T.P.S. Chawla, J.
(1) These are ten petitions under Article 226 of the Constitution of India. In all of them the parties are the same. So also are the essential facts and the questions to which they give rise. The only difference is that they pertain to different assessment years for purposes of income tax. Respecting the questions for determination that is of no significance, and, consequently, I proceed to dispose of all of them by this common judgment.
(2) Many years ago there was a Hindu Joint Family (the 'assessed') which carried on business in watches under the name and style of M/s Bal Kishan Dass & Sons at Chandni Chowk, Delhi. Ever since 1931-32 it was assessed to income tax and its assessment year was the same as the financial year. At the material time the karta was Bal Kishan Dass. For the seven assessment years extending between 1st April 1941 to 31st March 1949, assessments were first made under the Income Tax Act 1922 in the ordinary way. Afterwards, taking advantage of the Voluntary and Quasi-Voluntary Disclosure Scheme announced by the Government of India in May 1951, the assessed made disclosures in respect of these assessment years. thereforee, re-assessments were made for those years under section 34 of the said Act by separate orders all dated 31st December 1951. Assessments for the years 1949-50. 1950-51 and 1951-52 were made on 23rd March 1954, some date in February 1955 and 28th February 1956 respectively. Thus, assessments for the ten years between 1st April 1941 and 31st March 1952 were finally completed, and that is how matters rested until the events to which I will now refer.
(3) On 26th September 1963 the Income Tax Officer issued ten notices to the assessed, one in respect of each of the said ten assessment years. The notices alleged that one Harparshad Bhatnagar had been employed by the assessed during the years 1941 to 1951, and had been paid income chargeable under the head 'Salary', but income tax had neither been deducted at source nor paid to the Government as required by section 18 of the Income Tax Act of 1922. Hence the assessed was required to appear before the Income Tax Officer and furnish its Explanationn for these, defaults.
(4) In its answer dated 6th November 1963. the assessed maintained that Harparshad Bhatnagar had been employed by it only from January 1947 to April 1951. It was said that he started on a salary of Rs. 150.00 per month and was given increments from time to time, but his salary remained below the taxable limit till March 1949. In April 1949 his salary was said to have been raised to Rs. 325.00 per month, and remained constant at this figure till April 1951 when he left the service of the assessed. Deductions for tax made from his salary after it had become liable to tax were stated to have been deposited in the Reserve Bank of India. All this was reiterated in a subsequent letter dated 20th January 1964.
(5) On 27th August 1965, Bal Kishan Dass made a statement before the income Tax Officer denying that Harparshad Bhatnagar had been paid any commission in addition to his salary. He repudiated the figures, which were put to him, of the alleged commission, and also denied having made an earlier statement on 28th July 1951 admit- ting that commission had been paid.
(6) Thereafter, on 27th December 1965, the Income Tax Officer made an order in respect of each of the ten assessment years purporting to be an 'Order under section 18(7) '. The asscssec was required to pay the tax which ought to have been deducted at source out of the amounts alleged to have been paid to Harparshad Bhatnagar as commission in the particular year. It was said in the orders that :
Under the circumstances the provisions of section 18(7) would be applicable to the case and the assessed would be deemed to be an assessed in default in respect of the tax which remains unpaid.'
The orders ended with the direction Issue notice of demand and challan for the amount'.
(7) Notices of demand were issued on the same day, i.e. on 29th December 1965. It is important to observe that all of them are entitled 'Notice of demand under section 156 of the Income Tax Act 1961'. No doubt the first paragraph refers to section 18(7) of the Act of 1922, but the notice itself purports to have been issued under the Act of 1961.
(8) The assessed then filed petitions for revision dated 23rd July 1966, under section 264 of the Income Tax Act 1961, before the Commissioner of Income Tax seeking to have the orders made by the Income Tax Officer cancelled. In these petitions it. was admitted that the amounts alleged to have been paid as commission were in fact 'withdrawn' by Harparshad Bhatnagar from the assessed, but it was explained somewhat euphemistically that 'the nature of these payments is entirely different and amounts to sharing of benefits for transactions outside the records'. It was still denied that the payments were in the nature of salary or commission and that there was any obligation to deduct tax at source. Later, in a statement filed before the Commissioner by the authorised representative of the assessed, further elucidation was offered as follows:
'THESE huge amounts were obviously not in the nature of salary or commission for services rendered, but these were payments made to keep his mouth shut about understatement of income by the assessed. These facts were made clear to the department at the time of voluntary disclosure and accordingly these amounts were not taken as part of the income of the assessed but that of Harparshad Bhatnagar.'
(9) By a common order dated 4th August 1967 the Commissioner dismissed all the petitions for revision. He held that the various sums admitted to have been paid to Harparshad Bhatnagar were paid to him as commission by the assessed. The contention of the assessed that proceedings could not have been taken under section 18(7) of the Act of 1922 as it had been repealed by the Act of 1961, was held not to be sustainable in view of section 297(2)(a) of the latter Act and section 6(c) and (d) of the General Clauses Act 1897. A further contention that proceedings for recovery of tax were barred by time was also rejected on the ground that there was no time limit for making an order under section 18(7) of the Act of 1922.
(10) Meanwhile, recovery certificates dated 20th March 1967 were apparently issued against the assessed. Intimation of this was given by notices dated 2nd July 1967 addressed to 'Shri Bal Kishan, karta of M/s Balkishan Dass & Sons'. They are entitled 'Notice of demand to defaulter', and immediately below, within brickets, is the instruction See rule 2 of the Second Schedule to the Income Tax Act 1961'. The assessed was required to pay the amount of tax demanded within 15 days otherwise 'steps would be taken to realise the amount in accordance with the Second Schedule to the Income Tax Act 1961'.
(11) In November 1967 the present petitions were filed in this Court. They seek to have the orders made by the lncome Tax Officer and the Commissioner of Income Tax quashed by write of certiorari, and also pray for orders in the nature of mandamus and/or prohibition to restrain the respondents from taking proceedings for effecting recovery on the basis of the recovery certificates, The respondents are the Commissioner of Income Tax, the income Tax Officer and the Tax Recovery Officer, Delhi. No counter-affidavit has been filed on their behalf even though I recently extended time for filing the same, the original time prescribed having expired long ago. The reason, I was told, was that the connected departmental files were not available or traccablc. None were produced before me.
(12) Although in the course of arguments a number of points were canvassed by counsel for the petitioner, I do not propose to deal with any of them except one which, I think, is sufficient for deciding these petitions. But before I turn to it, I should mention a technical flaw in the cause title of the petitions which was initially the subject of objection by counsel for the respondents. In the petitions the petitioner is described as 'M/s Bal Kishan Dass & Sons (H.U.F.) '. It appears that the Hindu Undivided Family carrying on business in this name disrupted in September 1950, and its business was then taken over and continued by a firm. In those circumstances, it was contended, that the Hindu Undivided Family having ceased to exist when the petitions were filed could not possibly be the petitioner. and hence the petitions were not maintainable. However, it appears clearly from paragraph 1 of the petitions, and of the affidavits in support thereof, that Bal Kishan Dass, the karta. was intended, and, indeed, thought to be, the petitioner, notwithstanding the description in the cause title. After I indicated that I would be prepared to grant leave to amend the petition so as to show that the karta was in fact the petitioner, counsel for the respondents decided, in order to save time, not to insist on a formal amendment. The case was then heard as if the karta and not the Hindu Undivided Family was the petitioner.
(13) The point, which I regard as decisive, is the one relating to the time within which proceedings for recovery of tax must be commenced. To deal with it, some preliminary ground needs to be covered. Section 18(2) of the Act of 1922 enjoined that :
'ANY person responsible for paying any income chargeable under the head 'salaries' shall, at the time of payment, deduct income-tax and super-tax on the amount payable at a rate representing the average of the rates applicable to the estimated total income of the assessed under this head:............'.
A proviso follows, but it is not presently relevant. From section 7 of the Act it is clear that 'commissions' were included under the head 'Salaries', and had, thereforee, to suffer deduction of tax at source. The consequences of a failure to comply with the obligation imposed by section 18(2) were stated by sub-section (7) of that section as follows:
If any such person does not deduct or after deducting fails to pay the tax as required by or under this section, he, and in the cases specified in sub-section (3D) the company of which he is the principal officer shall, without prejudice to any other consequences which lie or it may incur, be deemed to be an assessed in default in respect of the tax:...............'.
Again, I omit the proviso as it is of no moment.
(14) It will be recalled that the Income Tax Officer purported to make orders under section 18(7) of the Act of 1922 against the assessed. But that section docs not seem to envisage the making of any order at all, for it automatically, and of its own force, transforms by a legal fiction any person who has failed to carry out his obligation under section 18(2) into an 'assessed in default'. However, without saying more on this point, I will proceed further on the assumption that the orders made by the Income Tax Officer, ostensibly under section 18(7) of the Act, were valid and operative.
(15) The 'mode and time of recovery' of tax from an assessed were dealt with by section 46 of the Act of 1922. Sub-section 2 of that section required that the Income Tax Officer should forward to the Collector a certificate specifying the amount of arrears due from the assessed, and the Collector was empowered to recover the same as if it were an arrear of land revenue. The time within which proceedings for recovery had to be taken was stated in sub-section (7) which read:
'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 commenced after the expiration of one year from the last day of the financial year in which any demand is made under this Act:............'.
Once again I omit the provisos which are of no importance
(16) At this stage I pause to make two observations. First, it is to be noticed that section-46 does not specifically refer to an asses- sec 'deemed' to be in default. So, it can be argued, and, indeed, was argued, that under the Act of 1922 there was no machinery provided for effecting recovery of tax from an assessce 'deemed' to be in default. Secondly, the time limit provided by section 46(7) for commencing proceedings for recovery is dependent on when 'any demand' was made under that Act. There was some argument on the question whether the words 'any demand' were intended to mean 'notice of demand' or were used in a more comprehensive sense. On this occasion it is unnecessary to dwell on any of these points. I will assume, for the purpose of the reasoning which follows, that if proceedings for recovery were governed in the present ease by section 46, and could be taken there under, they were within time.
(17) The Income Tax Act of 1961 came into force on 1st April 1962. This is expressly stated in section 1(3) of that Act. By section 297(1) of the Act of 1961 the Act of 1922 was repeated. Thus, when proceedings for recovery were commenced against the assessed the new Act had already come into force, and the old had ceased to be. In the new Act, the equivalent of section 46(7) in the old is section 231, which is entitled 'Period for commencing recovery proceeding' and reads:
'SAVE in accordance with the provisions of section 173 or subsection 7 of section 220, no proceedings for the recovery of any sum payable under this Act shall be commenced after the expiration of one year from the last day of the financial year in which the demand is made. or, in the case of a person who is deemed to be an assessed in default under any provision of this Act, after the expiration of one year from the last day of the financial year in which the assessed is deemed to be in dafult.'
I ignore the two Explanationns which are appended because they do not bear on the question with which I am concerned.
(18) Comparing section 231 of the New Act with section 46(7) of the old, one finds that in the new section there are two alternative modes of reckoning. The first is dependent on when 'the demand' is made. and the second on when the assessed is 'deemed' to be in default. The first mode of reckoning is nearly identical with that which was in section 46(7) of the Act of 1922. It is the second method of reckoning which is new. Moreover, it applies expressly to an assessed 'deemed' to be in default, and thereby the lacuna, if any, in the old section has been filled.
(19) In the present case the assessed was 'deemed' to be in default by virtue of section 18(7) of the Act of 1922, and the Income Tax Officer so held in the orders purporting to have been made there under. Those orders must now be deemed to have been made under the corresponding provision of the Act of 1961 as section 297(2)(k) of that Act so requires, and the assessed must be deemed to be in default under the new Act regardless of when the defaults in fact occurred. Rule 10 of the Income Tax Rules 1922 required that all sums deducted in accordance with the provisions of section 18, other than deductions by or on behalf of Government, should be paid within 'one week from the date of such deduction'. Other eventualities contemplated by the rule are not relevant. Having failed to make deductions at source as and when commission was paid to Harparshad Bhatnagar, the assessed must, in the light of the rule, be 'deemed' to have been in default recurrently on the eighth day after each such payment was made between 1st April, 1941 to 31st March, 1952. Applying the second mode of reckoning time prescribed by section 231 of the new Act (the mode for an assessed 'deemed' to be in default) . it is manifest that proceedings for recovery taken against this assessed in 1967 in respect of those defaults were hopelessly barred by time. It was not contended, and I do not think that it could possibly be contended that even though section 231 itself provided a specific and different method of reckoning time in respect of an assessed 'deemed' to be in default, yet the general method provided by it, based on the making of a demand, could be applied to such a case. Such an argument would make the specific provision utterly futile.
(20) So, the conclusion emerges, subject of course to the assumptions made en route, that if time for commencing proceeding for recovery against the assessed was controlled by section 46(7) of the old Act they were within time: but if by section 231 of the new Act, they were barred. The critical question, then, is whether those proceedings were governed by the old Act or the new.
(21) The answer, I think, is too plain from section 297(2)(j) of the Act of 1961 which provides that :
Any sum payable by way of income-tax, super-tax, interest, penalty or otherwise under the repealed Act may be recovered under this Act, but without prejudice to any action already taken for the recovery of such sum under the repealed Act.'
No form of words, I should have thought, could be more clear to show that the new Act prevails as regards recovery of tax sought to be made after it came into force. Nevertheless, counsel for the respondents argued that the matter fell within section 297(2)(a) , if properly construed, and that led to a different conclusion. Section 297(2)(a) says that :
'WHERE a return of income has been filed before the, commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed.'
It was contended that the word 'assessment' had here been used in its widest sense, and would include within its sweep even proceedings for recovery. Of course, if that were right, the time for commencing proceedings for recovery would be controlled by the old Act and not the new.
(22) Considering that sub-clause (j) of section 297 expressly deals with the matter of recovery, there really is no scope for this argument. Howsoever widely the word 'assessment' may be interpreted in subclause (a) , it surely cannot be so expanded as to override and render nugatory the other sub-clauses of section 297 which deal specifically with certain matters. If the argument, were sound there would be no necessity for any of the other sub-clauses, and yet so many are to be found in that section.
(23) The word 'assessment' is generally used in contradistinction to levy' or 'collection', and is capable of covering the whole field of taxation not occupied by them : see Firm L, Hazari Mal Kuthiala vs . Income-tax Officer, Special Circle, Ambala Cantt. and another, . It is used in more than one sense, and sometimes may have two separate meanings in the same section: see A. N. Lakshman Shenoy vs. Income-Tax Officer, Ernakulam and another, (1958) 34 I.T.R. 175 . But it is never used to denote levy' or 'collection'. And, proceedings for recovery are part of the process of collection.
(24) In Kalawati Devi Harlalka vs . Commissioner of Income-Tax West Bengal : 66ITR680(SC) , the case on which counsel for the respondents relied, it was recognised, in a passage occurring on page 687, that the meaning of 'assessment' has to be discerned from the context. There the court was actually concerned with the meaning of that word in section 297(2)(a) of the Act of 1961. In summing up, it was said :
It is quite clear from the authorities cited above that the word 'assessment' can bear a very comprehensive meaning; it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer.'
This does not show that the word 'assessment' includes proceedings for recovery. It establishes only that the word encompasses the 'procedure for ascertaining and imposing liability', and no more. Incidentally, I should mention, that in this case the Supreme Court also held that resort could not be had to section 6 of the General Clauses Act 1897 as section 297 of the Act of 1961 evinced a contrary intention.
(25) What was relied on most of all by counsel for the respondents was the passage in C. A. Abraham vs. Income-Tax Officer, Kottayam, and another (1960) 41 I.T.R. 425 where it was said:
'THE expression 'assessment' used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding that when by section 44, it is declared that the partners or members of the association shall be jointly; and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof.'
I think the words 'and the machinery for enforcement thereof occurring in this quotation arc not to be understood to mean proceedings for recovery of tax. They are linked by the word 'thereof to 'the procedure for declaration and imposition of tax liability'. The decision in the case itself indicates what the Supreme Court had in mind. The question was whether penalty could be imposed under section 28 of the Act of 1922 on a firm after it had been dissolved by the death of one partner. It was argued that section 44 of that Act, which provided for the making of an assessment in respect of a firm which had been discontinued, could not be availed of for the purpose of levying penalty on the firm. This argument was repelled in the passage which I have quoted above. From the background it transpires that the words 'and the machinery for enforcement thereof were intended to refer to section 28, the provision giving power to impose a penalty. It is now well settled that the word 'assessment' is wide enough to include penalty proceedings, and that is ail that this case decided. A Division Bench of the Kerala High Court likewise found that to be its real ratio decidendi: see Kunhalaumma and others vs . Income-Tax Officer, Calicut : 68ITR840(Ker) .
(26) thereforee, my view, that proceedings for recovery of tax against the assessed were governed by section 231 of the Act of 1961, abides. Presumably, that was also the view of the income tax authorities for the notices of demand were issued under the new Act, even though the orders purporting to create the demand recited the old. Since the assessed was one 'deemed' to be in default, the proceedings for recovery were barred by time in 1967. Consequently, I hold, that the recovery certificates were issued contrary to law, and cannot be allowed to stand. Because of this conclusion I have found it unnessary to discuss any of the other points raised on behalf of the petitioner.
(27) Accordingly, these petitions are allowed, and the recovery certificates issued by the respondents in respect of the ten assessment years from 1st April, 1941 to 31st.March, 1952 are quashed. Further, the respondents are prohibited from taking any proceedings for recovery in pursurance of those certificates.
(28) To avoid doubt or confusion, I add, that nothing in this judgment will be construed as precluding the respondents from taking steps to recover the tax from the assessed in such other manner as may be permissible in law.
(29) As the point of limitation on which these petitions have succeeded, though taken in the petitions, was not grounded on section 231 of the Act of 1961, I will leave the parties to bear their own costs.