1. The petitioner applies under Article 226 of the Constitution against recovery proceedings taken by the Income-tax Officer and the Tax Recovery Officer.
2. The petitioner is a partnership firm carrying on banking and cloth business. For the purpose of recovery of income-tax dues, the Tax Recovery Officcr, Income-tax, Kanpur, attached the petitioner's immovable properties on January 27, 1967, and this was followed by a notice dated February 7, 1967, for setting the sale proclamation with a view to theirsale. The petitioner objected to the recovery proceedings, but the proceedings have not been, dropped. The petitioner contends that the recovery proceedings are illegal because no tax remains due from the petitioner, that in any event there is no recovery certificate to support the recovery proceedings and that no notice under Rule 2 of the Second Schedule to the Income-tax Act, 1961, was ever served upon the petitioner. The petition is opposed by the respondents.
3. After hearing learned counsel for the parties, it seems unnecessary to consider all the grounds raised by the petitioner because, in our opinion, the petition can be disposed of shortly on one ground alone.
4. The petitioner says that the impugned recovery proceeding is not sanctioned by any existing recovery certificate. Our attention has been invited by Shri C. K. Daphtary, appearing for the petitioner, to the letter dated June 15, 1965, from the Income-tax Officer to the Tax Recovery Officer informing him that all the recovery certificates issued to him from different Income-tax Officers in respect of the arrear demands against Behari Lal Ram Charan Kothi and other members of the Behari Lal Ram Charan group had either been paid or written off up to the assessment year 1957-58, and that, therefore, all the recovery certificates should be treated as cancelled and returned. An amount of Rs. 7,046.25 was excluded but that represented tax due from the individual partners and not from the petitioner-firm. Even in respect of that amount, the Income-tax Officer directed the Tax Recovery Officer not to press the recovery proceeding until further intimation. The matter appears to have rested there until on January 15, 1967 (wrongly shown as January 25, 1967), the Income-tax Officer wrote to the Tax Recovery Officer setting out various sums said to be due from the petitioner-firm and its partners up to the assessment year 1957-58, amounting in all to Rs. 17,25,086.09. This was apart from the amount of Rs. 7,046.25 already mentioned. The Income-tax Officer desired to know what action was being taken by the Tax Recovery Officer to recover the amounts. Pursuant to this letter, it seems, the Income-tax Officer attached the immovable property of the petitioner by an order dated January 27, 1967, which stated that as the petitioner and others had failed to pay Rs. 17,32,132'34 'in respect of Certificate No. nil dated January 15, 1967, forwarded by the Income-tax Officer' the petitioner was prohibited and restrained from transferring or charging the said properties. This was followed on February 7, 1967, by an order of the Tax Recovery Officer fixing February 18, 1967, for drawing up the proclamation of sale and setting its terms. That notice also referred to ' certificate No. nil dated January 15, 1967, forwarded by the Income-tax Officer '. It is admitted in paragraph 7 of the counter-affidavit filed by the Tax Recovery Officer that the document of January 15, 1967, is not a recoverycertificate. In fact, in paragraph 4 of the second counter-affidavit of the Tax Recovery Officer the document is referred to as ' merely a reminder and an intimation of the revised and correct demand in respect of the certificates already issued ', And in paragraph 12 of his counter-affidavit the Income-tax Officer states:
'.........it is not claimed by the department that the letter datedJanuary 25, 1967, was a recovery certificate. As rightly pointed out by the petitioner, it was only a reminder to the Tax Recovery Officer for ascertaining the progress in the recovery of arrears.'
5. A recovery certificate under Section 222 of the Income-tax Act, 1961, is a document forwarded by the Income-tax Officer to the Tax Recovery Officer certifying the amount of arrears due from an assessee. It is a certificate on receipt of which the Tax Recovery Officer is obliged under the section to proceed to recover from the assessee the amount specified therein. The letter of January 15, 1967, assumes that a recovery certificate has already been issued, because it desires to know from the Tax Recovery Officer what action has been taken for recovering the tax arrears. We are of the definite view that the letter of January 15, 1967, cannot be described as a recovery certificate.
6. The case of the respondents is that recovery certificates had been issued earlier on various dates during the years 1958 to 1963 (annexures ' B-l ' and 'B-25 ' to the counter-affidavit of the Income-tax Officer). It is admitted that the letter dated June 15, 1965, was issued by the Income-tax Officer to the Tax Recovery Officer cancelling those recovery certificates. It is alleged that the letter was kept on the file but no action was taken on it by the Tax Recovery Officer. It is difficult to appreciate the purport of this assertion. Under Section 224(2) of the Income-tax Act, 1961, the Income-tax Officer has power to withdraw a recovery certificate issued to a Tax Recovery Officer, and this he does by sending an intimation to the Tax Recovery Officer. Nothing more is required. Upon such intimation the recovery certificate stands withdrawn. It is not necessary for the Tax Recovery Officer to pass any order for the purpose of making the order of withdrawal a valid and effective order. All that he can do is to give effect to it by terminating the recovery proceedings altogether.
7. It is contended by the respondents that the certificates in the present case could be said to have been cancelled and not withdrawn, and, therefore, the action of the Income-tax Officer cannot be referred to Section 224(2). Our attention has been invited to Section 224(3), which provides :
' The Income-tax Officer shall intimate to the Tax Recovery Officer any orders withdrawing or cancelling a certificate or any correction made by him under Sub-section (2) of this section or any amendment made under Sub-section (4) of Section 225.'
8. That, it seems to us, makes no difference. Whether the order can be attributed to Sub-section (2) or Sub-section (3) of Section 224, it plainly appears that the said order was passed by the Income-tax Officer. In our opinion, the Tax Recovery Officer was bound, without anything more, to terminate the recovery proceedings altogether. Reference has been made by the respondents to what is stated in paragraph 14 of the counter-affidavit of the Income-tax Officer. It is alleged that the letter of June 15, 1965, was issued on a misconception of the true situation. It is said that the petitioner and its partners applied for a settlement of their tax liability and on May 2, 1961, the Central Board of Revenue intimated the Government's acceptance of the offer proposed by them. It is alleged that no valid contract came into existence thereby because the requirements of Article 299(1) of the Constitution were not satisfied. In our opinion, those considerations cannot vitiate the order made by the Income-tax Officer under Section 224 withdrawing or cancelling the recovery certificates. The Income-tax Officer acted in the exercise of his statutory powers, and the order made by him under Section 224 cannot be assailed merely because of some misunderstanding or misconception prevailing in the Central Board of Revenue. It was for the Income-tax Officer to exercise his judgment and make an order under Section 224. While doing so he may have been prompted and influenced by an appreciation of the situation by the Central Board, which subsequently is now said to be erroneous. It may even be that the Income-tax Officer erred in his judgment when making the order under Section 224. That, it seems to us, is insufficient for destroying the legal status of the order. It is an administrative order, and a mere error of judgment while making the order cannot invalidate it and make it amenable to our writ jurisdiction so long as it lies within the statutory powers entrusted to the administrative authority.
9. We are, therefore, of opinion that, by reason of the order of June 16, 1965, of the Income-tax Officer directing the Tax Recovery Officer to treat the certificates as cancelled, the recovery proceedings initiated by the Tax Recovery Officer cannot be pursued any further. It is not the case of the respondents that any subsequent certificate has been issued and is in force today. There is, therefore, no legal sanction in support of the recovery proceedings.
10. The petition is allowed. The recovery proceedings which are being taken against the petitioner after the letter dated June 15, 1965, cancelling the recovery certificates are quashed. The petitioner is entitled to its costs.