Anil K. Sen, J.
1. The Union of India obtained these two rules on applications under Article 227 of the Constitution. The subject-matter of challenge in these two rules is an order dated February 22, 1969, passed by the Commissioner, Presidency Division, whereby he disposed of the two appeals under Rule 86 of the Second Schedule to the I.T. Act, 1961, being Cases Nos. 66 and 67 of 1968-69. By the order impugned the Commissioner has held that the tax recovery proceeding initiated under the I.T. Act, 1961, for recovery of tax dues on an assessment made under the previous Act, namely, the Indian I.T. Act, 1922, is not maintainable. According to the Commissioner, demand for payment of such tax having been made under the provisions of the 1922 Act, proceedings for recovery had already started under that Act and notwithstanding the coming into force of the Act of 1961 shortly thereafter, such proceeding under the 1922 Act must continue in view of the provisions of Section 297(2)(c) of the 1961 Act. The Commissioner has, therefore, taken the view that initiation of a proceeding under the 1961 Act for recovery of such dues is not maintainable in law.
2. The facts are not in dispute. The assessment was completed under the 1922 Act and the demand for payment of tax assessed was also issued under Section 29 of the 1922 Act at a time when the 1961 Act had not come into effect. But before any certificate could be issued, the 1961 Act came into force and hence, the recovery proceeding was initiated by the Revenue authorities under the provisions of the 1961 Act. An objection was raised that such a proceeding under the new Act is not maintainable which was overruled by the TRO but was sustained by the Commissioner on anappeal referred to hereinbefore. The short point that arises for our consideration is as to whether such a proceeding for recovery under the new Act could be initiated or whether the Revenue authorities are still required to proceed under the old Act for recovery of such dues.
3. On a careful consideration of the point at issue, we are of the view that the Commissioner materially misread the legal position as also the terms of Clause (c) of Sub-section (2) of Section 297 of the 1961 Act in thinking that, in view of that clause, the recovery has to be made under the provisions of the old Act.
4. Section 297(1) repeals the Act of 1922 and Sub-section (2) provides for savings. Clause (c) of that sub-section so much relied on by the Commissioner is as follows :
' (c) Any proceeding pending on the commencement of this Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference or revision, shall be continued and disposed of as if this Act had not been passed.'
5. In our view, Mr. Pal is right in pointing out that the Commissioner went wrong in two ways. In the first place, he went wrong in holding that the recovery proceeding had already been initiated under the old Act of 1922 by issue of notice of demand thereunder, so that such a proceeding became pending on the date the old Act being repealed, the new Act came into force. Secondly, the Commissioner failed to take note of the fact that Clause (c) speaks of a proceeding by way of appeal, reference or revision pending before any income-tax authority, the Appellate Tribunal or any court which does not include any recovery proceeding under the old Act read with the Public Demands Recovery Act. In our view, it would have been more appropriate for the Commissioner to rely upon the concluding part of Clause (j) instead of Clause (c) in holding that a recovery proceeding already started under the old Act must continue thereunder. Clause (j) reads as follows :
' (j) 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.'
6. But, in our view, the fundamental mistake of the Commissioner lies in the fact that he erroneously took the view that the recovery proceeding starts with the demand. We, however, find that under the statute the recovery proceeding can be initiated only when the assessee is in default and he is not in default until he had failed to pay on the demand made. Every bona fide assessee is expected to pay what is payable on a just and lawful assessment and thus avoid a proceeding for enforcedrecovery thereof. In order to enable the assessee to avail of that opportunity the demand is made. In that way such demand is a part of the assessment proceeding and not the proceeding for recovery. If the assessed amount be paid voluntarily on the demand made, there would arise no case for recovery. Hence, we accept the contention of Mr. Pal that the Commissioner went wrong in thinking that a notice of demand under Section 29 of the old Act having been issued, a recovery proceeding had already been initiated under that Act so that the recovery must be made in accordance with the provision of that Act and not the new Act of 1961. We further hold that the proceeding for recovery was yet to be initiated as and when the assessee fails to pay in accordance with the demand. The case, therefore, appropriately comes within the first part of Clause (j) referred to hereinbefore and, as such, the Revenue authorities were well within their rights to initiate a proceeding for recovery under the provisions of the new Act of 1961.
7. In the result, these revisional applications succeed and the impugned orders of the Commissioner in the two cases referred to hereinbefore being set aside, we direct that the recovery proceedings started before the TRO in terms of the 1961 Act should continue.
8. The rules are accordingly made absolute without any order as to costs in either of them.
S.N. Sanyal, J.
9. I agree.