Syed Jamaluddin Ali vs State Bank Of India And Ors

IN THE HIGH COURT OF JUDICATURE AT PATNA Civil Writ Jurisdiction Case No.6052 of 2018 ====================================================== Syed Jamaluddin Ali Son of Late Syed Asghar Ali, Resident of Mohallah- Chandwara, Azad Road, P.S.- Muzaffarpur Town, District- Muzaffarpur Bihar. ... ... Petitioner/s Versus 1. State Bank of India, 5th Floor, Local Head Office, West Gandhi Maidan, Patna- 800001 through the General Manager-I. 2. Assistant General Manager, State Bank of India, Central Pension Processing Centre, 4th Floor, Judges Court Road, Anta Ghat, Patna-800 001. 3. Assistant General Manager, Centralized Pension Processing Centre, North Eastern, 6th Floor of Sethi Trust Building, Guwahati- 781005 (Assam). 4. The Branch Manager, State Bank of India, Chandwara Branch, Pakki Sarai, Muzaffarpur-842001 Bihar. 5. The Principal Chief Commissioner of Income Tax (Bihar and Jharkhand), Central Ravenue Building, Bir Chand Patel Marg, Patna -800 001 (Bihar).

... ... Respondent/s ====================================================== Appearance: For the Petitioner/s : Mr. Raju Giri, Advocate Mr. Santosh Kumar Mishra, Advocate For the Respondent/s : Mr. Kaushlendra Kumar Sinha, Advocate Mrs. Archana Sinha, Advocate Mr. Rakesh Kumar Singh, Advocate Mr. Sunil Kumar Singh, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE S. KUMAR

CAV JUDGMENT

(Per: HONOURABLE THE CHIEF JUSTICE)

Date : 14-10-2020

By way of the present writ petition, the petitioner

seeks an issue of a writ of mandamus in the form of directions Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 2/17

to the respondent nos. 1-4, State Bank of India (SBI) and/or the

respondent no. 5, Income Tax Department (I-T Department), to:

(i) act under Section 89(1) and 192(2A) of the Income Tax Act, 1961 and spread over/ distribution of arrears of pension amount paid in a lump sum to the petitioner and not treat them as payable in May 2016;

(ii) refund the illegally deducted income tax from the pension of the petitioner with interest @ 18%;

(iii) not deduct advance income tax every month from the pension of the petitioner as he is a senior citizen and is enjoying exemption of Section 207 of the I-T Act;

(iv) allow costs of litigation at Rs 50,000/- to the petitioner.

2. The facts of the case are as follows.

Facts

3. The petitioner was supposed to retire from the

Railway Authorities with effect from November 8, 2007.

However, on account of proceedings pending against the

petitioner before the Railway Authority, his retirement and

pension benefits were withheld. After protracted litigation of

several years, in 2016, the petitioner was allowed his pension

(less 20% forfeited amount) back-dated with effect from

November 8, 2007. Accordingly, Pension Payment Order (PPO) Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 3/17

was issued in favour of the petitioner by the Finance Advisor

and Chief Accounts Officer and forwarded to the Central

Pension Processing Centre (CPPC) of the State Bank of India,

Patna.

4. Subsequently, on March 14, 2016, the petitioner

submitted an application to the Branch Manager of SBI

Chandwara Branch to commence the petitioner's pension and

pay the arrears in pension. The petitioner also submitted a

request to not deduct income tax on the amount by treating it as

income of the current year, to spread over/ distribute the

payment over the period, under Section 89 of the I-T Act read

with Rule 21A (2)(d) of the I-T Rules. This was done to ensure

that the income tax on the arrears of pension is not deducted by

treating the amount as taxable income of the current year and is

spread over in the relevant years from 2007 to 2016.

5. On March 30, 2016, the petitioner made a

similar application and requested to the CPPC, Patna. The

petitioner, further, furnished before the CPPC, all necessary

details and calculation sheet for pension as required under with

Section 192(2A) of the I-T Act as well as Form 10E of the I-T

Department, for claiming relief under Section 89(1) of the I-T

Act.

Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 4/17

6. It is the petitioner's case that despite repeated

requests, when the arrears of pension were released on June 18,

2016, the income tax was deducted from his pension treating

the entire amount as his income for the current year.

Thereinafter, the petitioner made more applications to SBI

demanding refund of the illegally deducted income tax, but with

no avail. The petitioner also applied for the Right to

Information Act, 2005 seeking information on the basis for

deductions made, from the CPPC, Patna. However, in reply, the

petitioner was informed that deductions made were on a pro-

rata basis month-wise in terms of the I-T Act, and the petitioner

directed to approach the I-T Department for a refund.

7. The petitioner argues that this deduction of

income tax constitutes an illegal deduction from his pension as

it is without regard to the statutory provisions, which allow a

spread over/distribution of pension amount. If the spread over

of amount were followed, the petitioner's total income would

not be falling within taxable limits and as such no income tax

would be deductible at source. Therefore, making the deduction

of pension by SBI as arbitrary, without jurisdiction and

unconstitutional.

8. The petitioner argued that it invoked operation Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 5/17

of Section 192 (2A) by submitting the required details and

forms and therefore in making a deduction of tax at source

under Section 192, SBI was duty-bound to act under the

statutory provision to spread over/distribute the arrears of

pension in making the deduction, which it failed to do.

9. Further, the petitioner submitted that the

petitioner, being a senior citizen, was exempted from paying

income tax in advance, under Section 207(2) of the I-T Act.

Therefore, the deduction of advance tax for the assessment year

2016-17 was riddled with further illegality.

10. On the other hand, it is SBI's case that as per

Section 89(1) of the I-T Act, the Assessing Officer of income

tax was the only authority that could grant relief under the

Section. This is done at the time when the petitioner files his

income tax return as per the I-T Act and makes an application

under Section 89. In the first place, petitioner was wrong in

approaching the SBI for availing the required relief. Moreover,

the petitioner already had a remedy to get a refund under

Section 237 of the I-T Act, and therefore the present writ

petition lacked legal force.

Position of Law

11. The relevant provisions of the I-T Act and I-T

Rules are produced below.

Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 6/17

Section 89 Relief when salary, etc., is paid in arrears or in advance.

"89. Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (iia) of section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed:" (emphasis supplied)

Rule 21A Relief when salary is paid in arrears or in advance, etc. "21A. (2) [...]

(d) Where the additional salary or additional family pension, as the case may be, relates to more than one previous year,--

(i) the previous years to which the additional salary or additional family pension relates and the amount relating to each such previous year shall first be ascertained;

(ii) tax shall, then, be calculated on the total income of each such previous year as increased by the amount relating to such previous year Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 7/17

ascertained under sub-clause (i); as if the total income so increased were the total income of that previous year, and the amount by which the aggregate amount of tax in respect of the aforesaid previous years as calculated under sub-clause (ii) exceeds the aggregate amount of tax payable by the assessee in respect of the total income of the said previous years shall, for the purposes of clause (a), be taken to be the aggregate tax on the additional salary or additional family pension, under this clause."

12. Section 89 provides that an assessee who

receives a sum like salary in arrears for more than 12 months,

making the total assessable income for the current year higher

than it would have otherwise been, are allowed relief as may be

prescribed. Under Section 17(1) (ii) of the I-T Act, salary

includes pension. Rule 21A (2)(d) provides the method of

calculation of tax for the year through the spread over/

distribution of arrears of salary amount across the years for

which they correspond.

Section 192 Deduction at source: Salary.

"192. (1) Any person responsible for paying any income chargeable under the head "Salaries"

shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed based on the rates in force for the financial year in which the payment is Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 8/17

made, on the estimated income of the assessee under this head for that financial year.

[...] (2A) Where the assessee, being a Government servant or an employee in a company, co-

operative society, local authority, university, institution, association or body is entitled to the relief under sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to in sub-section (1), such particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take it into account in making the deduction under sub-section (1)."

(emphasis supplied)

Rule 21AA Furnishing of particulars for claiming relief under section 89(1).

"21AA. Where the assessee, being a Government servant or an employee in a [company, co- operative society, local authority, university, institution, association or body], is entitled to relief under sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to in sub-section (1) of section 192, the particulars specified in Form No. 10E."

13. Section 192 provides for tax deduction at

source at specified rates, by the person making payment of

salary. Section 192 (2A) provides that in certain specified

cases, where the assessee is eligible for the benefit of Section

89 of the I-T Act, the assessee has the option to furnish

particulars by way of required forms to the person responsible Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 9/17

for making their payment, wherein the person accountable for

making deduction would compute the deduction based on the

details provided. Practically under this Section, where

particulars are submitted to the deductor, he shall take into

account relief of Section 89 while computing tax to be

deducted at source. Rule 21AA provides that Form No.10E has

to be furnished to the person responsible for making payment

to avail benefit under Section 89.

14. In the instant case, no one claims that the

petitioner is not entitled to relief under Section 89. SBI, as well

as I-T Department, are in agreement that the benefit of Section

89 is applicable in the present case.

15. The issue before us is whether the SBI erred in

not allowing the benefit of Section 89 while deducting TDS on

a pension under Section 192 of the I-T Act. Further, whether

this Court ought to direct the SBI or the I-T department to

make a refund to the petitioner.

16. To us, Section 89 is plain and clear. It provides

that it is for the Assessing Officer of income tax to grant the

relief under the Section and on application made before him.

We further see that the Hon'ble Apex Court has accepted this

position in multiple cases.

Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 10/17

17. In the case of Sundaram Motors (P.) Ltd. v.

Ameerjan 1985 1 SCC 118, the Hon'ble Apex Court awarded

the petitioners with compensation in place of reinstatement.

Holding that since the amount would be paid in lump sum, for

payment of income tax, the benefit of spread over must be

provided to the petitioners. Accordingly, the Court directed the

employee to make a necessary application before the I-T

Officer to claim relief under Section 89, and the officer to act

immediately in disposing of the said application:

"7. ...Therefore, we made it very clear that the entire amount awarded by our judgment shall be spread over from 1970 to 1989, 1970 being the year of dismissal from service and 1989 being the year of retirement on superannuation as per the relevant service rules. We are, accordingly, clear in our minds that viewed from any angle, respondent - Ameerjan, the workman is fully entitled to the relief under s. 89 of the I.T. Act. No other view on this point is possible. In order to satisfy the requirements of law, the respondent-Ameerjan shall with the assistance of the appellant and its income-tax consultants make the necessary application to the ITO having jurisdiction in the matter at Bangalore for relief under s. 89 and the officer concerned shall, without further enquiry, grant him immediate relief under s. 89 and dispose of the proceedings within a period of three months from the date of the application, so that the spirit and purpose of our judgment and order would be implemented without unnecessary delay and the agony and torture of unemployment heaped upon the lowly paid respondent-Ameerjan from 1970 be relieved." (emphasis supplied) Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 11/17

18. Similarly, in Sant Raj v. O.P. Singla 1985 2

SCC 345, the petitioner was allowed back wages in lieu of

reinstatement by the Hon'ble Apex Court. In the same decision,

the Court held that if the employer were to deduct income tax

at source on the amount allowed under Section 192, the

appellants would be entitled to relief under Section 89 of the I-

T Act. The Court directed the petitioner to approach the

competent authority (which as per the Section is the Assessing

Officer) to claim relief of spread over:

"8. ... Both the appellants are entitled to the relief under section 89 because compensation herein awarded includes salary which was in arrears for 12 years and it is being paid in one lump sum under the orders of this court. Therefore, the salary has to be spread over a period of 12 years as also the compensation in lieu of reinstatement and the relief should be given as provided by section 89 of the Income-tax Act read with rule 21A of the Income-tax Rules. Both the appellants are entitled to the same. If any application is necessary to be made, the same may be made to the competent authority and the respondent- employer shall assist the appellants in each case for obtaining the relief." (emphasis supplied)

19. Finally, in the case of K.C. Joshi v. Union of

India (1985) 3 SCC 153, where the Hon'ble Apex Court

quashing an order of the High Court, directed the employer-

ONGC to provide the petitioner-employees with back wages in

lieu of reinstatement, the Court held that:

Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 12/17

"17. ...If, therefore, the employer proceeds to deduct the income-tax as provided by section 192, we would like to make it abundantly clear that the appellant would be entitled to the relief under section 89 of the Income-tax Act which provides that where, by reason of any portion of the assessee's salary being paid in arrears or in advance or by reason of his having received in any one financial year salary for more than 12 months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, his income is assessed at a rate higher than that it would otherwise have been assessed, the Income-tax Officer shall on an application made to him in this behalf grant such relief as may be prescribed."

(emphasis supplied)

20. We are therefore clear that it is for the

Assessing Officer of income tax to grant relief under Section

89 of the I-T Act. In all the cases discussed above, the

employer had the responsibility to make tax deduction at

source under Section 192, before making payment of the lump

sum amount of salary. The Hon'ble Apex Court held that the

employees who were eligible for the benefit of Section 89, had

to apply before the I-T officer to avail benefit of the Section.

21. Now, we will deal with Section 192 (2A) of

the I-T Act. Per this subsection, an assessee who is entitled to

relief under Section 89 can furnish the required forms to the

person responsible for making payment under Section 192 (1)

(i.e. the employer), upon which the person responsible for

making deduction would compute the relief based on the Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 13/17

particulars and take it into account while deducting tax.

22. The petitioner placed great reliance on the

argument that SBI being the person responsible for making

deduction and payment under Section 192, was forwarded with

all particulars in the prescribed form (Form No. 10E) under

Section 192 (2A). Therefore it became the SBI's obligation to

only deduct amounts in accordance with Section 192 (2A). In

not doing so, the SBI has made illegal deductions from the

petitioners mention and therefore ought to be directed to refund

the amount to the petitioner.

23. On a reading of Section 192 (2A), we agree

that the SBI should have computed the relief on the basis of the

particulars and deducted income tax in accordance with Section

89. However, we see that the remedy of the undue deduction is

provided under Section 89 of the I-T Act itself, where the

assessee is required to apply to the Assessing Officer and avail

relief under the Section.

24. A similar case came before the Hon'ble

Madhya Pradesh High Court in the case of Shantilal Bagora v.

State Bank of Indore (2002) 255 ITR 60. The petitioners

applied to the Court claiming violation of Section 192 (2A) of

the I-T Act read with Rule 21AA of the I-T Rules. The SBI was Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 14/17

the person responsible for deducting the income tax in that case

as well. The petitioner claimed that in not allowing the benefit

of Section 89, despite their furnishing of particulars in the

prescribed form (Form No. 10E), the SBI acted in

contravention of the law. The Court agreed that Section 89

provided a statutory remedy to the petitioners to make an

application to the Assessing Officer for relief. However, it held

that it was for the Assessing Officer to examine the case and

decide whether relief was applicable. It was held that in cases

where the statute dedicated an authority to make an assessment,

it was not for the writ Court to examine the matter and grant

relief factually. The petitioner was directed to make the

appropriate application before the Assessing Officer under

Section 89 and directed the Assessing Officer to dispose of the

application expeditiously.

25. We agree that a statutory remedy is available

to the petitioner under Section 89. This instant case is not a writ

against the order of the Assessing Officer disallowing relief.

The petitioner has failed to approach the relevant authority

under the I-T Act to claim relief.

26. We do not wish to make any directions to

either SBI or the I-T Department to make any refunds to the Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 15/17

petitioner. It is trite law that where a statutory remedy is

available to a writ petitioner unless exceptional circumstances

are made out, the High Court must first require the petitioner to

avail of the statutory remedy [U.P. State Spg. Co. Ltd. v. R.S.

Pandey (2005) 8 SCC 246, Star Paper Mills Ltd. v. State of

U.P. (2006) 10 SCC 201,ITO v. M. PiraiChoodi (2010) 15

SCC 283 and others]. It is true that where the alternate remedy

is ineffectual or a mere formality, the Court must not send the

petitioner from "Caesar to Caesar's wife", however in the

present case it is not the petitioner's case that the available

alternate remedy under the I-T Act is ineffectual and non-

efficacious while invoking the writ jurisdiction of the High

Court. The appropriate forum for availing relief is the

Assessing Officer, and the petitioner must apply to the

Assessing Officer to avail the benefit of Section 89 of the I-T

Act.

27. The petitioner also argued before the Court

that for the assessment year 2016-2017, no tax was deductible,

as the petitioner was a senior citizen and therefore enjoyed

exemption from paying advance tax by operation of Section

207 of the I-T Act. However, to claim this exemption, the

procedure established under the Act has to be followed and the Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 16/17

required form submitted to the deductor. We are unsure

whether this procedure was followed by the petitioner. Be that

as it may, it remains open to the petitioner to provide the

following details and claim this exemption under Section 207

of the I-T Act in future.

28. No other submission is made on behalf of

learned counsel for the parties.

29. The instant petition was filed on 31.03.2018,

since when the petitioner has been diligently pursuing his

remedy before this Court. As such, the period of limitation

shall not come in the way of adjudication of the application of

the petitioner, if so filed, within next three months.

30. Accordingly, the petitioner is directed to make

a required application to the Assessing Officer having

jurisdiction of the matter for the grant of relief under Section

89 of the Act in accordance with the provisions of the statute.

The SBI is directed to extend all assistance to the petitioner to

enable him to avail such relief. We also hope and expect that

the Assessing Officer of the income tax considers and dispose

of the matter expeditiously and within a period of three months

from the date of receipt of application.

31. The writ petition stands disposed of with the Patna High Court CWJC No.6052 of 2018 dt. 14 -10-2020 17/17

aforesaid observations and directions.

32. Interlocutory Application, if any, shall stand

disposed of.

(Sanjay Karol, CJ)

S. Kumar, J: I agree

( S. Kumar, J) pallavi/-

AFR/NAFR AFR CAV DATE 25.08.2020 Uploading Date 14.10.2020 Transmission Date