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A. Thangal Kunju Musaliar Vs. the District Collector and Ex-officio Tax Recovery Officer, Quilon and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO.P. No. 38 of 1963
Judge
Reported inAIR1966Ker62
ActsConstitution of India - Article 14; Income-tax Act, 1961 - Sections 122; Income-tax Rules - Rules 73(2) and 75; Income-tax Act, 1922 - Sections 46(2); Travancore Income-tax Act, 1121 - Sections 66(3)
AppellantA. Thangal Kunju Musaliar
RespondentThe District Collector and Ex-officio Tax Recovery Officer, Quilon and anr.
Appellant Advocate V.K.K. Menon,; N. Palpu and; C.S. Padmanabhan Iyer,
Respondent Advocate Adv. General (for No. 1) and; C.T. Peter, Adv. (for No. 2)
DispositionAppeal dismissed
Cases ReferredAli Ahmed v. Collector of Bombay
Excerpt:
.....no order for the arrest and detention in civil prison of a defaulter shall be made unless the tax recovery officer has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice and to show cause why he should not be committed to the civil prison, and unless the tax recovery officer for reasons recorded in writing, is satisfied--(a) that the defaulter, with the object or effect of obstructing the execution of the certificate, has, after the receipt of the certificate in the office of the tax recovery officer, dishonestly transferred, concealed, or removed any part of his property, or (b) that the defaulter has, or has had since the receipt of the certificate in the office of the tax recovery officer, the means to pay the..........pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officer arresting him, such officer shall at once release him.74. ..... '75. pending the conclusion of the inquiry, the tax recovery officer may, in his discretion, order the defaulter to be detained in the custody of such officer as the tax recovery officer may think fit or release him on his furnishing security to the satisfaction of the tax recovery officer for his appearance when required.' 6. as i have stated, this mode of recovery by arrest and detention in civil prison has been approved by the supreme court. even so it is urged that the provision in sub-rule (2) of rule 73 that 'a warrant for the arrest of the defaulter may be issued by the tax recovery officer if the tax recovery.....
Judgment:

P. Govindan Nair, J.

1. The writ applicant is an assessee to Income-tax and I find from the records of the case that he has been assessed for a considerable number of years now. It is stated that arrears to the extent of Rs. 24,58,185.48 p. is due from the petitioner. In an attempt to rolled the fairly large amount, a notice Ex. P-1. in Form No. I. T. CP125, was issued to the petitioner pursuant to Rule 73 of the Second Schedule to the Income-tax Act, 1961. This notice stated:

'You are hereby required to appear before the undersigned on the 11th day of January 1963 in this office at 11 A.M. and to show cause why you should not be committed to the Civil Prison in execution of the said certificate.'

2. The petitioner did not appear to show cause on the 11th but approached this Court on the 7th of January, 1963 and obtained an order of stay of operation of further proceedings pursuant to the notice Ex. P-1. The order of stay was passed on the 9th of January, 1963.

3. The petitioner's counsel has raised large issues in this writ application. The first of these is that this mode of recovery of arrears of Income-tax, provided by Section 222 of the Indian Income Tax Act 1961, read with Schedule II to the Statute is inconsistent with the constitutional guarantees conferred on the citizens of this country. I have to repel this contention. The Supreme Court has more than once pronounced that such a mode of recovery is permissible. The decisions are reported in Purshottam Govindji Halai v. B. M. Desai, (S) AIR 1956 SC 20 and Collector of Malabar v. Erimmal Ebrahim Hajee, (S) AIR 1957 SC 688.

4. The petitioner's counsel raised an alter-native argument. This is based on Sub-rule 2 of Rule 73 in Part V of the Second Schedule to the Income-tax Act, 1961 as also Rule 75. Before proceeding to deal with this argument, it is necessary to extract Section 222 and read Rules 73 and 75, of the Indian Income-tax Act, 1961.

5. Section 222 is in these terms:

'222. (1) When an assessee is in default or is deemed to he in default in making a payment of tax, the Income-tax Officer may forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the assessee, and the Tax Recovery Officer on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein by one or more of the modes mentioned below, in accordance with the rules laid down in the Second Schedule--

(a) ***

(b) ***

(c) ***

(d) ***

(2) The Income-tax Officer may issue a certificate under Sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken.'

And Rules 73 and 75 in Part V of the Second Schedule under the heading 'Arrest and detention of the defaulter' read as follows:

'73(1). No order for the arrest and detention in civil prison of a defaulter shall be made unless the Tax Recovery Officer has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice and to show cause why he should not be committed to the civil prison, and unless the Tax Recovery Officer for reasons recorded in writing, is satisfied--

(a) that the defaulter, with the object or effect of obstructing the execution of the certificate, has, after the receipt of the certificate in the office of the Tax Recovery Officer, dishonestly transferred, concealed, or removed any part of his property, or

(b) that the defaulter has, or has had since the receipt of the certificate in the office of the Tax Recovery Officer, the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same.

(2) Notwithstanding anything contained in Sub-rule (1), a warrant for the arrest of the defaulter may be issued by the Tax Recovery Officer if the Tax Recovery Officer is satisfied, by affidavit or otherwise, that with the object or effect of delaying the execution of the certificate, the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Tax Recovery Officer.

(3) Where appearance is not made in obedience to a notice issued and served under Sub-rule (1), the Tax Recovery Officer may issue a warrant for the arrest of the defaulter,

(4) Every person arrested in pursuance of a warrant of arrest under Sub-rule (2) or Sub-rule (3) shall be brought before the Tax Recovery Officer as soon as practicable and in any event within twenty-four hours of his arrest (exclusive of the time required for the journey) :

Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officer arresting him, such officer shall at once release him.

74. .....

'75. Pending the conclusion of the inquiry, the Tax Recovery Officer may, in his discretion, order the defaulter to be detained in the custody of such officer as the Tax Recovery Officer may think fit or release him on his furnishing security to the satisfaction of the Tax Recovery Officer for his appearance when required.'

6. As I have stated, this mode of recovery by arrest and detention in civil prison has been approved by the Supreme Court. Even so it is urged that the provision in Sub-rule (2) of Rule 73 that 'a warrant for the arrest of the defaulter may be issued by the Tax Recovery Officer if the Tax Recovery Officer is satisfied, by affidavit or otherwise, that with the object or effect of delaying the execution of the certificate, the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Tax Recovery Officer' is repugnant to the freedom guaranteed to the citizen of India by the Constitution. It is stressed that a business man, owing large amounts to the State, compelled to leave the local jurisdiction of the Tax Recovery Officer for bona fide personal or trade or business reasons must apprehend the possibility of an affidavit being filed by the Tax Recovery Officer that he left the jurisdiction with a view to delay the execution of the certificate, resulting in a warrant being issued for his arrest. This possibility, though perhaps remote, can-not be ruled out. And the restraint of the freedom of an individual in such cases results from an ex parte order passed without giving any opportunity to the person arrested.

7. Similarly Rule 75 provides that even during the pendency of an enquiry, the Tax Recovery Officer, may in his discretion, order that the defaulter be detained in the custody of such officer as the Tax Recovery Officer may think fit or released on his furnishing security to the satisfaction of the Tax Recovery Officer for his appearance when required. Here also there is the possibility of restraint of freedom before the completion of the investigation and before a conclusion is reached as to whether 'the defaulter, with the object or effect of obstructing the execution of the certificate, has, after the receipt of the certificate in the office of the Tax Recovery Officer, dishonestly transferred, concealed, or removed any part of his property, or that the defaulter has, or has had since the receipt of the certificate in the office of the Tax Recovery Officer, the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same'. A conclusion on this aspect is a condition precedent before, a person can be ordered to be detained in Civil Prison. The provision in Rule 75 which enables for detention being effected even before a conclusion is reached also appears to me to be not a fair or just procedure.

8. Notwithstanding the prima facie impression created in my mind regarding the invalidity of the provisions 1 do not think that 1 can deal with these provisions piece-meal. The general provision for arrest and detention has been approved by the Supreme Court. In case the petitioner is inclined to question those decisions, it can only be done before the Supreme Court and if he does so, he certainly can raise these points regarding the validity of Sub-rule (2) of Rule 73 and Rule 75. I therefore, express no opinion on this aspect.

9. The arguments advanced by counsel on behalf of the petitioner concluded with a final submission that in any view of the matter, for the amounts mentioned as due. for the year 1122 . . Rs. 9,92,696.37 for the year 1114 . . Rs. 1,56,413.69 for the year 1119 and 1120 . . Rs. 4,15,458.00 and for the year 1119 . . Rs. 35,313.93 amounting in all to Rs. 15,99,881.99, resort cannot be had to the provisions for arrest and detention in Civil Prison.

10. Admittedly, the above amount became due by way of lax payable in accordance with the provisions of Act XXIII of 1121 which was in force in the Travancore area before 1-4-1950, the date of the Federal Financial Integration. The argument of counsel for the petitioner is that the amounts due by way of income-tax assessed under the provisions of that statute can only be recovered by the modes which were available for recovery at that time under the provisions of that statute. And according to him that statute did not provide for arrest and detention in civil prison as a mode of recovery of income tax. The learned Advocate General has opposed this contention and according to him the proviso to Section 66(3) of the Travancore Income-tax Act 1121 enables this mode of recovery, viz., resort to arrest and detention in civil prison being applied if so deemed necessary. Counsel for the Revenue Mr. C. T. Peter strenuously supports this contention of the Advocate General. Section 60(3) of the Travancore Income-tax Act 1121 is in these terms:

'66(3). The Income-tax Officer may forward to the Division Peishkar a certificate under his signature specifying the amount of arrears due from an assesses, and the Division Peishkar, on receipt of such certificate, shall proceed to recover from such asses see the amount specified therein as if it were an arrear of land revenue:

Provided that without prejudice to any other powers of the Division Peishkar in this behalf, he shall, for the purpose of recovering the said amount, have the powers which under the Code of Civil Procedure, 1100, a civil court has for the purpose of the recovery of an amount due under a decree.

11. It cannot be disputed that in view of Section 2(ii) of the Travancorc-Cochin Adaptation of Laws Act, Act 29 of 1950, the Collector will be entitled to act for the Division Peishkar and so the Collector would be entitled to act under Section 66(3) of the Travancore Income-tax Act 1121. The only question therefore is as to whether the Collector can resort to the mode of arrest and detention. The learned counsel appearing for the State and the Revenue stressed the words in the proviso and pointed out that the powers under the Code of Civil Procedure vested in a Civil Court for the recovery of a debt by detention in Civil Prison have been made available to a Collector. According to them, the Collector can exercise all the powers that can be exercised by a court. It is not denied that the Code of Civil Procedure contains the mode of recovery of a debt due under a decree by arrest and detention. So it is said, the Collector will have this power as well. I think, the answer to this contention is clearly furnished by the decision of the Supreme Court reported in AIR 1956 SC 20.

12. In that case it was argued that Section 46(2) of the Indian Income-tax Act provides for two different and alternative methods of recovery of the dues and clothes the Collector with the power to apply either of the two methods, that is to say, he may issue a warrant of arrest under Section 13 of the Bombay City Land Revenue Act, 1876 against one defaulter and keep him in detention for a period which may work out to he much longer than six months and he may proceed against another defaulter under the Code of Civil Procedure and arrest and detain him for the maximum period of six months. This, it was contended, has resulted in discrimination of a serious nature in that certain defaulters could be detained under the provisions of the Bombay City Land Revenue Act for a period which may he more than six months which is the maximum provided under the Code of Civil Procedure. This argument, as I understand the judgment of the Supreme Court has been negatived in unequivocal terms. Their Lordships said:

'This argument appears to us to be founded on a misapprehension about the true meaning of Section 46(2). On a proper reading, that subsection does not prescribe two alternative modes of procedure at all.

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 this 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. The statement to the contrary in the Judgment of the Bombay High Court in Ali Ahmed v. Collector of Bombay, AIR 1950 Bom 33 at p. 35, does not appear to us to be correct.'

12. There is another paragraph following the above quotation and I am extracting that also only because counsel appearing for the State relied on that paragraph in support of his submission that all the powers available to a Civil Court are available to a Collector and one of such powers of the Civil Court is the power to detain in Civil Prison for the recovery of a debt due under a decree. This paragraph is in these terms:

'In our opinion 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. Viewed in this light, there is no question at all. This part of the argument cannot, therefore, be accepted.'

(13) This paragraph, makes it clear, that all that the proviso to Section 46(2) of the Indian Income-tax Act 1922 has done is to confer the additional powers on the Collector for the better and more effective application of the only mode of recovery provided by Section 46(2). The mode of recovery is what is provided in the Revenue Recovery Act. If that Act does not provide for a mode of recovery by arrest and detention in Civil Prison, I feel no doubt, that the Collector will not get that power. I therefore negative this contention of counsel on behalf of the Revenue and counsel on behalf of the State.

14. In the light of the above, Ex. P-1 has to he quashed and I do so. I must also say that this does not preclude the Income-tax Officer from issuing a fresh notice after omit- ting the amount of Rs. 15,99,881.99, the arrears of tax due from the petitioner for the years 1122, 1114, 1119 and 1120 and 1119. If such a notice is issued, resort to detention in Civil Prison or detention in custody must be had only after full opportunity is given to the petitioner to place and prove his case and only after a conclusion is reached that the conditions laid down by Clauses (a) and/or (b) of Sub-rule (1) of Rule 73 of the Second Schedule to the Income-tax Act 1961, has or have been satisfied.

15. I allow this writ application on the above terms. There will be 110 order as to costs.


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