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2024 Supreme(Cal) 1008
IN THE HIGH COURT AT CALCUTTA
APURBA SINHA RAY, J.
Sushant Agarwal (HUF) & Anr. - Petitioners
Versus
Anmol Agarwal & Ors. - Respondents
EC No. 431 of 2022, IA No. G.A. 1 of 2024
Decided On : 02-08-2024
For the Petitioners: Mr. Jitendra Patnaik, Mr. Nirmalya Dasgupta, Ms. Dikcha Jajodia.
For the Judgement-debtors : Mr. Partha Ganguly, Mr. Atreya Chakraborty, Ms. Nandini Sharma.
IMPORTANT POINT
An executing court cannot impose tax liability on parties not designated as vendors in a property transaction, as it contradicts statutory provisions.
Headnote:
Execution - Consent Decree - Income Tax Act Sections - The court analyzed the provisions of the Income Tax Act, particularly Section 50-C, and the implications of a consent decree, concluding that tax liability cannot be imposed on parties not designated as vendors in the transaction.
Fact of the Case:
The execution case was initiated to enforce a consent decree from 2018, where the decree-holder alleged improper transfer of property by the judgment-debtors, leading to tax liability issues.
Finding of the Court:
The court found that the judgment-debtors had not complied with the consent decree's obligations and that the tax liability could not be imposed on them as it contravened the Income Tax Act provisions.
Issues: Whether the executing court can impose tax liability on parties not designated as vendors in a property transfer under a consent decree.
Ratio Decidendi: The court held that it cannot direct a party to shoulder tax responsibility contrary to the provisions of the Income Tax Act, even if there was an undertaking by their counsel.
Result: GA No. 1 of 2024 stands dismissed.
JUDGMENT :
Apurba Sinha Ray, J.
1. The Execution Case no. 431 of 2022 was initiated to implement a consent decree passed on 18.05.2018 in connection with C.S. No. 201 of 2015. The present application being IA No. GA 1 of 2024 has been filed by the decree-holder Sushant Agarwal (HUF) being represented by its Karta Sushant Agarwal alleging, inter alia, that the then director of Nav Technology Pvt. Ltd., Anmol Agarwal, the judgement-debtor no. 1, transferred the office space of Nav Technology Pvt. Ltd. 113, Park Street, Kolkata to the judgement-debtor no.2 Manju Agarwal at a consideration of Rs.1001/- when the valuation of the property is more than 2 crores. As the Nav Technology Pvt. Ltd. has been shown to be the transferor of the said property, the entire tax liability of the transaction would fall upon the said company, which has now become the property of the decree holder by virtue of the said consent decree, upon Section 50-C of the Income Tax Act, 1961.
2. During hearing of the execution proceeding the learned counsel of the judgement debtor no. 2 had undertaken before the court that his client would comply with all the requisite obligations under the consent decree and he has further undertaken that his client shall file an affidavit stating that the tax responsibility of the relevant transaction shall be upon the judgement-debtor no. 2. Subsequently, the judgement debtor no. 2 refused to submit such an undertaking, and without changing the learned counsel who undertook on behalf of the judgement-debtor, the case was started to be represented by another lawyer of the judgement-debtor no. 2 on the ground of illness of the previous learned counsel.
3. When the judgement-debtor no. 2 refused to submit the relevant affidavit as aforesaid, the decree-holder filed the IA No. GA 1 of 2024 praying for:-
“(a) For direction upon the Judgment Debtors to give an undertaking that any tax liability arises out of sale and/or transfer of the Park Street Office from Nav Technology Private Limited to and in favour of Judgment Debtor No. 2 shall be the liability and responsibility of the Judgment Debtors and not of Nav Technology Private Limited or of the decree holders.
(b) The Judgment Debtors shall bear and/or reimburse all expenses to deal with any demand notice or order or direction demanding any tax on the difference of the assessed value and the recorded consideration of such transfer of the Park Street office from Nav Technology Private Limited vide Deed of Conveyance dated 30th December, 2022.
(c) The Judgment Debtors shall also provide an undertaking with respect to the property tax liability or any other liability due and payable on account of the Park Street office held in the name of Nav Technology Private Limited.
(d) In the alternative, the deed of conveyance dated 30th December, 2022 for sale and transfer of Park Street office space be declared as null and void and the same be cancelled.
(e) For direction upon the Judgement Debtor No. 2 to handover the duly signed share certificates of Nav Technology Private Limited to the Decree Holders.
(f) The Judgment Debtors shall pay to the Decree Holder No. 2 the entire surrender value received by the Judgment Debtors on surrender of the tenancy right in the third and fourth floor of P-161, VIP Road, Scheme VII M, Kolkata 700054 which the Judgment Debtors have been entitle only for their use and occupation and not for transfer or release or surrender or handover of the same to any third party which the Judgment Debtors have done in gross violation of terms of settlement.”
4. The learned counsel of the decree holder refers to the decisions reported at (1993) 2 SCC 185 (Salil Dutta Vs. T.M. And M.C. Private Ltd.) in support of his contention that there is no such absolute rule that a party can disown its advocate at any time and seek relief in contradistinction to the undertaking given on his behalf. No such absolute immunity can be recognized.
5. According to him, the principle of res judicata app
