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Gora Chand Porel Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberAppeal from Appellate Decree No. 2113 of 1965
Judge
Reported in90CWN265,[1986]160ITR158(Cal)
ActsIndian Income Tax Act, 1922 - Sections 29 and 46; ;Taxation Laws (Constitution and Validation of Recovery Proceedings) Act, 1964 - Section 3(1)
AppellantGora Chand Porel
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateR.P. Bagchi and ;S.S. Roy, Advs.
Respondent AdvocateN.L. Pal and ;R.C. Prasad, Advs. for respondent No. 1
Cases ReferredBeharilal Baldeo Prasad v. Commissioner
Excerpt:
- .....concerned proceeded with the previous certificate case which is not in accordance with law. as a fresh notice was issued under section 29 of the act, there could not have been any default before the expiry of the period of notice for the purpose of sections 45 and 46 of the act and the old certificate case was thus illegal and invalid. 4. the defendant contended that there was no illegality or irregularity in respect of the certificate proceeding and the plaintiff was not entitled to a fresh notice. the certificate proceeding was thus legal and valid. the learned munsif dismissed the suit upon the finding that there was no need for a fresh notice under section 29 of the act because of the reduction of the amount of tax by the appellate authority and the notice actually issued could be.....
Judgment:

S.N. Sanyal, J.

1. This is an appeal by the plaintiff against the decision of the learned Subordinate Judge, 8th Court, Alipore, dismissing theplaintiff's appeal against the judgment and decree of the learned Munsif, 2nd Court, Alipore.

2. The plaintiff instituted a suit for a declaration that the proceedings and orders in relation to or arising out of Certificate Case No. 5168 Income-tax of 1956-57 pending before the Certificate Officer and Additional District Magistrate of 24-Parganas were illegal, ultra vires and without jurisdiction and not binding upon the plaintiff. The plaintiff also prayed for permanent injunction.

3. The plaintiff's case as made out in the plaint is that he is the karta of a Hindu undivided family. The Income-tax Officer, District-VI, Calcutta, assessed the income-tax of the family for the year 1955-56 by a notice dated February 25, 1956, under Section 29 of the Indian Income-tax Act, 1922, and directed payment of Rs. 15,595-7-0 as tax. Against the said assessment, an appeal was preferred. A sum of Rs. 5,940-11-0 was paid as tax on March 29, 1956, and subsequently other amounts were also realised. On or about March 21, 1957, the Income-tax Officer forwarded a certificate under Section 46(2) of the Income-tax Act to the Certificate Officer of 24-Parganas for recovery of the balance of Rs. 9,634-12-0. The Certificate Officer thereupon signed a certificate under the Bengal Public Demands Recovery Act of 1913 for the recovery of the said amount. While the certificate case was being proceeded with, the original assessment was reduced in appeal by a sum of Rs. 4,521 by an appellate order dated September 19, 1957. On November 11, 1957, the Income-tax Officer issued a notice of demand under Section 29 of the Act directing payment of Rs. 6,839.91. In spite of the reduction of the amount, the authorities concerned proceeded with the previous certificate case which is not in accordance with law. As a fresh notice was issued under Section 29 of the Act, there could not have been any default before the expiry of the period of notice for the purpose of Sections 45 and 46 of the Act and the old certificate case was thus illegal and invalid.

4. The defendant contended that there was no illegality or irregularity in respect of the certificate proceeding and the plaintiff was not entitled to a fresh notice. The certificate proceeding was thus legal and valid. The learned Munsif dismissed the suit upon the finding that there was no need for a fresh notice under Section 29 of the Act because of the reduction of the amount of tax by the appellate authority and the notice actually issued could be considered to be a mere intimation. On appeal, the lower appellate court dismissed the appeal and held that in view of the provisions of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (hereinafter referred to as the Act of 1964), it was not necessary to issue any fresh notice under Section 29 of the Act when the tax wasreduced in appeal. The learned judge held that the second notice issued under Section 29 of the Act was redundant in view of the Act of 1964. Issue of fresh notice cannot invalidate the existing proceeding. Being aggrieved, the plaintiff has preferred the present appeal.

5. The only point urged by Mr. Bagchi assisted by Mr. S.S. Roy is that in the case of ITO v. Seghu Buchiah Setty : [1964]52ITR538(SC) , the Supreme Court held that a fresh demand notice had to be served before an assessee could be treated as a defaulter when the amount of tax was reduced in appeal. It was further held by the Supreme Court that on the Income-tax Officer's order being revised in appeal, the default based on his order and all consequential proceedings must be taken to have been superseded and fresh proceedings have to be started to realise his dues as found by the revised order. Mr. Bagchi argued that after this decision, the law has undoubtedly been changed by the Act of 1964 but the present case, according to Mr. Bagchi, will not come within the purview of the Act of 1964 as the said Act deals with cases where no second notice under Section 29 of the Act has been issued after the disposal of the appeal. The argument of Mr. Bagchi is that when after the reduction of the tax in appeal a fresh notice under Section 29 of the Act was issued, the first notice under Section 29 was superseded and the proceeding based on the first notice thus ceased to exist and there could not be any continuation of the first proceeding which had been superseded.

6. Mr. Pal, learned advocate for respondent No. 1, has argued that the Act of 1964 was enacted subsequent to the decision of the Supreme Court in the case of ITO v. Seghu Buchiah Setty : [1964]52ITR538(SC) . The argument of Mr Pal is that Section 3(1)(b) of the Act of 1964 deals with cases where the Government dues are reduced in appeal or proceeding. According to the provisions of the said Act, no second notice is necessary and the second notice thus issued would mean that the assessee was given intimation about the reduction of the amount in appeal. The contention of Mr. Pal is that unless the assessment order is set aside in appeal, any reduction of amount does not mean that the assessee ceases to be a defaulter and the proceeding pending against him on the basis of the earlier assessment will continue in view of the provisions of Section 3 of the Act of 1964 and it will not be necessary to start a fresh proceeding. Mr Pal has also referred to the case of Baladin Ram Kalwar v. ITO : [1966]62ITR392(All) . In this case it has been held that when the law laid down by the Supreme Court in Seghu Buchiah Setty : [1964]52ITR538(SC) stood, the recovery proceedings against the assessee could not continue whenever the assessed income-tax was reduced by a superior authority and a fresh notice of demand was necessary. This decision further held that apparentlybecause of the decision of the Supreme Court, Parliament enacted the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, and in view of Section 3 of the said Act, where the Government dues are reduced upon appeal or other proceedings, it will not be necessary for the income-tax authority to serve a fresh notice of demand upon the asses-see and Section 5 declares that the provisions of the Act shall apply and shall always be deemed to apply in relation to every notice of demand served upon an assessee by a taxing authority under the Indian Income-tax Act, 1922, whether such notice was served before or after the commencement of the Act.

7. Another decision referred to by Mr. Pal is the case of Beharilal Baldeo Prasad v. Commissioner, Jhansi Division : [1967]63ITR555(All) . In this decision, it has been held that Section 3(1)(c) of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, protects the recovery proceeding from any invalidity arising out of the fact that the Government dues have been reduced in appeal or the fact that no fresh notice of demand or a fresh recovery certificate was issued. This provision will not, however, save non-compliance with the provisions of Sub-clauses (ii) and (iii) of Section 3(1)(b) which are mandatory and which require that the taxing authority shall give intimation to the assessee and the Tax Recovery Officer of the fact of such reduction and that proceedings for recovery may be continued only in relation to the reduced amount of Government dues.

8. Section 29 of the Indian Income-tax Act, 1922, lays down as follows :

'When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable.'

9. In the instant case, there is no dispute that the said notice of demand was issued. Thereafter, the Income-tax Officer forwarded the case to the Certificate Officer. After the reduction of the amount in appeal, another notice under Section 29 of the Act was issued to the assessee. In ITO v. Seghu Buchiah Setty : [1964]52ITR538(SC) , it was held by Sarkar J. (as his Lordship then was), that on the Income-tax Officer's order being revised in appeal, the default based on his order and all consequential proceedings must be taken to have been superseded and fresh proceedings have to be started to realise his dues as found by the revised order,

10. Hidayatullah J. (as his Lordship then was) held that when an assessment made by the Income-tax Officer is altered (whether the tax assessedis reduced or increased) by reason of any order under the Act, it is the duty of the Income-tax Officer under Section 29 of the Act to issue a fresh notice of demand in the prescribed form and serve it upon the assessee.

11. Shah J. (as his Lordship then was) held otherwise. According to his Lordship, in the absence of any provision imposing an obligation upon the Income-tax Officer to issue successive notices of demand from time to time for recovery of the amount due during the process of assessment, the notices of demand issued by the Income-tax Officer in exercise of the power under Section 29 may be enforced in the manner provided by Section 46 and within the period of limitation provided in Section 46(7), even after the appeal against the order of assessment by the Income-tax Officer is disposed of, subject to adjustment of the amount to b& recovered in the light of the order of the Appellate Assistant Commissioner. A person who has failed to comply with a notice of demand would continue to be a defaulter notwithstanding the reduction of his liability by an order of the appellate authority. There is only one exception to this rule and that is when the order of assessment is wholly set aside.

12. The position was altered by the enactment of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964. Section 5 of the said Act made it retrospective and in view of that section, the provisions of this Act shall apply and shall be deemed always to have applied, in relation to every notice of demand served upon an assessee by any taxing authority under any scheduled Act whether such notice was or is served before or after the commencement of this Act. In the Schedule, item No. 1 is the Indian Income-tax Act, 1922 (XI of 1922).

13. Section 2(b) of the said Act lays down as follows (see [1964] 52 ITR 63):

''Government dues' in relation to any scheduled Act, means any tax, duty, penalty, fine, interest, annuity deposit or any other sum payable to the Government by an assessee under that Act.'

14. Section 3(1)(b) lays down as follows (see [1964] 52 ITR 63) :

'Where such Government dues are reduced in such appeal or proceeding,--

(i) it shall not be necessary for the taxing authority to serve upon the assessee a fresh notice of demand;

(ii) the taxing authority shall give intimation of the fact of such reduction to the assessee, and where a certificate has been issued to the Tax Recovery Officer for the recovery of such amount, also to that officer ;

(iii) any proceedings initiated on the basis of the notice or notices of demand served upon the assessee before the disposal of such appeal orproceeding may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.

15. Section 3(1)(c) lays down as follows (see [1964] 52 ITR 63):

'no proceedings in relation to such Government dues (including the imposition of penalty or charging of interest) shall be invalid by reason only that no fresh notice of demand was served upon the assessee after the disposal of such appeal or proceeding or that such Government dues have been enhanced or reduced in such appeal or proceeding.'

16. The point urged by Mr. Bagchi is that had no fresh notice under Section 29 of the Act been issued, he would have no point to argue in this appeal in view of the provisions of the Act of 1964. The argument of Mr. Bagchi that because of the issue of the second notice, the case will go out of the ambit of the Act of 1964, is without any substance. The Act of 1964 was enacted for continuation and validation of recovery proceedings. The recovery proceeding was there when the appeal was pending and when the tax was reduced in appeal, the second notice under Section 29 of the Act should be considered to be an intimation given as required under Section 3(1)(b)(ii) of the Act of 1964. The earlier certificate proceeding based on the first notice does not cease to be valid because a notice was issued subsequently under Section 29 of the Act. Any proceeding initiated on the basis of the notice or notices of demand served upon the assessee before the disposal of such appeal or proceeding may be continued under the Act in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal. I am unable to agree with Mr. Bagchi that the second notice superseded the first notice and there was no existence of the certificate proceeding and fresh certificate proceeding had to be instituted after the same. If that were so, the very object of the enactment of the Act of 1964 would be negatived.

17. In such circumstances, the contention raised by Mr. Bagchi cannot be accepted and the appeal must fail.

18. This appeal is, accordingly, dismissed.

19. There will be no order as to costs.


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