K.S. Hegde, J.
1. These are connected petitions. They are filed by the two partners of a dissolved firm. The firm in question was assessed to excess profits tax in a sum of Rs. 74,612-11-0 and a compulsory deposit of Rs. 19,816 for the chargeable accounting period from October 30, 1943 to April 30, 1944, and a notice of demand was issued to them by the Income-tax Officer on February 1, 1948, which was served on them on or before March 10, 1948 (The exact date is not known). The assessee applied to the Income-tax Officer for extension of time for the payment of tax assessed. Time was granted till April 15, 1948. Meanwhile, they filed on appeal to the Appellate Assistant Commissioner. The Inspecting Assistant Commissioner extended time on September 3, 1948, for the payment of the tax levied till the disposal of the appeal. The appeal was disposed of in 1957. A certificate under section 46(2) of the Indian Income-tax Act, read with rule 3 of the Excess Profits Tax Rules, 1940, was issued on March 23, 1950.
2. It is contended that any action under section 46(2) of the Indian Income-tax Act, 1922, read with rule 3 of the Excess Profits Tax Rules, 1940, is now barred. The question is whether this contention is correct.
3. Mr. Srinivasan has not contended before us that the other remedies available to the department are barred. The view taken in the several decided cases is that merely because no steps can be taken under section 46(2) of the Indian Income-tax Act, the right of the department to recover the tax due otherwise is not taken away.
4. Section 46(7) as it stood prior to its amendment in 1953 read as follows :
'Save in accordance with the provisions of sub-section (1) of section 42, or of the proviso to section 45 no proceedings for the recovery of any sum payable under this Act shall be commended after the expiration of one year from the last day of the financial year in which any demand is made under this Act : Provided that where the sum payable is allowed to be paid by instalments, the period of one year herein referred to shall be reckoned from the date on which the last of such instalments was due.'
5. This provision was further amended as a result of Central Act. No. 25 of 1953. The section as it stands now, in addition to other provisions, contains proviso (iii) to section 46(7), which says :
'Where the date of payment of tax has been extended by an income-tax authority, be reckoned from the date up to which the time for payment had been extended.'
6. The benefit of this provision is not available to the department as it was not in existence a the time when time for payment was extended by the Income-tax Officer or by the Inspecting Assistant Commissioner (See Jethalal Nagji Shah v. Municipal Corporation for Greater Bombay) That being so, it must be held that the right of the department to proceed under section 46(2) is barred on the basis of the demand notice issued by it. The contention of the learned counsel for the department that the order passed by the Income-tax Officer extending the time for payment of the tax levied amounts to granting of instalments within the meaning of that expression found in the proviso as it stood prior to the amendment in 1953, does not appear to us to be correct on the language of the provision. Extending time for payment of the tax due is something different from granting instalments. Further, the legislative history referred to above, to an extent, weakens the above contention of the learned counsel for the department.
7. For the reasons mentioned above, we hold that the steps taken by the department on the basis of the certificate issued on March 23, 1950, for the collection of excess profits tax and the compulsory deposit is not authorised by law and, therefore, if permitted would amount to an illegal exaction. We, accordingly, issue a writ of mandamus directing the respondent to forbear from taking further steps in the matter of realisation of the amounts mentioned above on the basis of the certificate dated March 23, 1950.
8. In the circumstances of the case, we direct the parties to bear their own costs.
9. Petitions allowed.