1996;
  u/S.19(3) of the Act, although the
birth of  first three children may not operate to disqualify the 4th respondent for contesting for the election to the post of Sarpanch, under the second proviso to the said sub-section, the birth of a fourth child (which results in the increase in the number of children of  4th respondent after 22.04.1994 ) resulted in the disqualification of  4th respondent; So, his nomination for the
post of Sarpanch should have been rejected outright by  3rd respondent; the Election tribunal has ignored this material admission on the part of the 4th respondent while passing the impugned order;  4th respondent had failed to produce any evidence as to the death of his fourth child; 
the election tribunal
had perversely placed the burden of proving that the child born to the 4th
respondent on 11.08.1996 is living on  6th respondent; 
it is settled law that
the burden of proving an exception to a rule is on the person who wants the
benefit of the exception; if the 4th respondent's case is that the fourth child
born to him is dead, the burden of proving the said fact should have been placed
on him and not on  6th respondent (he relied upon the decision in B. Kantha
Reddy v. Mandal Development Officer-cum-Additional District Election Authority,
Manopad Mandal, Mahabubnagar District and others2 in this regard); the mere act
of procreation of more children than permitted after the relevant date for
seeking elected office under the Act creates a disqualification as held by this
Court in B.K. Parthasarathi and others v. Govt. of A.P., Panchayat Raj Dept. and
others3 and Are Gangadhar  v. Zilla Praja Parishad, Karimnagar and others4;
that in Javed and others v. State of Haryana and others5, the Supreme Court had
held that the disqualification is attracted no sooner the third child is born;
in the A.P. Panchayat Raj Act,1994 there is no specific provision like in
Haryana Panchayat Raj Act, 1994 and Haryana Municipal Act, 1973 that the  
additional child should also be alive; therefore, whether the fourth child of
the 4th respondent was alive or dead is unnecessary to be gone into; this
principle of law has also been ignored by the election tribunal; in any event,
the order of the election tribunal is perverse and is unsustainable.
14.     Per contra, The counsel for  4th respondent contended that the writ
petition should be dismissed summarily as petitioner herein had not challenged
the election of  4th respondent by filing an election petition u/S.233 of the
Act;  although 6th respondent has challenged the same by filing O.P.No.5 of 2001
and the order dismissing the said O.P in W.P.No.19127 of 2003, he did not pursue
the matter and dismissal of the said writ petition has attained finality; under
Article 243-O of the Constitution of India, an election cannot be challenged
except by way of an election petition as per law made by State Legislature;
there cannot be a collateral attack to the election and the writ petitioner
herein cannot be allowed to take advantage of this writ petition and plead the
cause of 6th respondent; there is therefore a constitutional bar to grant any
relief to the petitioner; the remedy of a writ is a discretionary remedy and in
the facts and circumstances of this case, this Court should not come to the aid
of the petitioner; he relied upon the decision in Rafique Bibi v. Sayed
Waliuddin and others6 and contended that the right remedy of filing of election
petition has to be invoked by a contestant in an election to invalidate the
election and as the petitioner herein had not chosen to do so, he should not be
granted any relief; he also relied upon the decision of this Court in Golla
Jayamma and Ors. V. District Collector and Ors.7; Bhukya Bujji v. Bhukya
Saraswathi and others8; and Zile Singh v. State of Haryana and others9. He also
contended the scope of certiorari jurisdiction of the High Court is very narrow;
that errors of fact in the order of the election tribunal cannot be interfered
with in exercise of jurisdiction under Art.226 and relied on Syed Yakoob v.
Radhakrishnan10 and Surya Dev Rai v. Ram Chander Rai and others11.  
15.     I have noted the submissions of the respective parties.
16.     The admitted facts are that petitioner and respondent Nos.4 to 6 filed
nominations for the post of Sarpanch of Bata Singaram Grampanchayat which was
notified on 01.08.2001.  The said election was held on 14.08.2001 and the 4th
respondent was declared as elected.  At the time when the nominations for the
said election were put up for scrutiny, 6th respondent through one R. Jangaiah
filed an objection petition on 05.08.2001 stating that  4th respondent had three
female children, the last of whom was born on 11.08.1996 and therefore, he was
not eligible to contest for the said post.  The 3rd respondent-the election
officer, rejected the said contention.  Thereafter, the 6th respondent
approached the Chief Election Commissioner and submitted objections but he was
advised to approach the election tribunal for relief.  The 6th respondent
thereafter filed O.P.No.5 of 2001 before the Election tribunal u/S.233 of the
Act to declare election of the 4th respondent to the office of the Sarpanch of
the Bata Singaram Grampanchayat as null and void and consequently to declare him
as the elected candidate.  In the said election petition, the petitioner herein
is arrayed as the 5th respondent.
17.     In the O.P, the 6th respondent alleged that 4th respondent filed a false
affidavit along with his nomination stating that he had only two children, that
he was actually having three children as on the date of the election
notification and the third child was born on 11.08.1996 and therefore, he was
disqualified to contest the election; and in view of the said disqualification,
the OP should be allowed.
18.     4th respondent filed a counter in the OP denying the allegations in the OP
and contending that he had not violated any of the provisions of the A.P.
Panchayat Raj Act; that the petition filed by R. Jangaiah opposing his
nomination was rightly dismissed by 3rd respondent and he had given in writing
to  3rd respondent that his third child was born on 12.02.1994 and, as such, he
is not disqualified under the provisions of the Act.  He also stated that the
child born to him on 11.08.1996 died after it's birth and therefore, the
question of incurring disqualification by him on account of having three
children does not arise.
19.     The petitioner (in his capacity as 5th respondent in the O.P) filed a
counter stating that  4th respondent was having three children as on the date of
notification and the 4th respondent had filed a false affidavit along with his
nomination by suppressing the facts; that the 4th respondent was disqualified
under the provisions of the A.P. Panchayat Raj Act,1994 from contesting to the
post of Sarpanch and he had been illegally allowed to contest the election; in
the said election 4th respondent was declared as a returned candidate and the
election of  4th respondent is null and void.
20.     During the course of trial in the O.P, the 4th respondent was examined as
DW.2 in the election petition.  He stated as follows :
"I have four children.  My eldest daughter is Kum. Mounika, She was born on
22.8.90.  My second daughter is Narshika, She was born on 23.1.93.  My third
daughter is Kum. Rushika she was born on 12.2.94.  My fourth daughter was born
on 11.8.96.  She took birth in APSRTC Hospital, Tarnaka and she died within
fifteen days of taking birth.  I do not specifically remember the date of death
of my fourth daughter.  She died due to vomiting and loose motions.
As on the date of submission of nominations papers I was having three surviving
daughters.  All these three daughters are born before the cut of date 22.4.1995.
I did not beget any surviving child after 22.4.95. ... ..."
21.     Thus, it was not disputed by 4th respondent that he had four children, on
the date when the Act came into force, three of whom were born before 22.04.1994
and one child/a daughter born after the Act came into force, who allegedly died.
22.     Section 19(3) of the Act states as follows :
"S.19.(3):      A person having more than two children shall be disqualified for
election or for continuing as member:
Provided that the birth within one year from the date of commencement of the
Andhra Pradesh Panchayat Raj Act, 1994 hereinafter in this section referred to
as the date of such commencement, of an additional child shall not be taken into
consideration for the purposes of this section.
Provided further that a person having more than two children (excluding the
child if any born within one year from the date of such commencement) shall not
be disqualified under this section for so long as the number of children he had
on the date of such commencement does not increase.
Provided also that the Government, may direct that the disqualification in this
section shall not apply in respect of a person for reasons to be recorded in
writing."
23.     The above provision makes it clear that the election petitioner has to
prove that the returned candidate had more than two children and a third child
was born after 30.05.1995 and if the returned candidate had more than two
children prior to the coming into force of the Act, he would not be disqualified
under this provision so long as the number of children he had on 30.05.1994 did
not increase subsequently.
24.     It is important to note that this provision in the Act, does not use the
words "two living children" as  in the Haryana Municipal Act, 1973 as amended by
Haryana Acts 3 and 15 of 1994 (considered in Zile Singh (8 supra) )  and the
Haryana Panchayat Raj Act, 1994 (considered in Javed and others (5 supra)).  It
merely states that a person having more than two children shall be disqualified
for election or for continuing as a member.  Interpreting Section 19(3), in B.K.
Parthasarathi (3 supra), a Division Bench of this Court held :
        "22.    The impugned provision, viz., sub-section (3) of Section 19 of the
said Act does not directly curtail or directly interfere with the right of any
citizen to take a decision in the matter of procreation.  It only creates a
legal disability on the part of any person who has procreated more than two
children as on the relevant date of seeking an elected office under the Act.
The substance of the provision is that it does not compel directly anyone to
stop procreation, but only disqualifies any person who is otherwise eligible to
seek election to various public offices coming within the ambit of the Andhra
Pradesh Panchayat Raj Act, 1994 or declares such person who have already been
holding such offices to be disqualified from continuing in such office if they
procreate more than two children.
        ... ... ...
        26.     What is sought to be curtained by the Legislature in this case is
not the right to procreation but the right to seek certain elected offices
created under the Andhra Pradesh Panchayat Raj Act, 1994 if one begets more
children than the prescribed limit . ... ... ..."(emphasis mine)
25.     Another Division Bench of this Court in Are Gangadhar              (4
supra), held that :
        "2.     ... ... ... There is a provision under Section 19(3) of A.P.
Panchayat Raj Act, 1994 disqualifying the elected member, if he has more than
two children.  Even if a person before election has got two children, but begets
third child after the election, such person is liable to be disqualified. ...
..."(emphasis mine)
26.     In view of the above decisions it is clear that the very act of
procreation of more than the prescribed number of children would result in
disqualification of a candidate for contesting the election to a post under the
Act.  Thus if there is such a procreation, the fact that such child died
thereafter has no relevance.

27.     Although the counsel for 4th respondent Sri V. Venkataramana sought to
contend that the word "having two children" in S.19(3) implies that the child
(whose birth would result in the incurring of the disqualification) should also
be alive at the time of the notification, such an interpretation is not possible
in view of the absence of the word "living" in Section 19.  The Court cannot add
words to a statute as held in P.K.Unni v. Nirmala Industries12. In the said
case, the Supreme court held:
"14. Appearing for the appellant (the auction purchaser), Mr Parasaran submits
that the High Court was not justified in attempting to correct or supply, what
it thought to be, a defect or an omission in the statute. He rightly contends
that even if there was an omission, it was not for the court to rectify it.
15. The court must indeed proceed on the assumption that the legislature did not
make a mistake and that it intended to say what it said: See Nalinakhya Bysack
v. Shyam Sunder Haldar3. Assuming there is a defect or an omission in the words
used by the legislature, the court would not go to its aid to correct or make up
the deficiency. The court cannot add words to a statute or read words into it
which are not there, especially when the literal reading produces an
intelligible result. No case can be found to authorise any court to alter a word
so as to produce a casus omissus: Per Lord Halsbury, Mersey Docks and Harbour  
Board v. Henderson Brothers4. "We cannot aid the legislature's defective
phrasing of an Act, we cannot add and mend, and, by construction, make up
deficiencies which are left there": Crawford v. Spooner5."
In fact, the first proviso to sub-Section 3 of Section 19 which states that
"birth within one year from the date of commencement of the Act, (i.e.,
30.05.1994) of an additional child shall not be taken into consideration for the
purpose of this Section" indicates that it is the birth of the child, i.e., the
very procreation of the child more than the permissible limit which would result
in the incurring of disqualification and there is no necessity that the said
child should also be alive as on the date of the notification.  Sri
Venkataramana relied upon Zile Singh (9 supra) and contended that the Supreme
Court in the said cases has also held that if there are more than two children,
they should also be alive in order that a disqualification may be incurred.  But
in the Haryana Municipal (Amendment) Act, 1994 (as amended in the Haryana
Municipal Act, 1973) and as inserted in the principal Act considered in that
case ,the disqualification is incurred for having more than two "living"
children. But, in the A.P. Panchayat Raj Act,1994 the word "living" is not
mentioned and therefore, it is not open to interpret the provisions of Section
19(3) of A.P. Act to mean that it would apply only if the child whose birth
would result in the incurring of the disqualification is alive.  I have
therefore, no hesitation in rejecting this contention raised by the learned
counsel for the respondent.
28.     A reading of the judgment of the election tribunal no where indicates that
the said tribunal has considered the issue whether the birth of the extra child
by itself would result in the 4th respondent incurring in the disqualification.
A reading of the said order of the tribunal also discloses that no where in the
said order has the election tribunal referred to the admissions contained the
evidence of 4th respondent as RW.2 as set out above.  In view of the categorical
admission of 4th respondent before it that he had four daughters and the fourth
child was born on 11.08.96 (after the Act came into force), the tribunal ought
to have allowed the election petition as the very procreation of the fourth
child is sufficient to disqualify the 4th respondent.  By ignoring the clear
language of S.19(3) of the Act , misreading it, and refusing to consider the
material evidence of 4th respondent and misreading the other evidence the
Tribunal clearly committed  an error apparent on the face of record .
29.     Assuming for the sake of argument that 4th respondent would not incur
disqualification if the fourth child were not alive (although this is not the
legal position as set out above), the burden is on the 4th respondent to
establish that the said child is not alive.  This is a fact within his personal
knowledge and he has not adduced any evidence in support of the fact that the
fourth child died except his ipsi dixit.  In B. Kantha Reddy (2 supra), a
contention was raised by the petitioner therein claiming a benefit under the
proviso of Section 19(3) of the Act on the ground that his wife gave birth to
last of his three children on 29.12.1994.   This Court held when a person claims
benefit under the proviso it is for him to prove that he did not incur the
disqualification.  It held that if the petitioner is claiming benefit under the
proviso on the ground that the last child was born within one year on the date
of the commencement of the Act, it is for him to prove the said fact. In view of
this decision, it has to be held that 4th respondent failed to prove that his
case falls within the exception assuming for the sake of argument that death of
his 4th child will not make him disqualified.
30.     The respondents before the election tribunal had filed Ex.B.14 a letter
dt.13.2.2003 addressed to the 4th respondent by the Dy. Secretary to Government,
Revenue (Ser.II) Dept., A.P. Secretariat, Hyderabad, in connection with the
cancellation of the nativity and date of birth certificate by the Collector,
Ranga Reddy District, which had been challenged in a revision petition by the
4th respondent.  In the said letter, the 4th respondent was requested to produce
the death certificate of the deceased daughter to take further action in the
matter.  Admittedly, no certificate was produced by the 4th respondent before
the Government in the said proceeding.  It was also not produced before the
election tribunal.  Thus 4th respondent never discharged the burden of proving
that his 4th child was dead. Wrongly placing the burden of proving the fact that
the 4th respondent's fourth child was dead on the election petitioner-Respondent
no.6 is clearly an error apparent on the face of record.
31.     The Election tribunal also stated that no father or mother would come
forward to speak falsehood with regard to their death of their child for
whatever reasons it may be and if the said child was born and living, the 4th
respondent would not come forward and speak falsehood stating that a child who
is living is dead.  This Court is of the opinion that such implicit trust in the
4th respondent by the election tribunal was totally misplaced .         In the
counter-affidavit filed by 4th respondent to the review petition in
W.P.M.P.No.25018 of 2010 in this writ petition, the 4th respondent stated that
his third child was born on 11.08.1996 and that the child died after the birth
and therefore, the question of incurring disqualification on account having
three children does not arise as on the date of notification he had only two
surviving children.  This statement in the counter-affidavit also contradicts
the evidence of the 4th respondent as RW.2 before the election tribunal wherein
he admitted that he had four daughters.  The above conduct of the 4th respondent
clearly indicates that he would not hesitate to speak untruth if it is to his
advantage and mislead any authority for gain.
32.     The election tribunal also refers to an observation by this Court in an
order dt.27.06.2003 in W.P.MP.No.13167 of 2003 that "it is open for the tribunal
to decide the election petition without being influenced in any manner that the
date of birth certificate issued by MRO and the orders canceling the said
certificate by the District Collector".  The order of the District Collector
referred to in the said order is Ex.A.7.  The Election tribunal held that it
would not consider Ex.B.4, Ex.A.7, Ex.A.8 and the evidence of PW.4 (who was the
returning officer who deposed about the proceedings before the Collector) and
the order of the Collector dt.04.12.2002 without stating why it is not
considering them.   It is  un-understandable as to how it could construe the
observations of this Court referred to above as precluding it from considering
the said evidence, when the High Court left it open to it to consider them or
not to take them into account.  This also indicates total non-application of
mind by the Election Tribunal.
33.     This Court in Golla Jayamma and Ors. (7 supra) held that a finding as to
incurring of a disqualification u/S.19(3) of the Act would haunt a candidate for
the rest of his life and he would be ineligible to contest; that consequences of
incurring disqualification u/S.19(3) are far more reaching than those flowing
from corrupt practice as in the latter, the disqualification is only for a
limited period.  It held that disqualification u/S.19(3) of the Act would
disqualify once for all in a persons' lifetime and prevent him from seeking
election from any office or post under the Act.
34.     In Javed and others (5 supra), the Supreme Court had an occasion to
consider whether the provision disqualifying a person under Haryana Panchayati
Raj Act, 1994, on the ground that he had more than two living children is
unsustainable.  It held as follows :
"9.     It was submitted that the number of children which one has, whether two or
three or more, does not affect the capacity, competence and quality of a person
to serve on any office of a Panchayat and, therefore, the impugned
disqualification has no nexus with the purpose sought to be achieved by the Act.
There is no merit in the submission. We have already stated that one of the
objects of the enactment is to popularize family welfare/family planning
programme. This is consistent with the National Population Policy.
... ... ...

10.     ... ... ...

Family welfare would include family planning as well. To carry out the purpose
of the Act as well as the mandate of the Constitution the legislature has made a
provision for making a person having more than two living children ineligible to
either contest for the post of Panch or Sarpanch. Such a provision would serve
the purpose of the Act as mandated by the Constitution. It cannot be said that
such a provision would not serve the purpose of the Act.

        ... ... ...

18.     To make a beginning, the reforms may be introduced at the grass-root level
so as to spiral up or may be introduced at the top so as to percolate down.
Panchayats are grass-root-level institutions of local self-governance. They have
a wider base. There is nothing wrong in the State of Haryana having chosen to
subscribe to the national movement of population control by enacting a
legislation which would go a long way in ameliorating health, social and
economic conditions of rural population, and thereby contribute to the
development of the nation which in its turn would benefit the entire citizenry.
... ... ...
... ... ...

22.     Right to contest an election is neither a fundamental right nor a common
law right. It is a right conferred by a statute. At the most, in view of Part IX
having been added in the Constitution, a right to contest election for an office
in Panchayat may be said to be a constitutional right - a right originating in
the Constitution and given shape by a statute. But even so, it cannot be equated
with a fundamental right. There is nothing wrong in the same statute which
confers the right to contest an election also to provide for the necessary
qualifications without which a person cannot offer his candidature for an
elective office and also to provide for disqualifications which would disable a
person from contesting for, or holding, an elective statutory office."

35.   The Supreme Court held that the obligations imposed on the State under
Article 38, 47, and on the citizen under Article 51A of the Constitution of
India cannot be achieved without controlling population in as much as, the
resources of the country are limited and claimants are many and disqualification
provided in the statute of having more than two living children seeks to achieve
a laudable purpose -socio-economic welfare and health care of the masses- and is
consistent with the National Population policy.

36.     In the light of the above authoritative pronouncement of the Supreme
Court, the contentions of the counsel for the respondent that the petitioner in
this writ petition is not an election petitioner, that he has not filed an
election petition challenging the election of 4th respondent and therefore no
relief can be granted to the petitioner in this writ petition are wholly
untenable.  This Court as a constitutional court cannot be a mute spectator to
the gross violation of the provisions of the Act by 3rd respondent in permitting
4th respondent to contest the election and of the 1st respondent in upholding
the action of 3rd respondent and driving 6th respondent to file an election
petition.  It is not denied that the 4th respondent not only completed his term
as Sarpanch from 14.08.2001, but he also contested the Panchayat election in
2006 and also subsequently for the same post inspite of his disqualification
thus making a mockery of the Act and the policy of the legislature.

37.     The counsel for 4th respondent also relied upon Rafique Bibi (6 supra) and
contended that a Court will invalidate an order only if the right remedy is
sought by the right person in the right proceedings and circumstances and that
the right remedy in the facts and circumstances is filing of an election
petition, that the petitioner has not filed the election petition and therefore,
no relief should be granted. This contention is untenable. Indisputably the
petitioner is a party to the election petition filed by 6th respondent and both
6th respondent and petitioner have challenged orders passed by the election
tribunal dismissing the O.P/election petition.  The writ petition of the
petitioner was entertained by this Court, admitted and although initially
dismissed as infructuous, subsequently revived.  The petitioner undoubtedly has
a right to canvass the correctness of the order of the election tribunal being a
party to the election petition.  Merely because the 6th respondent after
dismissal of W.P.No.19127 of 2003 filed by him against order in the O.P did not
pursue it, that will not render deprive this writ petitioner of locus to file
the writ and continue it.  The locus of the petitioner herein is not dependent
on the fate of the writ filed by 6th respondent particularly where the latter
was not decided on merits but erroneously dismissed as infructous. As the issue
involved is a serious one, i.e., to prevent persons who have incurred
disqualification like  4th respondent from contesting for an election to a post
in the gram panchayat which has been enacted by the State Legislature to
implement the constitutional objectives set out in Javed and others (5 supra),
this writ petition cannot be rejected on the ground that the petitioner has not
filed the election petition.  If contention of 4th respondent is accepted, it
would allow the 4th respondent to contest future elections for posts in the gram
panchayat in spite of the fact that he has incurred a disqualification from
contesting them under the Act and  result in perpetuation of a fraud on the
statute.

38.     The counsel for 4th respondent lastly contended that the scope of writ
jurisdiction is very limited; that findings of fact of subordinate tribunals
cannot be normally interfered with in exercise of Certiorari jurisdiction by
this Court; this Court cannot act as an appellate court; an error of fact,
however grave it may appear to be, cannot be corrected and only errors of law
apparent on the face of record can be corrected.        He cited Syed Yakoob (10
supra) and Surya Dev Rai (11 supra).

39.     In Syed Yakoob (10 supra), the Supreme Court laid down :

"7.     The question about the limits of the jurisdiction of High Courts in
issuing a writ of certiorari under Article 226 has been frequently considered by
this Court and the true legal position in that behalf is no longer in doubt. A
writ of certiorari can be issued for correcting errors of jurisdiction committed
by inferior courts or tribunals: these are cases where orders are passed by
inferior courts or tribunals without jurisdiction, or is in excess of it, or as
a result of failure to exercise jurisdiction. A writ can similarly be issued
where in exercise of jurisdiction conferred on it, the Court or Tribunal acts
illegally or properly, as for instance, it decides a question without giving an
opportunity, be heard to the party affected by the order, or where the procedure
adopted in dealing with the dispute is opposed to principles of natural justice.
There is, however, no doubt that the jurisdiction to issue a writ of certiorari
is a supervisory jurisdiction and the Court exercising it is not entitled to act
as an appellate Court. This limitation necessarily means that findings of fact
reached by the inferior Court or Tribunal as result of the appreciation of
evidence cannot be reopened or questioned in writ proceedings. An error of law
which is apparent on the face of the record can be corrected by a writ, but not
an error of fact, however grave it may appear to be. In regard to a finding of
fact recorded by the Tribunal, a writ of certiorari can be issued if it is shown
that in recording the said finding, the Tribunal had erroneously refused to
admit admissible and material evidence, or had erroneously admitted inadmissible
evidence which has influenced the impugned finding. Similarly, if a finding of
fact is based on no evidence, that would be regarded as an error of law which
can be corrected by a writ of certiorari. In dealing with this category of
cases, however, we must always bear in mind that a finding of fact recorded by
the Tribunal cannot be challenged in proceedings for a writ of certiorari on the
ground that the relevant and material evidence adduced before the Tribunal was
insufficient or inadequate to sustain the impugned finding. The adequacy or
sufficiency of evidence led on a point and the inference of fact to be drawn
from the said finding are within the exclusive jurisdiction of the Tribunal, and
the said points cannot be agitated before a writ Court. It is within these
limits that the jurisdiction conferred on the High Courts under Article 226 to
issue a writ of certiorari can be legitimately exercised (vide Hari Vishnu
Kamath v. Syed Ahmad Ishaque Nagandra Nath Bora v. Commissioner of Hills  
Division and Appeals Assam and Kaushalya Devi v. Bachittar Singh)."

40.     In Surya Dev Rai (11 supra), the Supreme Court declared :
"38. ... We sum up our conclusions in a nutshell, even at the risk of repetition
and state the same as hereunder:
                ... ... ...

 (3)    Certiorari, under Article 226 of the Constitution, is issued for
correcting gross errors of jurisdiction i.e. when a subordinate court is found
to have acted (i) without jurisdiction - by assuming jurisdiction where there
exists none, or (ii) in excess of its jurisdiction - by overstepping or crossing
the limits of jurisdiction, or (iii) acting in flagrant disregard of law or the
rules of procedure or acting in violation of principles of natural justice where
there is no procedure specified, and thereby occasioning failure of justice.
... ... ...

 (5)    Be it a writ of certiorari or the exercise of supervisory jurisdiction,
none is available to correct mere errors of fact or of law unless the following
requirements are satisfied: (i) the error is manifest and apparent on the face
of the proceedings such as when it is based on clear ignorance or utter
disregard of the provisions of law, and (ii) a grave injustice or gross failure
of justice has occasioned thereby.
... ... ...
 (7)    The power to issue a writ of certiorari and the supervisory jurisdiction
are to be exercised sparingly and only in appropriate cases where the judicial
conscience of the High Court dictates it to act lest a gross failure of justice
or grave injustice should occasion. Care, caution and circumspection need to be
exercised, when any of the above said two jurisdictions is sought to be invoked
during the pendency of any suit or proceedings in a subordinate court and the
error though calling for correction is yet capable of being corrected at the
conclusion of the proceedings in an appeal or revision preferred thereagainst
and entertaining a petition invoking certiorari or supervisory jurisdiction of
the High Court would obstruct the smooth flow and/or early disposal of the suit
or proceedings. The High Court may feel inclined to intervene where the error is
such, as, if not corrected at that very moment, may become incapable of
correction at a later stage and refusal to intervene would result in travesty of
justice or where such refusal itself would result in prolonging of the lis.
 (8) The High Court in exercise of certiorari or supervisory jurisdiction will
not convert itself into a court of appeal and indulge in reappreciation or
evaluation of evidence or correct errors in drawing inferences or correct errors
of mere formal or technical character.
(9) In practice, the parameters for exercising jurisdiction to issue a writ of
certiorari and those calling for exercise of supervisory jurisdiction are almost
similar and the width of jurisdiction exercised by the High Courts in India
unlike English courts has almost obliterated the distinction between the two
jurisdictions. While exercising jurisdiction to issue a writ of certiorari, the
High Court may annul or set aside the act, order or proceedings of the
subordinate courts but cannot substitute its own decision in place thereof. In
exercise of supervisory jurisdiction the High Court may not only give suitable
directions so as to guide the subordinate court as to the manner in which it
would act or proceed thereafter or afresh, the High Court may in appropriate
cases itself make an order in supersession or substitution of the order of the
subordinate court as the court should have made in the facts and circumstances
of the case.

41.     In Sumathi P.Rai v. Isac D'Almeida13, the Supreme Court observed:

"7.     Learned Senior Counsel for the appellant is right, so far the position of
law is concerned that the High Court, while exercising writ jurisdiction, cannot
reappreciate the evidence as if it is the court of appeal, but, in the instant
case, the learned Single Judge has not acted as the court of appeal. He has
corrected the patent error committed by the Tribunal as is evident from para 8
extracted above. Since the Tribunal has misread the evidence and ignored
material evidence, the learned Single Judge of the High Court was right in
interfering with such a finding of fact. The Division Bench of the High Court,
after perusing the order of the learned Single Judge, taking an overall view of
the matter, was right in not interfering with the order of the learned Single
Judge."
        (emphasis mine)

42.     In Uttamrao Shivdas Jankar v. Ranjitsinh Vijaysinh Mohite-Patil14, the
Supreme Court considered the power of the High Court in an election petition
tried by it under S.100 of the Representation of People Act, 1951 against an
improper rejection of a nomination and opined:

"31.    Section 100 of the Act provides for the grounds for declaring election to
be void inter alia in a case where a nomination has been improperly rejected.
Improper rejection of a nomination, on a plain reading of the aforementioned
provision, in our opinion, would not mean that for the said purpose an election
petitioner can only show an error in the decision-making process by a Returning
Officer but also the correctness of the said decision.
32. Indisputably, there exists a distinction between a decision-making process
adopted by a statutory authority and the merit of the decision. Whereas in the
former, the Court would apply the standard of judicial review, in the latter, it
may enter into the merit of the matter. Even in applying the standard of
judicial review, we are of the opinion that the scope thereof having been
expanded in recent times viz. other than (i) illegality, (ii) irrationality, and
(iii) procedural impropriety, an error of fact touching the merit of the
decision vis--vis the decision-making process would also come within the
purview of the power of judicial review.
33. In Cholan Roadways Ltd. v. G. Thirugnanasambanda this Court observed: (SCC
p. 253, paras 34-35)
 "34. ... It is now well settled that a quasi-judicial authority must pose unto
itself a correct question so as to arrive at a correct finding of fact. A wrong
question posed leads to a wrong answer. In this case, furthermore, the
misdirection in law committed by the Industrial Tribunal was apparent insofar as
it did not apply the principle of res ipsa loquitur which was relevant for the
purpose of this case and, thus, failed to take into consideration a relevant
factor and furthermore took into consideration an irrelevant fact not germane
for determining the issue, namely, that the passengers of the bus were
mandatorily required to be examined. The Industrial Tribunal further failed to
apply the correct standard of proof in relation to a domestic enquiry, which is
'preponderance of probability' and applied the standard of proof required for a
criminal trial. A case for judicial review was, thus, clearly made out.
35. Errors of fact can also be a subject-matter of judicial review. (See E v.
Secy. of State for the Home Deptt.2) Reference in this connection may also be
made to an interesting article by Paul P. Craig, Q.C. titled 'Judicial Review,
Appeal and Factual Error' published in 2004 Public Law, p. 788."
34. In S.N. Chandrashekar v. State of Karnataka this Court observed: (SCC p.
221, paras 33-34)
"33. It is now well known that the concept of error of law includes the giving
of reasons that are bad in law or (where there is a duty to give reason)
inconsistent, unintelligible or substantially inadequate. (See De Smith's
Judicial Review of Administrative Action, 5th Edn., p. 286.)
34. The Authority, therefore, posed unto itself a wrong question. What,
therefore, was necessary to be considered by BDA was whether the ingredients
contained in Section 14-A of the Act were fulfilled and whether the requirements
of the proviso appended thereto are satisfied. If the same had not been
satisfied, the requirements of the law must be held to have not been satisfied.
If there had been no proper application of mind as regards the requirements of
law, the State and the Planning Authority must be held to have misdirected
themselves in law which would vitiate the impugned judgment."
(See also Indian Airlines Ltd. v. Prabha D. Kanan, SCC p. 88, para 47 and Meerut
Development Authority v. Assn. of Management Studies.)
.....
46.     In an election petition, the High Court, therefore, was required to
consider whether the Returning Officer had wrongly shifted the onus in view of
S.N. Chandrashekar, which would come within the purview of an error apparent on
the face of the record."(emphasis mine)

43.     In Ritesh Tewari and another v. State of Uttar Pradesh and others15, the
Supreme Court held as follows :
       
"26.    The power under Article 226 of the Constitution is discretionary and
supervisory in nature. It is not issued merely because it is lawful to do so.
The extraordinary power in the writ jurisdiction does not exist to set right
mere errors of law which do not occasion any substantial injustice. A writ can
be issued only in case of a grave miscarriage of justice or where there has been
a flagrant violation of law. The writ court has not only to protect a person
from being subjected to a violation of law but also to advance justice and not
to thwart it. The Constitution does not place any fetter on the power of the
extraordinary jurisdiction but leaves it to the discretion of the court.
However, being that the power is discretionary, the court has to balance
competing interests, keeping in mind that the interests of justice and public
interest coalesce generally. A court of equity, when exercising its equitable
jurisdiction must act so as to prevent perpetration of a legal fraud and promote
good faith and equity. An order in equity is one which is equitable to all the
parties concerned.
        27.     Where a party's claim is not founded on valid grounds, the party
cannot claim equity. A party that claims equity must come before the court with
clean hands as equities have to be properly worked out between parties to ensure
that no one is allowed to have their pound of flesh vis--vis the others
unjustly.
28.     In A.P. State Financial Corpn. v. Gar Re-Rolling Mills this Court
observed: (SCC p. 662, para 18)
"18. ... Equity is always known to defend the law from crafty evasions and new
subtleties invented to evade law."
... ... ...
32.     It is settled legal proposition that if an order is bad in its inception,
it does not get sanctified at a later stage. A subsequent action/development
cannot validate an action which was not lawful at its inception, for the reason
that the illegality strikes at the root of the order. It would be beyond the
competence of any authority to validate such an order. It would be ironical to
permit a person to rely upon a law, in violation of which he has obtained the
benefits.
33.     In C. Albert Morris v. K. Chandrasekaran this Court held that a right in
law exists only and only when it has a lawful origin."

44.     In the present case, the election tribunal while dismissing the election
petition filed by 6th respondent did not ask itself the correct question of law
i.e 
whether the very birth of the fourth child has resulted in the incurring of disqualification by 4th respondent? 
It ignored the spirit and the letter of the law in S.19 (3) of the Act. 
It asked itself a wrong question i.e 
whether by death of the 4th child of 4th respondent his disqualification is erased?  
It
also wrongly placed the burden of proving that the fourth child is alive on the
election petitioner.  
It perversely believed the statement of  4th respondent
that his fourth child is dead even though no evidence is produced by him to
substantiate the said fact by saying that no parent would state that his child
is dead when it is alive.  
It misread the evidence and ignored the admission of
4th respondent that he had four daughters and passed the impugned order which
has resulted in grave injustice.  
Thus there is a clear error apparent on the
face of record warranting interference by this Court under Article 226 of the
Constitution of India with the order of the Election Tribunal.

45.     For the above reasons, the writ petition is allowed with costs and the
order dt.22.07.2003 in O.P.No.5 of 2001 on the file of the Election Tribunal-
cum- Principal Junior Civil Judge, Hyderabad (East and North), Ranga Reddy
District, is quashed and 
it is declared that the 4th respondent has incurred the
disqualification u/S.19(3) of the Act disentitling him from contesting for any post in the Grampanchayat of Bata Singaram Village, Hayath Nagar Mandal, Ranga  
Reddy District under the Act.
__________________________________    
JUSTICE M.S.RAMACHANDRA RAO        
Date:29-04-2013

Section 245: Set off of refunds against tax remaining payable: Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case 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 sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section." 20. From a reading of the above Section, it is crystal clear that the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case 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 sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section. (emphasis supplied).On a perusal of the entire material documents including the impugned order, it is clearly evident that there is no intimation in writing to the petitioner-assessee before making such an adjustment of refund. No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. It is conspicuous from the records that there is no intimation in writing to the petitioner before making such adjustment of refund. As the respondent has not followed the procedures prescribed under the provisions of the Act while adjusting the refund amount with the outstanding amount, the impugned order is vitiated in law and is liable to be set aside. For the foregoing reaasonings, the impugned order is set aside. The Writ Petition is allowed and the matter is remanded back to the respondent for compliance of Section 245 of the Act, and thereafter, the respondent is at liberty to adjust the refund amount payable to the petitioner with the amount payable for the respective assessment year, in accordance with law. Such an exercise shall be completed by the respondent within a period of four weeks from the date of receipt of a copy of this order. No costs. The Miscellaneous Petition is closed.

 Reported in/ published in http://judis.nic.in/judis_chennai/filename=41825
IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 30.4.2013

CORAM:

THE HONOURABLE MR.JUSTICE V.DHANAPALAN

W.P.No.8571 of 2013
&
M.P.No.1 of 2013






M/s.Cognizant Technology Solutions India P. Ltd.,
6th Floor, New No.165/Old No.110,
Menon Eternity Building,
St.Mary's Road,
Chennai-600 018
represented by its Director .. Petitioner

Vs.

The Deputy Commissioner of Income Tax,
Large Taxpayer Unit,
1775, Jawaharlal Nehru Inner Ring Road,
Anna Nagar Western Extension,
Chennai-600 101. .. Respondent





Writ Petition filed under Article 226 of the Constitution of India, praying for issuance of a Writ of Certiorarified Mandamus to call for the records and
quash the impugned order made in PAN AAACD3312M, dated 22.3.2013 passed by the respondent herein for Assessment Year 2008-09 in so far as it seeks to adjust the refund of Rs.103,09,77,260/- as against the alleged demand outstanding for Assessment Year 2009-10 and 
consequently direct the respondent herein to refund the aforesaid sum of Rs.103,09,77,260/- under Section 240 of the Income Tax Act, 1961 together with interest thereon as may be payable under Section 244/244-A of the Act.




For petitioner : Mr.Arvind P.Datar, Senior Counsel
assisted by Mr.Sandeep Bagmar.R

For respondent : Mr.T.Pramod Kumar Chopda,
Senior Standing Counsel




ORDER

By consent of the learned counsel appearing for the parties, the Writ Petition is taken up for disposal.
2. This Court heard the learned counsel appearing for the parties exhaustively on 29.4.2013 and the Writ Petition was posted "for orders" today (30.4.2013) and accordingly, it is disposed of by this order.
3. Heard Mr.Arvind P.Datar, learned Senior Counsel assisted by Mr.Sandeep Bagmar.R, learned counsel for the petitioner and Mr.T.Pramod Kumar Chopda, learned Senior Standing Counsel appearing for the respondent-Income Tax Department.
4. The petitioner calls in question the order made in PAN AAACD3312M, dated 22.3.2013 passed by the respondent herein for Assessment Year 2008-09 in so far as it seeks to adjust the refund of Rs.103,09,77,260/- as against the alleged demand outstanding for Assessment Year 2009-10, seeking to quash the same and consequently direct the respondent herein to refund the aforesaid sum of Rs.103,09,77,260/- under Section 240 of the Income Tax Act, 1961 (for short, 'the Act') together with interest thereon as may be payable under Section 244/244-A of the Act.
5. The case of the petitioner is as follows:
(a) The petitioner is a Private Limited Company incorporated under the Companies Act, 1956 and engaged in the business of development of computer software and related services and its export and provides various software solutions to variety of industries.
  The petitioner carries out its business activities through various units set up in Software Technology Parks (STPs) and Special Economic Zones (SEZs) and claims deduction under Section 10-A and 10-AA of the Act.
(b) For the assessment year 2008-09, the petitioner filed their Return of income on 29.9.2008, which was processed under Section 143(1) of the Act on 8.3.2010. The petitioner's case was selected for scrutiny by the Assistant Commissioner of Income Tax under Section 143(2) of the Act on 12.8.2009 and details were called for by the respondent under Section 142(1) of the Act on 26.8.2011, for which, detailed submissions were made by the petitioner before the respondent from time to time.
(c) The petitioner's case was referred to the Transfer Pricing Officer for necessary verification under Section 92-CA of the Act, as the petitioner has international transactions with their group companies abroad. 
The Transfer Pricing Officer, vide order dated 11.10.2011, accepted the arm's length price of the transactions of the petitioner-Company with that of their group companies abroad. Consequently, no transfer pricing adjustments were made by the respondent.
(d) The respondent passed the assessment order under Section 143(3) read with Section 92-CA of the Act for the assessment year 2008-09 in the petitioner's case on 30.12.2011, by which the following items had been disallowed:
(i) Disallowance of excess claim of deduction under Section 10-A/10-AA of the Act;
(ii) Disallowance of Exchange Fluctuation Gain on EEFC Account for the purpose of computation of deduction under Section 10-A/10-AA of the Act;
(iii) Exclusion of Expenditure in Foreign Currency from export turnover, but not from total turnover for computation of deduction under Section 10-A/10-AA of the Act;
(iv) Exclusion of telecommunication expenditure from export turnover, but not from total turnover for computation of deduction under Section 10-A/10-AA of the Act;
(v) Disallowance of provisions made on contingent liabilities;
(vi) Disallowance of loss pertaining to the 10-A/10-AA units for computation of total income of the assessment year 2008-09;
(vii) Disallowance under Section 14-A of the Act;
(viii) Disallowance of expenditure incurred for selecting employees and
(ix) Disallowance under Section 40(a)(i) towards payments made to non-residents on account of non-deduction of taxes at sources.
After making disallowances and adjustments on the above grounds, 
the respondent assessed the income of the petitioner at Rs.716,33,79,150/- as against the returned income of Rs.93,54,87,072/- and 
consequently, a demand of Rs.181,37,25,560/- was raised, vide demand notice, dated 31.12.2011 under Section 156 of the Act.
(e) Pursuant to the said demand notice, the petitioner filed a stay petition before the respondent under Section 220(6) of the Act and the respondent, vide order dated 6.7.2012, stayed the demand to the extent of Rs.71,55,83,993/- pending disposal of the appeal before the Commissioner of Income Tax (Appeals) (i.e. for short, 'CIT(A)') or until 31.12.2012 whichever is earlier. 
The petitioner remitted Rs.25,22,00,000/- on 24.2.2012 and the respondent adjusted income tax refund of Rs.71,47,53,133/- relating to various assessment years on various dates only with express consent of the petitioner given during the hearing while completing the assessment, and thereafter, on 17.12.2012, the petitioner requested for extension of stay of demand till the disposal of appeal by CIT(A).
(f) The petitioner filed an appeal against the said assessment order, dated 30.12.2011, for assessment year 2008-09 on 30.1.2012 and the same was decided in favour of the petitioner on 25.2.2013. The CIT(A) allowed the appeal except on one issue pertaining to disallowance under Section 14-A of the Act.
(g) The petitioner's case for the assessment year 2009-10 was selected for scrutiny by the respondent under Section 143(2), vide notice dated 23.8.2011. The respondent, vide order dated 22.8.2012, transferred the case of the petitioner for the assessment year 2009-10 to the Additional Commissioner of Income Tax, LTU, Chennai. The assessment for the assessment year 2009-10 was completed by the Addl.C.I.T.  on 5.3.2013 and the income of the petitioner was assessed at Rs.1473,42,53,550/- (as per normal provisions of the Act) as against the returned income of Rs.2229,73,15,902/- (under Section 115-JB of the Act) and consequently, a demand of Rs.362,38,85,090/- was raised, vide notice dated 7.3.2013 under Section 156 of the Act, which was received by the petitioner on 11.3.2013, which provided for 30 days' time for payment of the said demand and the said period of 30 days expired on 10.4.2013.
(h) By virtue of the order passed by the C.I.T (Appeals) on 25.2.2013, the petitioner became entitled to refund of Rs.103,09,77,260/-. The respondent has to refund the amount to the assessee automatically in terms of Section 240 of the Act. As against the refund of Rs.103,09,77,260/-, the respondent set-off the said refund to the demand of Rs.362,38,85,090/-.
(i) The respondent instead of issuing the refund to the petitioner, adjusted the said refund of Rs.103,09,77,260/- against the demand made for the assessment year 2009-10 without intimating the petitioner and
the said adjustment was made by the impugned order, dated 22.3.2013, even before the expiry of 30 days from the date of demand notice for the assessment year 2009-10. 
Under Section 245 of the Act, the respondent can set-off the amount of refund against any sum payable by an assessee which is due, only after giving intimation in writing to such assessee of the action proposed to be taken.
(j) The issues involved in the assessment order for the assessment year 2009-10 including the significant disallowance of tax holiday benefit on certain income and with the exception of three very minor issues (i.e. disallowance for MAT computation purpose of market-do-market foreign exchange loss and Section 14-A adjustment and disallowance for normal computation purpose of an amount under Section 40(a)(i) with respect to non-with-holding of taxes for payments made for purchase of software licence), are similar to that of the one made in assessment year 2008-09, which was eventually decided in favour of the petitioner by CIT(A) and many of the issues being similar, were already decided in favour of the petitioner for the assessment year 2005-06 and 2007-08 by the Income Tax Appellate Tribunal, Chennai, by order dated 23.1.2013 in I.T.A.Nos.114 and 2100 (Mds) of 2011 and I.T.A.No.90(Mds) of 2011. Thus, the demand made by the Additional C.I.T. for the assessment year 2009-10, is untenable.
(k) Even assuming without admitting that the three new and minor issues as stated above, are decided against the petitioner, the total sum of income tax demand payable will only be approximately to an extent of Rs.6,00,00,000/- as against the untenable demand made at Rs.362,38,85,090/-.
(l) Where the demand made is substantially greater than the Returned income, the recovery proceedings are liable to be stayed and where the demand arises out of the issues which have been decided in favour of the assessee in the earlier years by an appellate authority, the same ought to be stayed and such an assessee cannot be treated as being in default in respect of the amount attributable to such disputed amount.
6. The petitioner challenges the impugned order on the ground that it is without jurisdiction and contrary to Sections 240 and 245 of the Act, as the same has been passed  by the respondent without intimating in writing to the petitioner. The order of adjustment of refund made by the respondent is bad in law, as the jurisdiction to make adjustment or set-off vests only with the assessing officer who has made the assessment and the consequent demand under Section 156 of the Act and the respondent is not the assessing officer and is not competent to make the order of adjustment of refund and pass the impugned order, which  amounts to treating the petitioner as an assessee in default or in arrears when the time limit for payment of the demand for the assessment year 2009-10 has not yet expired. The petitioner assails the impugned order also on the ground that the petitioner is entitled to move a stay petition under Section 220(6) of the Act against the notice of demand made in the assessment year 2009-10 within 30 days from the date of receipt of the notice under Section 156 of the Act; however, by the action of the respondent, the legal remedy available to the petitioner has been taken away, resulting in recovery of tax demand even without waiting for completion of 30 days' period as provided for in the notice of demand issued to the petitioner under Section 156 of the Act. According to the petitioner, the impugned action of the respondent amounts to violation of fundamental right available to the petitioner under Article 19(1)(g) of the Constitution of India. It is further alleged that the action of the respondent is contrary to the law laid down by Courts holding that before an adjustment of refund due against the sum payable is made, a prior intimation to the assessee is mandatory and only thereafter, the Revenue has jurisdiction to make the set-off and such refund is to be set-off only against any amount found payable by such assessee. The impugned action of the respondent is also contrary to the instruction of the Central Board of Direct Taxes (CBDT) in Instruction No.1952, dated 14.8.1998, Instruction No.1969, dated 20.8.1999, Instruction No.1989, dated 20.10.2010 and Board's letter dated 28.4.2010, wherein, CBDT gave instructions to the Revenue Officers that the provisions of Section 245 of the Act must be followed and written intimation must be sent to the assessee before adjusting refund of the outstanding demand and any lapse in this regard shall be viewed seriously. The petitioner claims balance of convenience in their favour and alleges that prima-facie case is made out and states that grave prejudice and irreparable loss will be caused if the impugned order is allowed to be acted upon.
7. The respondent has filed counter affidavit, inter-alia stating as follows:
(a) The respondent objects to the usage of the term "alleged demand" by the petitioner, as the demand for the assessment year 2009-10 was raised under the provisions of the Act and is very much existing on record and the demand for Rs.362,38,85,090/- raised in the assessment year 2009-10   is a legally enforceable demand as on date, as demand notice was issued along with the assessment order, and the said notice was served on the assessee on 11.3.2013. The averment of the petitioner that the income tax refund of Rs.71,47,53,133/- relating to various assessment years were adjusted against the demand of the assessment year 2008-09 only with the express consent of the petitioner given during the hearing while completing the assessments, is not correct. The refunds due to an assessee can be adjusted against the demands due to the same assessee, as per the provisions of Section 245 of the Act.
(b) While disposing of the assessee's petition for stay of demand raised in assessment year 2008-09, the assessing officer issued order under Section 220(6) of the Act on 6.7.2012, wherein stay was granted for demand of Rs.87,55,83,993/- (Rs.16,00,00,000/- + Rs.71,55,83,993/-) till the disposal of appeal before CIT(Appeal) or 31.12.2012, whichever is earlier. However, it is clearly mentioned in that order that any refund arising to the assessee shall be appropriated against the pending demands without prejudice to that order. Section 220(6) of the Act gives discretionary power to the assessing officer to dispose of a stay petition filed by the assessee and further empowers him to impose such conditions as he may think fit for granting stay of demand.
(c) The respondent does not deny that consequent to the appellate order, the petitioner is entitled to refund of Rs.103,09,77,260/- in the assessment year 2008-09 and as soon as the appellate order for assessment year 2008-09 was received in the office of the respondent on 22.3.2013, effect was immediately given to the said order on the same day and a refund of Rs.103,09,77,260/- was determined. The said refund of Rs.103,09,77,260/- determined in the assessee's case in assessment year 2008-09, was adjusted against the demand pending in the assessee's case in the assessment year 2009-10, which was intimated to the assessee in the order giving effect to the appellate order.
(d) While the order dated 22.3.2013 containing refund details and intimation regarding adjustment of refund against demand, was sent to the assessee by post, the adjustment of refund was simultaneously carried out on 26.3.2013 in 'Online Tax Accounting System'. Section 245 of the Act requires that the assessee need to be intimated about the adjustment of refund. Though the adjustment of refund against the demand made on 26.3.2013 was intimated to the assessee along with the order dated 22.3.2013 to give effect to the appellate order, it is verified from records that the said intimation was sent by post on 30.3.2013. In the month of March, the assessing officer was under tremendous pressure of completing time barring scrutiny assessments and also to give effect to various appellate orders and collection of demands. The delay in dispatching the intimation about the adjustment of refund, is genuinely regretted, which is only a procedural delay and the act of adjustment of refund against the demand payable, is well within the framework of law.
(e) The averment of the petitioner that the refund due to the petitioner in assessment year 2008-09 was adjusted against the demand raised in assessment year 2009-10 even before the same becoming due, is not acceptable. The demand raised under the Act becomes payable the moment the demand notice is served on the assessee (petitioner). As per Section 220(1) of the Act, the assessee is required to pay the demand specified in demand notice under Section 156 of the Act within 30 days from the date of service of the demand notice and the period of 30 days can further be reduced by the assessing officer if he has any reason to believe that it will be detrimental to the Revenue, if the full period of 30 days is allowed. If the demand is not paid within the period of 30 days, the assessee is liable to pay simple interest @ 1% for every month of default under Section 220(2) of the Act. Hence, the demand raised under the Act is to be paid within 30 days from the date of service of demand notice and the petitioner's contention that the same becomes due for payment only on 10.4.2013, i.e. after the lapse of 30 days from the date of service of demand notice on 11.3.2013, is not correct. If the demand is not paid within the stipulated period of 30 days, the petitioner is liable for penalty under Section 221(1) of the Act. Further, steps for recovery can be initiated as provided in Sections 222 and 226 of the Act. When the petitioner is duty bound to make payment of demand within 30 days, there is nothing wrong on the part of the Department to collect the demand by adjustment of refund within the stipulated period of 30 days. In fact, by adjusting the refund against the demand within the period of 30 days from the date of service of demand notice, the liability of the petitioner to pay interest under Section 220(2) of the Act is reduced to that extent.
(f) The main issue, viz., disallowance of tax holiday benefit on receipt towards software maintenance, was dealt in a different manner in assessment year 2009-10 from the one dealt in assessment year 2008-09. In the appellate order for assessment year 2008-09, the CIT(A) relied on the recent circular issued by the CBDT in Circular No.1/2013 in F.No.178/84/2012-ITA.1, dated 17.1.2013 and held that software maintenance activity is also eligible for tax holiday under Section 10-A/10-AA of the Act. However, in the assessment order completed for the assessment year 2009-10, when this Circular of CBDT, dated 17.1.2013 was pointed out by the petitioner-assessee, it was specifically brought out by the assessing officer that the assessee-Company has not complied with the requirement specified in the Circular.
(g) As per the Circular, it is necessary that there must exist a direct and intimate nexus or connection of development of software done abroad with the eligible units set up in India and such development of software should be pursuant to a contract between the client and the eligible unit. However, the petitioner-Company could produce only an MoU entered into between the principal holding company, viz., Cognizant Inc. USA and there is no agreement with the client or the final site of maintenance. Based on these and after elaborate analysis of the facts, the tax holiday claimed on overseas software maintenance was denied in the assessment order, which resulted in substantial reduction in tax holiday under Section 10-A/10-AA of the Act, i.e. from Rs.2163,35,14,860/- claimed by the assessee-Company to Rs.1004,40,71,894/-. Based on the findings made in the assessment year 2009-10, the order of CIT (Appeals) granting relief to the assessee on the issue of tax holiday on overseas software maintenance was not accepted and it is proposed to file further appeal by the Department before the I.T.A.T.
(h) With regard to the decisions of the appellate authorities in the earlier assessment years, the assessing officer has not accepted these decisions and proposals had  already been submitted to the Commissioner for further contesting these appellate decisions in the earlier assessment years to the next higher appellate forum. The order of CIT (A) in assessment year 2008-09 is proposed to be contested before the ITAT and orders of ITAT for assessment years 2005-06 and 2007-08 are proposed to be appealed before this Court under Section 260-A of the Act. The time limit for filing such appeals has not barred and the same will be filed in an appropriate manner after compliance of legal formalities. Thus, the receipt of appellate order in favour of the assessee in the earlier year, would not make demand raised in subsequent year, viz., 2009-10 on similar issues as an untenable one.
(i) As per Instruction No.1914 issued by the CBDT, the assessing officer may grant stay for such demands arising out of issues which were decided in assessee's favour in earlier years. Section 220(6) of the Act empowers the assessing officer to impose such conditions as he may think fit before granting stay against collection of demand. Accordingly, while disposing of assessee's stay petition in assessment year 2008-09, it was clearly stated in the order dated 6.7.2012 that any refund arising to the assessee will be adjusted against the demand irrespective of the stay granted. The stay orders granted by the office of the respondent under Section 220(6) of the Act, invariably contains a clause that refund arising to the assessee shall be adjusted against demand irrespective of the stay order. On similar lines, even if the demand raised in assessment year 2009-10, were to be stayed by the assessing officer, then the refund determined in assessment year 2008-09 would have been adjusted against the demand payable in assessment year 2009-10. The demand raised in assessment year 2009-10 to the tune of Rs.362 crores, was very much existing on record and no appellate order has been received against that order. In such case, the assessee cannot expect the Income Tax Department to issue refund arising in assessment year 2008-09 directly to the assessee without adjusting against the existing demand.
(j) The contention of the assessee that the respondent has no jurisdiction to make adjustment of refund, is not correct. The respondent is the assessing officer of the petitioner for income tax purpose and has jurisdiction to make adjustment of refund against demand in the petitioner's case. Only for completing the assessment proceedings of assessment year 2009-10 under Section 143(3) of the Act, the Commissioner of Income Tax, Large Taxpayer Unit, Chennai, vide order in F.No.1/Notifications & Orders/12-13, dated 22.8.2012, transferred the case of the petitioner to the Additional Commissioner of Income Tax, Large Taxpayer Unit, Chennai. In the said Notification, it is clearly stated that after completion of assessment proceedings under Section 143(3) of the Act for assessment year 2009-10, the Additional Commissioner of Income Tax (LTU) shall return the files to the Deputy Commissioner of Income Tax, Large Taxpayer Unit, Chennai, i.e. the respondent. Thus, after completing the assessment proceedings under Section 143(3) of the Act in assessment year 2009-10, vide order dated 7.3.2013, the Additional CIT, LTU has returned the relevant records to the assessing officer, viz., Deputy CIT, LTU and thereafter, refund determined in assessment year 2008-09 was adjusted against the demand raised in assessment year 2009-10.
(k) It is for the assessee to file a stay petition under Section 220(6) of the Act as and when a demand notice is served on them. The Department need not anticipate for any stay petition to be filed by the petitioner. At the time  of determination of refund in assessment year 2008-09, no stay petition has been filed by the petitioner against notice of demand in assessment year 2009-10. Hence, the refund determined in assessment year 2008-09 was rightfully adjusted against the demand of assessment year 2009-10.
(l) The demand raised under the provisions of the Act is required to be paid within 30 days from the date of service of notice. It does not mean that no collection can be made till 30th day. In fact, after the lapse of 30 days, the assessee shall be treated to be in default of taxes and is liable for interest under Section 220(2) and penal provisions under Section 221(1) and other recovery proceedings under Section 222 and 226 of the Act. Hence, there is no violation of fundamental rights of the petitioner by collection of demand by adjusting refund determined in the petitioner's case.
(m) Though the assessee relied on various decisions of the Courts, in the instant case, the demand of assessment year 2009-10 is a correct demand raised after completion of assessment proceedings under Section 143(3) of the Act, which is not disputed even by the petitioner. Along with the adjustment of refund through Online, the intimation regarding adjustment was conveyed in the order giving effect to the appellate order in assessment year 2008-09. The delay of a few days in despatching the intimation to the assessee, arising due to the workload of time barring assessments at the end of March 2013, is regretted. However, the refund has been adjusted against a valid demand.
(n) The demand raised in assessment year 2009-10 is not on similar lines as raised in assessment year 2008-09 and hence, the appellate order of CIT (Appeals) in assessment year 2008-09 cannot equally be applied to the assessment year 2009-10 and the demand raised in assessment year 2009-10 is a tenable one and the assessee can file appeal before the CIT (Appeals) against the order of assessment in assessment year 2009-10.
(o) If there is any relief given to the assessee, then any tax collected will be refunded along with interest under Section 244-A of the Act. Similar action was taken in assessment year 2008-09, wherein, pending disposal of appeal proceedings and pending stay order issued by the assessing officer, substantial demands were collected by way of refund adjustment. As soon as the receipt of appellate order, the entire tax collected in excess was determined as refundable to the assessee, which was eventually adjusted against the demand pending in assessment year 2009-10.
(p) Since act of adjustment of refund of assessment year 2008-09 against the demand of assessment year 2009-10, has already been completed on 26.3.2013 and no further action is pending, the question of granting stay of the impugned order does not arise.
(q) The order dated 22.3.2013 was passed to give effect to the order of CIT (Appeals) for assessment year 2008-09, whereby, refund of Rs.103,09,77,260/- was determined. If this order is quashed, no refund can be issued. Even if the order dated 22.3.2013 is quashed, then a fresh order of refund is to be passed in assessment year 2008-09. In such circumstances, as per provisions of Section 245 of the Act, the demand pending in assessment year 2009-10 needs to be adjusted against the refund, which will be a repetition of what was already done by the Department, which does not serve any purpose. According to the respondent, the Writ Petition is not maintainable and is devoid of merits and hence, the respondent prayed to dismiss the Writ Petition.
8. The respondent has also filed an affidavit, dated 18.4.2013, stating as follows:
(i) A demand of Rs.362,38,85,090/- was raised, vide assessment order, dated 7.3.2013 issued under Section 143(3) of the Act in the petitioner's case relating to the assessment year 2009-10.
(ii) The appellate order of CIT (Appeals), Large Taxpayer Unit, Chennai, relating to the assessment year 2008-09, was received by the respondent's office on 22.3.2013 and that appellate order was given effect to and a refund of Rs.103,09,77,260/- was determined in the petitioner's case, vide order made in PAN: AAACD3312M, dated 22.3.2013.
(iii) The refund of Rs.103,09,77,260/- determined in the assessment year 2008-09, was adjusted against the tax demand relating to the assessment year 2009-10 as per the provisions of Section 245 of the Act and the adjustment of refund against the tax demanded, was done Online on 26.3.2013 and intimation regarding the same was sent to the petitioner thereafter by post.
(iv) Section 245 of the Act stipulates that the assessing officer may adjust the refund against the demand after giving an intimation to the assessee. There is no provision for cancellation of the refund adjustment and the amount adjusted has already been remitted into Government Account and therefore, no refund can be issued once again in assessment year 2008-09.
(v) If the adjustment of refund is cancelled, then it will result in refunding the collection made in assessment year 2009-10, i.e. an amount of Rs.103.09 crores collected out of demand of Rs.362.38 crores may have to be refunded in assessment year 2009-10, if the order of adjustment is cancelled, which will result in refunding of the amount pending subsisting demand.
(vi) The delay in giving intimation under Section 245 of the Act may be condoned and the order of adjustment of refund against the demand, may be upheld in the interest of the Revenue.
9. The learned Senior Counsel appearing for the petitioner vehemently contended that under Section 245 of the Act, the assessing officer may, in lieu of payment of refund, set-off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section.
10. The learned Senior Counsel appearing for the petitioner pointed out the Circular of the Central Board of Direct Taxes (for short, 'the CBDT'), issued in Instruction Nos.1952, dated 14.8.1998 and Instruction No.1969, dated 20.8.1999, stating that written intimation must invariably be sent to assessee before adjusting his refund with outstanding demand in compliance to provisions of Section 245 of the Act. As there were certain lapses on the part of the Department in some cases, the CBDT reiterated the position in the subsequent circulars also. Therefore, the learned Senior Counsel appearing for the petitioner submitted that there is non-compliance of the provisions of Section 245 of the Act, as there was no intimation sent to the petitioner-assessee before the impugned adjustment of refund is made by the respondent.
11. On the other hand, the learned Senior Standing Counsel appearing for the respondent-Revenue submitted that it is only to give effect to the order of the Commissioner of Income Tax (Appeals), LTU, Chennai in I.T.A.No.108/11-12/LTU(A), dated 25.2.2013 and the assessment order under Section 143(3) of the Act, dated 30.12.2011 read with rectification order, dated 23.1.2013, the impugned order dated 22.3.2013 has been passed and therefore, the amount due to be paid by the petitioner-assessee has been adjusted towards the demand outstanding for the assessment year 2009-10 and accordingly, Rs.103,09,77,260/- had been adjusted, which was duly intimated to the petitioner-assessee and ultimately, it is the adjustment made towards the due to the Department.
12.   I have heard the learned counsel appearing for the parties and perused the material documents available on record.
13. It is seen that the petitioner-Company is an assessee in PAN.No.AAACD3312M and they are engaged in the business of development of computer software and related services and its export and they provide various software solutions to variety of industries. The petitioner carries out their business activities through various units set up in Software Technology Parks (STPs) and Special Economic Zones (SEZs) and claims deduction under Section 10-A and 10-AA of the Act. It is the case of the petitioner that for the assessment year 2008-09, the petitioner filed their Return of income on 29.9.2008 and the same was processed under Section 143(1) of the Act on 8.3.2010. The petitioner's case was selected for scrutiny by the Assistant Commissioner of Income Tax under Section 143(2) of the Act on 12.8.2009 and the details were called for by the respondent under Section 142(1) of the Act on 26.8.2011 and the petitioner claims that detailed submissions were made by the petitioner before the respondent from time to time.
14. The petitioner's case was referred to the Transfer Pricing Officer for necessary verification under Section 92-CA of the Act, as the petitioner has international transactions with their group companies abroad. The Transfer Pricing Officer, vide letter dated 11.10.2011, accepted the arm's length price of the transactions of the petitioner-Company with that of their group companies abroad and consequently, no transfer  pricing adjustments were made by the respondent.
15. While so, the respondent passed the assessment order under Section 143(3) read with Section 92-CA of the Act for the assessment year 2008-09 in the petitioner's case  on 30.12.2011, by which, the respondent inter-alia disallowed various items, as quoted above. After making disallowances and adjustments, the respondent assessed the income of the petitioner at Rs.716,33,29,150/- as against the Returned  income of Rs.93,54,87,072/- and consequently, demand of Rs.181,37,25,560/- was raised by demand notice, dated 31.12.2011 issued under Section 156 of the Act. The petitioner filed a stay petition before the respondent under Section 220(6) of the Act and the respondent, vide order dated 6.7.2012, stayed the demand to the extent of Rs.87,55,83,993/- (Rs.16,00,00,000/- + Rs.71,55,83,993/-) pending disposal of the appeal before the Commissioner of Income Tax (Appeals) or until 31.12.2012, whichever is earlier. The petitioner remitted an amount of Rs.25,22,00,000/- on 24.2.2012 and the respondent adjusted income tax refund of RS.71,47,53,133/- relating to various assessment years on various dates only with express consent of the petitioner given during the hearing while completing the assessments. Thereafter, the petitioner on 17.12.2012, requested for extension of stay of demand till the disposal of the appeal by CIT(A).
16. The petitioner filed an appeal against the said assessment order dated 30.12.2011 for the assessment year 2008-09 on 30.1.2012 and the same was decided in favour of the petitioner on 25.2.2013. The CIT(A) allowed the appeal except on one issue pertaining to disallowance under Section 14-A of the Act. The assessment for the assessment year 2009-10 was completed by the Additional C.I.T. on 5.3.2013 and the income of the petitioner was assessed at Rs.1473,42,53,550/- as against the Returned income of Rs.2229,73,15,902/- under Section 115-JB of the Act, and consequently, a demand of Rs.362,38,85,090/- was raised, vide notice dated 7.3.2013 under Section 156 of the Act, which was received by the petitioner-assessee on 11.3.2013, which provided for a period of 30 days' time for payment of the said demand.
17. By virtue of the order passed by the CIT (A) on 25.2.2013, the petitioner became entitled to refund of Rs.103,09,77,260/- and as per the contention of the petitioner, the respondent has to refund the said amount to the assessee automatically in terms of Sections 240 of the Act and that under Section 245 of the Act, the respondent can set-off the same only after giving intimation in writing to the petitioner; but, by the impugned order dated 22.3.2013, the respondent set-off the said refund amount of Rs.103,09,77,260/- in respect of the demand of Rs.362,38,85,090/- made for the assessment year 2009-10. The respondent ultimately passed the impugned order, dated 22.3.2013 by giving effect to the order of the CIT (Appeals), LTU, Chennai, in I.T.A.No.108/11-12/LTU(A), dated 25.2.2013 and modifying the assessment order under Section 143(3), dated 30.12.2011 read with rectification order, dated 23.1.2013, and challenging the said order, dated 22.3.2013, the Writ Petition is filed by the petitioner.
18. The only question that arises for consideration is as to whether the respondent is empowered to adjust the refund amount automatically without complying with the provisions of Section 245 of the Act.
19. In this connection, it is worthwhile to extract Section 245 of the Act, as follows:
Section 245: Set off of refunds against tax remaining payable:
Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case 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 sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section."

20. From a reading of the above Section, it is crystal clear that the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case 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 sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section. (emphasis supplied).
21. On a perusal of the entire material documents including the impugned order, it is clearly evident that there is no intimation in writing to the petitioner-assessee before making such an adjustment of refund. No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. It is conspicuous from the records that there is no intimation in writing to the petitioner before making such adjustment of refund. As the respondent has not followed the procedures prescribed under the provisions of the Act while adjusting the refund amount with the outstanding amount, the impugned order is vitiated in law and is liable to be set aside.
22. For the foregoing reaasonings, the impugned order is set aside. The Writ Petition is allowed and the matter is remanded back to the respondent for compliance of Section 245 of the Act, and thereafter, the respondent is at liberty to adjust the refund amount payable to the petitioner with the amount payable for the respective assessment year, in accordance with law. Such an  exercise shall be completed by the respondent within a period of four weeks from the date of receipt of a copy of this order. No costs. The Miscellaneous Petition is closed.









cs

To

The Deputy Commissioner of Income Tax,
Large Taxpayer Unit,
1775, Jawaharlal Nehru Inner Ring Road,
Anna Nagar Western Extension,
Chennai 600 101