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Smt. Kalawati and anr. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 452 of 1965
Judge
Reported in[1970]76ITR96(All)
ActsIncome Tax Act, 1922 - Sections 46(2); Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1951 - Sections 279; Code of Civil Procedure (CPC) , 1908 - Order 21, Rules 54 and 58; Limitation Act, 1908 - Schedule - Article 120
AppellantSmt. Kalawati and anr.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateSudhir Chandra, Adv.
Respondent AdvocateV.P. Srivastava, Adv. for ;K.P. Agarwal, Adv.
Excerpt:
.....are recoverable as arrears of land revenue as that is the only mode of recovery authorised by the body of sub-section (2) of section 46 of the income-tax act. the proviso to that section merely confers upon the collector some anciliary or additional power for the better and more effective application of the only mode of recovery. recourse to the provisions of the civil procedure code is to be taken for the purpose of better and more effective application of that power. when the collector effects an attachment in exercise of his powers under clause (f) of section 279 of the abolition act and in good faith attaches the property of a third person other than the assesses who owes the tax liability, it is open to the aggrieved third party to apply to the collector apprising him of the true..........suit the plaintiffs had given notice to the first and second defendants under section 80 of the civil procedure code. another suit was also filed by kalawati and binda prasad as plaintiffs against the same defendants and others for an injunction restraining them from selling the three houses alleged to have been wrongly attached by the collector. both the suits were defended by the defendants, who pleaded that the three attached houses were the property of phool chand, the assessee, and not of the plaintiffs. certain technical pleas were also raised regarding the validity of the notice under section 80 of the civil procedure code and regarding the maintainability of the suit. no plea was raised in the written statement that the suit was barred by limitation. the two suits were.....
Judgment:

K.B. Asthana, J.

1. This appeal against an order of remand passed by the lower appellate court arises in the following circumstances:

One Phool Chand was assessed to income-tax under the name and style of Sheo Prasad Phool Chand. He did not pay the income-tax dues. The Income-tax Officer concerned issued a certificate for realisation of the tax dues to the Collector in exercise of his powers under Section 46(2) of the Income-tax Act and he proceeded to recover the tax dues as arrears of land revenue. Three houses situate in Kanpur City were attached by the Collector for sale by auction. Smt. Kalawati and her son, Binda Prasad, made an application before the Collector stating that the houses attached belonged to the applicants with which the assessee, Phool Chand, had nothing to do and the same be released from attachment. The Collector rejected that application, taking the view that under the law no such application could be entertained. An appeal against this order of the Collector was dismissed by the Commissioner. Smt. Kalawati and her son, Binda Prasad, then instituted Suit No. 184 of 1962 in the Court of the First Civil Judge, Kanpur, on December 1, 1962, for a declaration that the three houses attached were not liable to be sold in respect of realisation of arrears of income-tax dues from Phool Chand or Sheo Prasad Phool Chand. To this suit were impleaded as first defendant, the Union of India, as second defendant, the Income-tax Officer, and as third defendant, Phool Chand. It may be mentioned that before instituting the said suit the plaintiffs had given notice to the first and second defendants under Section 80 of the Civil Procedure Code. Another suit was also filed by Kalawati and Binda Prasad as plaintiffs against the same defendants and others for an injunction restraining them from selling the three houses alleged to have been wrongly attached by the Collector. Both the suits were defended by the defendants, who pleaded that the three attached houses were the property of Phool Chand, the assessee, and not of the plaintiffs. Certain technical pleas were also raised regarding the validity of the notice under Section 80 of the Civil Procedure Code and regarding the maintainability of the suit. No plea was raised in the written statement that the suit was barred by limitation. The two suits were consolidated by the trial court for hearing. Necessary issues were framed on the picas raised. The substantial question that arose for determination in the suit related to the title of the plaintiffs to the three houses in dispute. The learned judge who heard the suit repelled all the technical pleas raised in defence and on the main issue found in favour of the plaintiffs holding that the three houses in dispute were the property of the plaintiffs and not that of the third defendant, Phool Chand. The result was that the Suit No. 184 of 1962 for declaration was decreed and so was the connected suit for injunction.

2. From the decrees in the two suits the defendants went up in appeal which in their turn were consolidated for hearing and disposed of by the Additional District Judge, Kanpur. In appeal it appears for the first time on behalf of the defendant-appellant that the question of limitation was agitated- A perusal of the judgment of the learned Additional District Judge shows that, while affirming the findings of the court of first instance on the question of title, he held that the suit being one for a declaration would be in the nature of a suit under Order 21, Rule 63, Civil Procedure Code, and ought to have been instituted within six months of the date of rejection of the objection of the plaintiffs before the Collector. The learned Additional District Judge further held that the question whether the plaintiffs were entitled to the exclusion of the time which elapsed during the pendency of the appeal against the order of the Collector, before the Commissioner and what was the length of that time were necessary to be determined before finding out whether the suit of the plaintiffs for declaration, namely, Suit No. 184 of 1962, was within time. Accordingly, the learned Additional District Judge allowed the appeal of the defendants, set aside the decree of the court below in the said suit and remanded the case to the court of first instance for recording of findings on the question of limitation in the light of the directions given. In the other suit, which was for injunction, the appeal of the defendants was also allowed and the learned Additional District Judge, holding that it was misconceived, dismissed it. Now Smt. Kalawati and Binda Prasad, the plaintiffs, have come up in appeal before this court in Suit No. 184 of 1962. They have conceded to the decree in the connected suit for injunction and have not appealed from the decree of the dismissal of that suit.

3. Sri Sudhir Chandra Agarwal, learned counsel appearing for the plaintiff-appellant, in support of the appeal contended that the suit was governed by Article 120 of the First Schedule of the Limitation Act, 1908, and the court below was in error in holding that it, was governed by Article 11 of that Schedule and thus wrongly remanded the case to the trial court for further enquiry on the question of limitation. It was submitted that the attachment made by the Collector could not be an attachment of immovable property in execution of a decree within the meaning of Order 21, Rule 54, and the application which was filed by the plaintiffs before the Collector would not be an objection or claim within the meaning of Order 21, Rule 58, of the Civil Procedure Coda. Hence, the rejection of that application would not be final in the sense that no other remedy was available except by way of a suit under Order 21, Rule 63, Civil Procedure Code. It was further submitted that the instant suit was a simple suit for a declaration of rights not governed by the provisions of Order 21, Rule 63, Civil Procedure Code. It was argued that the Collector attached the houses in suit in the exercise of his powers under Section 279(f) of the U.P. Zamindari Abolition and Land, Reforms Act and not under the provisions of Order 21, Rule 54, Civil procedure Code, as a civil court in execution of a decree in a suit; hence, there was no occasion for Smt. Kalawati and Binda Prasad, whose property was wrongly attached, to prefer any claim or file any objection under Order 21, Rule 58, Civil Procedure Code, which applies only when immovable property is attached in execution of a decree.

4. On the other hand, Sri V. P. Srivatsava holding the brief of Sri K. P. Agarwal, learned counsel for the respondent, Phool Chand, submitted that under the proviso to Sub-section (2) of Section 46 of the Indian Income-tax Act, the Collector has the power of the civil court when realising the arrears of tax and the procedure provided for attachment and sale of immovable property in execution of decrees mutatis mutandis applies as he becomes a civil court and any objection filed or claim preferred by a third party to the attachment or sale of immovable property would be nothing but a proceeding under Order 21, Rule 58, of the Code as regards the attachment and under other provisions as regards sale. The submission was that the proviso to Section 46(2) of the Indian Income-tax Act incorporates a rule of reference and it must be given full effect and when so done there will be no difference between the Collector taking proceedings by attachment of immovable property for realisation of revenue and a civil court sitting in execution attaching immovable property of the judgment-debtor in execution of a decree.

5. From the above arguments advanced before me at the Bar the basic question that arises for determination in this appeal is whether the order of the Collector rejecting the application of the plaintiffs for releasing the houses in suit from attachment or for lifting the attachment on the housesin suit was made under Order 21, Rule 58, of the Civil Procedure Code, andthe instant suit which was subsequently brought would be a suit underOrder 21, Rule 63, Civil Procedure Code. On behalf of the respondentsreliance was placed on Deo Sharma v. Chartered Bank of India, I.L.R. 1955 All 673 and Unionof India v. Parvati Kuwar, A.I.R. 1965 All. 154. The former case was decided by a DivisionBench of this court. In that case it was held that the attachment of animmovable property by the Collector in the course of recovery of income-taxdues will be deemed to be in exercise of powers under Order 21, Rule 58, ofthe Civil Procedure Code, as there was no provision under Section 146 of theU. P. Land Revenue Act for attachment of other immovable property of thedefaulter though there was provision for the sale of such property. I donot think the ratio of the decision of that case helps the respondents as nowunder Section 279 of the U.P. Zamindari Abolition and Land Reforms Act,in its Clause (f), there is specific power conferred on the Collector torecover an arrear of land revenue by attachment and sale of otherimmovable property of the defaulter. It has not been disputed before methat the only provisions of law, which now are available in Uttar Pradeshfor recovery of arrears of land revenue, are contained in the U.P. ZamindariAbolition and Land Reforms Act and the former Section 146 and certainother related sections of the U.P. Land Revenue Act stand repealed. Itfollows, therefore, that when the Collector takes proceedings for recovery ofthe income-tax dues which is realisable as arrears of land revenue he exercises his powers under the relevant provisions of the U. P. ZamindariAbolition and Land Reforms Act. In the latter case cited, which is a decisionof a learned single judge of this court, the question that arose was whethera suit for a declaration that the attachment by the Collector of immovableproperty was null and void, which attachment was made in the courseof realisation of income-tax dues as arrears of land revenue, could be filedagainst the Union of India without serving upon it and its officers a priornotice under Section 80 of the Civil Procedure Code The learned singlejudge held that such a suit could be filed without serving a prior noticeunder Section 80 of the Civil Procedure Code, as the proceedings in the suitwere in continuation of the objection formerly raised before the Collector towhich the Union of India and its officers were already a party. In thecourse of his reasoning no doubt the learned single judge drew analogy fromthe provisions of Order 21, Rule 58, and observed that the former objectioncould be deemed to be under that provision. I do not think I am bound bythe reasoning or any observations made by the learned single judge in thecourse of his judgment. In the instant case due notice under Section 80 was served upon the Union of India before filing of the suit and no such question arises before me.

6. In the case of Purshottam Govindji Halai v. B.M. Desai, Additional Collector of Bombay, [1955] 28 I.T.R. 891, [1955] 2 S.C.R. 887, the Supreme Court had occasion to consider the true effect of Section 46 of the Indian Income-tax Act and its proviso. The learned judges in paragraph 8 of the reported judgment observed as follows:

'All that the sub-section directs the Collector to do is to proceed to recover the certified amount as if it were an arrear of land revenue, that is to say, he is to adopt the procedure prescribed by the appropriate law of his State for the recovery of land revenue and that in thus proceeding he is, under the proviso, to have all the powers a civil court has under the Code. The sub-section does not prescribe two separate procedures...... In ouropinion the proviso does not indicate a different and alternative mode of recovery of the certified amount of tax but only confers additional powers on the Collector for the better and more effective application of the only mode of recovery authorised by the body of Sub-section (2) of Section 46.'

7. From the above quoted observations of the Supreme Court it is clear that the tax dues are recoverable as arrears of land revenue as that is the only mode of recovery authorised by the body of Sub-section (2) of Section 46 of the Income-tax Act. The proviso to that section merely confers upon the Collector some anciliary or additional power for the better and more effective application of the only mode of recovery. According to the Supreme Court, the law, as I understand, is that one has to look to the power of the Collector under the relevant law of the State providing for recovery of arrears of land revenue and the power of the Collector is to be founded on those provisions. Recourse to the provisions of the Civil Procedure Code is to be taken for the purpose of better and more effective application of that power. The only law in our State for recovery of arrears of land revenue is contained in Section 279 of the U. P. Zamindari and Land Reforms Act and succeeding sections. Clause (f) of Section 279 gives power to the Collector to attach other immovable property of the defaulter. Then Rule 273(a) of the Rules framed under the U. P. Zamindari Abolition and Land Reforms Act enjoins that the attachment of other immovable property under Section 279(f) shall be effected in the manner prescribed in Order 21, Rule 54, of the Code of Civil Procedure, 1908. I do not agree with the construction put upon the said rule by the learned counsel for the respondents that the attachment made in exercise of his power by the Collector under Section 279(f) of the U. P. Zamindari Abolition and Land Reforms Act becomes an attachment under Order 21, Rule 54, under the Civil Procedure Code. The rule when correctly read by itself makes it clear that the source of power of the Collector for effecting attachment is not the Code of Civil Procedure but Clause (f) of Section 279 of the Abolition Act. The rule, instead of repeating the phraseology of Order 21, Rule 54. for detailing the mode of attachment, just refers for convenience that whatever is provided in Order 21, Rule 54, of the Civil Procedure Code, will also be the mode of attachment effected in exercise of the power under Clause (f) of Section 279 by the Collector. The rule as worded is nothing but an artifice which the draftsman often adopts for the sake of convenience and brevity-Thus the power of attachment and the mode how it is to be effected is provided for in the U. P. Zamindari Abolition and Land Reforms Act. It is fallacious then to say that the attachment, affected by the Collector of other immovable property of the defaulter is under the provisions of the Code of Civil Procedure. To my mind there is no warrant for such a proposition. It is obvious that when the attachment is not made under the Code of Civil Procedure any objection to it by a third party would also not be under the provisions of the Code of Civil Procedure. When the Collector effects an attachment in exercise of his powers under Clause (f) of Section 279 of the Abolition Act and in good faith attaches the property of a third person other than the assesses who owes the tax liability, it is open to the aggrieved third party to apply to the Collector apprising him of the true situation. Such an application would not be deemed to be a claim preferred or objection raised to attachment within the meaning of Order 21, Rule 58, Civil Procedure Code, as the said provision in terms applies only when an attachment is made in execution of a decree as defined in 'the Civil Procedure Code. The learned counsel for the respondents has not placed before me any provision of the Income-tax Act or of any other law for the time being in force that the recovery of the tax dues amounts to an execution of a decree for recovery of money. If the contention of the learned counsel for the respondent is accepted, then, I will have to import a fiction in the law which is not there that under Section 46(2) of the Income-tax Act, the recovery of arrears of tax on a certificate issued by the Income-tax Officer will be deemed to be an execution of a decree for money passed by a civil court.

8. It was then submitted, on behalf of the respondents, that there is no provision in the U. P. Zamindari Abolition and Land Reforms Act or under the Rules framed thereunder for preferring of claims or objections by third parties to the attachment levied by the Collector and since the plaintiffs preferred such a claim or filed such objection before the Collector, they would be deemed to have invoked the power of the Collector under Order 21, Rule 58, of the Civil Procedure Code. Much was tried to be made on the mention of Order 21, Rule 58, Civil Procedure Code, in the heading of the application made by the plaintiffs before the Collector. I do not think the law will change only because under some mistaken advice the mention was made of Order 21, Rule 58, Civil Procedure Code, in that application.

9. Were it to be assumed for a moment that an objection or claim is not contemplated against the attachment effected by the Collector under Section 279(1) of the U.P. Zamindari Abolition and Land Reforms Act, it will in no way prejudice the case of the plaintiffs before me inasmuch as the proceedings taken by them, even if considered without any authority of law, can be ignored without affecting their substantive rights in the houses attached. It would be no more than a futile proceeding. Moreover, it appears to me that, there being no bar under any provision of law, it was open to the plaintiffs, on whose proprietary rights an allegal invasion was being made by the attachment made under a mistaken impression that the houses in suit belonged to Phool Chand, the assessee, to approach the Collector and seek the necessary relief. As it happened, the Collector rejected that application on the ground that such an application was not entertainable. Nothing, therefore, turns on the proceedings taken by the plaintiffs before the Collector and those proceedings will not have any effect on their right to seek their remedy in a regular court of law to protect their proprietary rights in the houses in dispute.

10. Once it is held that the provisions of Order 21, Rule 58, were not applicable and no objection or claim under the Civil Procedure Code could be made under those provisions to the attachment of the three houses in dispute by the Collector, no question will arise of filing a suit under Order 21, Rule 63, of the Civil Procedure Code, as the order passed by the Collector will not be an order within the meaning Order 21, Rule 58, Civil Procedure Code, In any view of the matter, as the facts of this case show, the Collector refused to entertain the application. For a moment let it be assumed that it was an application under Order 21, Rule 58, of the Civil Procedure Code, The Collector did not adjudicate upon it on merits. He just rejected it on the ground that it did not lie. I do not think such an order passed by an execution court under Order 21, Rule 58, can be said to be an order rejecting the claim or the objection after adjudicating upon it on merits. It would be as if no application was made under Order 21, Rule 58, of the Civil Procedure Code. There is no bar in law operating upon the right of a third party whose property has been wrongly attached to straightaway file a suit in the civil court for declaration of his rights in regard to that property.

11. For the reasons given above, I am of the view that the learned judge of the court below was in error or thinking that the instant suit filed by the plaintiffs was one under Order 21, Rule 63, of the Civil Procedure Code. I agree with the learned counsel for the plaintiffs-appellants that the suit was one for a declaration of their rights in an immovable property and would be governed by Article 120 of the Limitation Act. The suit of the plaintiffs, therefore, was not barred by limitation.

12. The result is that this appeal is allowed and the order of the court below remanding the case is set aside. As the finding on merits is in favour of the plaintiffs, their suit for declaration as prayed for stands decreed with costs throughout.


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