ASSISTANT COMMISSIONER OF INCOME TAX versus AK. MENON AND ORS.

Citation: [1995] SUPP. 2 S.C.R. 181 · Decided: 18-07-1995 · Supreme Court of India · Bench: A.M. AHMADI, S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

ASSISTANT COMMISSIONER OF INCOME TAX 
v. 
AK. MENON AND ORS. 
JULY 18, 1995 
[A.M. AHMADI, CJ AND S.P. BHARUCHA, J.] 
Special Court (Trial of Offences Relating to Transactions in Securities) 
Act, 1992: Section I I-Special Court-Jurisdiction of-Tax liability of a 
notified person-Held: Special Court has no jun'sdiction to detemiine whether 
the liability is bonafide reasonable, justified or enf orceable-lt can only deter-
mine the pliorities in which claims upon the property under attachment shall 
be paid. 
A 
B 
c 
The Special Court (Trial of Offences Relating to Transactions in 
Securities) Act was enacted in 1992 to provide for the establishment of a 
Special Court for the trial of offences relating to transactions in securities D 
and for matters connected therewith or incidental thereto. The appellant· 
Assistant Commissioner of Incometax sought release of a certain sum 
being the tax liabilities of the respondents, who were the notified persons 
under Act. The Special Court adjourned the matter holding that the 
notified parties were entitled to try and show to court that the claim was E 
unreasonable and unjustified. Hence this appeal. 
Allowing the appeal, this Court 
HELD : 1. The Special Court has no jurisdiction to sit in appeal over 
the assessment of the tax liability of a notified person by the authority or 
tribunal or court authorised to perform that function by the statute under 
which the tax is levied. The Special Court has, therefore, no jurisdiction 
to determine whether or not any assessment of the tax liability of a notified 
person by the appropriate authority is bona fide or reasonable or justified 
or enforceable. [185-E] 
2. The order under appeal is set aside insofar as it requires the 
appellant to· produce the records and permits the notified persons to 
satisfy the Special Court that the claims made in regard to their tax 
liability were not bonafide, or were unreasonable, unjustified or unenfor-
ceable. [185-F] 
181 
F 
G 
H 
182 
SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R. 
A 
S. V. Kondaskar v. V.M. Deshpande, AIR (1972) S.C. 878, distin-
B 
c 
guished. 
CIVIL APPELLATE JURISDICTION 
Civil Appeal No. 6323 
(NT) of 1995. 
From the Judgment and Order dated 21.3.95 of the Special Court 
(Trial of Offences Relating to Transactions in Securities) at Bombay in 
Misc. Application No. 107 of 1993. 
D.P. Gupta, Solicitor General, (Ms. A. Subhashini) for S.N. Terdol 
for the Appellant. 
Atul Setalvad, A.D.N. Rao and A. Sobba Rao for the Respondent 
No. 1. 
Jahangir DJ. Mistri, Kartik Desai and Ms. Lata Krishnamurthy for 
D 
the Respondents 2-14. 
E 
F 
The following Order of the Court was delivered : 
Special leave granted. 
This appeal is filed against an order of the Special Court appointed 
under the provisions of the Special Court (Trial of Offences Relating To 
Transactions in Securities) Act, 1992. The appellant, an Assistant Commis-
sioner of Income Tax, sought release of the sum of Rs. 80,80,198.34, being 
the tax liabilities of the respondents, who are notified persons under the 
said Act, from the funds available with the Custodian appointed under. the 
provisions thereof. Learned counsel appearing for some of these notified 
persons submitted to the learned judge that he wished to show .that the 
demands. of the appellant were unreasonable and unjustified and, if satis-
fied, he should not order release of the amounts claimed. Having heard 
counsel, the learned judge passed the impugned order. It said that while 
the Special Curt could not sit in appeal over orders of the tax authorities, 
G it was entrusted with the task of distributing the funds in the manner laid 
down under section 11 of the said Act and the priorities laid down 
thereunder had to be observed. The priorities and objects of the said Act 
could and would -be defeated if the Special Court could not "go into the 
bonafides of a claim. In that case a party, like the Income Tax Department, 
H may make a claim in an absurdly large amount." Whether a claim was 
• 
ASSTI. COMMR. OF INCOME TAX v. AK. MENON 
183 
'justified or enforceable can only be decided by looking into that claim". A 
Counsel for the notified parties was, therefore, "entitled to try and show to 
court that the claim is unreasonable and unjustified". The appellant's 
application was adjourned for the purpose, and he has appealed. 
The said Act was enacted to provide for the establishment of a 
Special Court for the trial of offences relating to transa

Excerpt shown. Read the full judgment & AI analysis in Lexace.