Refund of amount wrongly transferred to an entry provider declined- SC dismisses SLP

Refund of amount wrongly transferred to an entry provider party whose bank account was attached by Income Tax Department declined- SLP dismissed by Supreme Court

ABCAUS Case Law Citation
ABCAUS 3655 (2023) (02) SC

As alleged by the petitioner, in the course of its business it sought to invest in the project of a company and was required to make a payment to the account of such company through Net Banking. 

It was submitted that the regular accountant of the petitioner was  not available, the substitute person who carried  out  the  said net banking transaction inadvertently and by error transferred the said amount to the account of another party (the receiving party).

The same day, on realising the mistake the Petitioner wrote to his banker pointing out the mistake and requested  for  reversal  of  the  said  transaction.  However, the bank informed the petitioner that there was a statutory freeze and alien notice in the aforementioned account of the receiver party in which the credit   had been  allegedly  made  by  mistake.  

The Petitioner then filed a writ petition before the Hon’ble High Court seeking a direction to a Bank to reverse/transfer back the amount allegedly wrongly transferred in the account of the receiving party maintained with the said bank. The income Tax Department was arrayed as first respondent in the said Writ Petition.

The Income Tax Department in its counter affidavit pointed out that the said bank account was attached by the Income-tax Officer on account of a huge demand due from the said party. It was further stated as per information received, the said receiving party was an intermediary beneficiary in providing and taking accommodation entries. Therefore, amount allegedly inadvertently transferred by   the petitioner could not be reversed as it appeared to be an after-thought to hide illegal activities of being a beneficiary  of accommodation entries.

The learned Single judge of the Hon’ble High Court opined that in view of the facts shown, the averments of the petitioner lack complete bona fide. Other than a bald averment claiming that the said amount had been sent by an error there was nothing on record to show any error committed by the petitioner. In fact, the plea that the money was to be transferred to another company, no material was placed on record to show any such intention or liability on the part of the petitioner to transfer funds.

The learned Single judge opined that the averments made by the Petitioner were doubtful and highly disputed questions of facts and there was no merit in the petition.

However, the liberty was granted to the petitioner to take steps, as per law, for recovery of the alleged claims before an appropriate forum/appropriate Civil Court.

The Petitioner again filed a Writ Petition before the Division Bench of the Hon’ble High Court. The case of the Petitioner was that the Income Tax Department rejected the contentions raised in the application moved by the Petitioner by simply relying upon the decision of the learned Single Judge and has not considered the contentions raised by the petitioner.

It was submitted that the petitioner should not suffer due to the outstanding demand of Income Tax for no fault of his.

The Division Bench observed that he Single Judge on similar averments had held that the petition lack bona fide and raised highly disputed questions of facts. The Division Bench opined that the petitioner should have taken steps to agitate its claim before  the appropriate forum/civil court.

Accordingly, the writ petition was also dismissed by the Division Bench with liberty to the petitioner to file appropriate proceedings  in accordance with law.

Not satisfied by the judgment of the Division Bench of the Hon’ble High Court, the Petitioner approached the Hon’ble Supreme Court by filing Petition for Special Leave to Appeal.

However, the Division Bench of the Hon’ble Apex Court declined to entertain the Special Leave Petition (SLP) under Article 136 of the Constitution of India.

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