Held
In our view, it was an admitted position that the petitioner represented M/s. JSS Enterprises in capacity as the power of attorney holder, as per the Contract Act and the capacity of the petitioner was as that of the agent and the principal was his mother who was the Proprietor of M/s.JSS Enterprises. In law, for the act of the agent, principal may be held responsible but for the liability of the principal, the agents cannot be made responsible unless there is specific condition so provided in the contract of agency. When it is an undisputed position that the mother who is proprietor of M/s. JSS Enterprises is alive, the capacity of the mother as principal and the capacity of the petitioner as an agent deserves to be separately identified in law unless an enquiry is held in detail and it is found by the taxing authority that the mother was a fictitious person or that was a projected dummy and all money and other activities pertaining to the business were by the petitioner himself for his benefit and not for the benefit of the mother. It is not the case of respondent Nos.1 and 2 that any such enquiry was held. In absence of any enquiry, the liability as per the Contract Act, needs to be followed including that of the contract of the agency.
HIGH COURT OF KARNATAKA
M.S. Jagadeesh Kumar
v.
Deputy Commissioner of Commercial Taxes
WRIT APPEAL NO. 2707 OF 2015 (T-RES)
JUNE 21, 2016
P.M. Nayak, Advocate for the Appellant. Smt. Swetha Krishnappa, HCGP for the Respondent.
JUDGMENT
Jayant Patel, J. – The present appeal is directed against the order dated 04.08.2015 passed by the learned Single Judge in W.P.No.27292/2015, whereby the learned Single Judge for the reasons recorded in the order has dismissed the petition.
2. We have heard Mr. P.M. Nayak, learned Counsel appearing for the appellant and Ms. Shwetha Krishnappa, learned HCGP appearing for the respondent Nos. 1 and 2 – authorities for final disposal. So far as respondent No. 3 is concerned, it is served through postal track report and none appears on his behalf.
3. We need not refer to the facts in detail but the following factual position are admitted:
| 1. | Respondent Nos.1 and 2 have to recover the amount from the mother of the petitioner who is Proprietor of the firm known as M/s. JSS Enterprises, Subrahmanya Nagar, Bangalore. | |
| 2. | The petitioner is holding the general Power of Attorney of his mother and he used to represent M/s. JSS Enterprises in capacity as the power of attorney. | |
| 3. | M/s. JSS Enterprises was required to pay the tax dues but it did not and therefore there is liability to pay the amount of Rs.24,78,320/- more particularly, which has not been paid. The said aspects of liability of tax is not modified by any higher forum. | |
| 4. | The respondent Nos.1 and 2 in exercise of the power under Section 14 of the Karnataka Sales Tax Act (for short ‘the KST Act’), directed the respondent No.3-Bank who is having Bank account on the name of the petitioner in his individual capacity as proprietor of Preethi Wines, to attach the account and to transfer the balance of the amount lying in the account of the petitioner in his individual capacity. | |
| 5. | The respondent No.3 pursuant to the said order of respondent No.1 has transferred the amount of Rs.2,23,288/- to respondent No.1. | |
| 6. | The petitioner in his individual capacity is also running the business on the name of M/s. Preethi Wines and the account with respondent No.3 Bank was of the petitioner as Proprietor of M/s. Preethi Wines and not as the power of attorney holder or as representative of M/s. JSS Enterprises. |
4. Under the circumstances, the petitioner approached this Court by preferring the writ petition. The learned Single Judge found that the petitioner represented M/s. JSS Enterprises at all stages and he is also General Power of Attorney Holder of M/s. JSS Enterprises and hence the learned Single Judge found that the taxing authorities were justified in exercising the power under Section 14 of the KST Act, in issuing notice to the Bank in respect of the account held by the petitioner and therefore, the learned Single Judge did not find any fault with the notice and ultimately dismissed the petition. Under the circumstances, the present appeal before this Court.
5. In our view, it was an admitted position that the petitioner represented M/s. JSS Enterprises in capacity as the power of attorney holder, as per the Contract Act and the capacity of the petitioner was as that of the agent and the principal was his mother who was the Proprietor of M/s.JSS Enterprises. In law, for the act of the agent, principal may be held responsible but for the liability of the principal, the agents cannot be made responsible unless there is specific condition so provided in the contract of agency. When it is an undisputed position that the mother who is proprietor of M/s. JSS Enterprises is alive, the capacity of the mother as principal and the capacity of the petitioner as an agent deserves to be separately identified in law unless an enquiry is held in detail and it is found by the taxing authority that the mother was a fictitious person or that was a projected dummy and all money and other activities pertaining to the business were by the petitioner himself for his benefit and not for the benefit of the mother. It is not the case of respondent Nos.1 and 2 that any such enquiry was held. In absence of any enquiry, the liability as per the Contract Act, needs to be followed including that of the contract of the agency.
6. However, the learned Government Pleader attempted to contend that the conduct of the appellant-petitioner was such that he was, for all stages, representing the mother. Pursuant to the said power of attorney, she submitted that when such a conduct in the business was demonstrated, the authorities could be said as justified in reaching to the individual property or the bank account of the petitioner, even if he was an agent.
7. We cannot accept the contention for the simple reason that when two separate identity in law are in existence, such identity including the inter se liability of each identity cannot be mixed with nor can be extended unless the same is found in an enquiry, that the other identity was a dummy or a dummy projected or fictitious or bogus. Such is not the fact situation in the present case, since no enquiry is held nor it is reported to this Court that any enquiry at any stage was held.
8. In view of the above, the order at Annexure ‘G’ dated 20.02.2015 issued by respondent Nos.1 and 2-authority cannot be sustained in the law and further any action taken by respondent No.3 pursuant to the said order of transferring the amount can also not be sustained in the eye of law. The resultant effect would be that respondent Nos.1 and 2 who are now holding the amount of Rs. 2,23,288/- will be required to refund the amount to the appellant. Such refund shall be made within a period of one month from the date of receipt of a certified copy of the judgment of this Court.
9. In view of the above, the order of the learned Single Judge is set aside. The appeal is allowed as per the relief granted earlier. No order as to costs.