Champa Kumari Singhi & Ors Vs. The
Member Board of Revenue, West Bengal & Ors [1970] INSC 11 (2 February 1970)
02/02/1970 HIDAYATULLAH, M. (CJ)
HIDAYATULLAH, M. (CJ) SHAH, J.C.
HEGDE, K.S.
GROVER, A.N.
RAY, A.N.
DUA, I.D.
CITATION: 1970 AIR 1108 1970 SCR (3) 467 1970
SCC (1) 404
ACT:
Indian Income Tax Act (11 of 1922), ss. 46
and 47Liability agreed to be paid by installments, and in default of single installment
entire balance exigibleAssessment orders in terms of agreementDemand notices
issuedDefault in installmentRecovery proceeding after more than one year of the
default but before the last installment dueWhether claim barred.
HEADNOTE:
An agreement was signed between the Revenue
and the assessees fixing the assessees' incometax liability for several past
years, and fixing installments for its payment.
The last installment was payable on March 31,
1957. It was also stipulated that on the breach of a single installment the
whole amount would become exigible. The Incometax Officer made the assessment
orders in accordance with the agreement. These orders and demand notices to pay
the amount by March 31, 1953 were sent to the assessees in September 1952 with
letters stating that if there was no default in payment of the installment due
on March 31, 1953, further extension of time for paying the balance will be
granted. The assessees filed revisions under s. 23A of 'the Incometax Act, 1922
against the orders of assessment.
The Commissioner held the assessments were
properly made as they were made in accordance with the settlement after the
assessees' disclosure. Later the earlier agreement for payment by installments
was varied. The main variation in the second agreement was that the penalty was
reduced and smaller installments were fixed. In March 1956 certificates under
s. 46(2) of the Act were issued and notices under the Bengal Public Demands
Recovery Act, 1913 were served. On the question whether the certificates were
barred by limitation under s. 47(1) Indian Incometax Act, 1922 this Court,
HELD : (Per Hidayatullah, C. J., Shah,
Grover, Ray and Dua, JJ.) The certificates were not barred by time.
The assessment order reproduced the agreement
as part of it and the agreement therefore became the assessment order.
Under the assessment order a notice of demand
was sent to pay the money of the first installment by March 31, 1953. on breach
of it the whole amount was said to be exigible and the demand in 'respect of
that was also made. The assessees, therefore, became defaulters on the failure
to pay the first installment. Since installments were granted, cl. (iv) of the
proviso to S. 47(7) applied. That clause does not mention about the exigibility
of the whole amount or exigibility of any particular installment. It only says
that if installments are granted time of one year ending with the end of the
financial year is to be calculated from the date on which the last installment
is payable. The language of cl. (iv) of the proviso was unfortunate in
expressing this intent and has now been corrected in the new Incometax Act but
the intention was obvious. always Even in the second agreement which replaced
the agreement the same condition 468 obtained. There was a concession shown in
the matter of penalty and smaller installments were fixed. But the revenue had
stipulated even then that the concession mentioned above would only be
available if the revised scheme of payment was strictly followed. in other
words, payment was to be made by installments and this concession therefore,
attracted the provisions of cl. (iv). The Government could always accept any installment
even if paid late without having to worry about the period of limitation of one
year from the date of demand, since cl. (iv) of the first proviso gave them an
option to wait till the last installment was payable. The scheme of installments
took the matter out of the main part of subs. (7) and brought it within the
proviso to clause (iv). [476 G477 D] (Per Hegde, J. dissenting) :If an assessee
fails to comply with the demand made in accordance with the provision in s.45
within the time mentioned therein then he is 'defaulter' within the meaning of
the Act. Unless the assessee is a defaulter, no action can be taken against him
under s. 46.
Nonfulfillment of the terms of the agreement
does not amount to a default under s. 45. Subsection (7) of s. 46, clearly says
that no proceedings for recovery of any sum payable under the Act can be
commenced after the expiration of one year from the last day of the financial
year in which any demand is made under the Act. Under sub cl. (iv) of the
proviso to s. 47(7) where the sum payable is allowed to be paid in installments,
the one year prescribed in s. 46(7) will be computed from the date on which the
last of such installments was due. The expression "was due" can only
mean "is due" under the Act. The expression does not appear to be
grammatically correct; this correction has been made in the new Act, but that
correction is immaterial for the present purpose. For finding out when the sum
claimed 'was due', one must go to s. 45, and cannot fall back on the agreement.
Chapter V of the Act has nothing to do with the agreement between the assessees
and the revenue. The expression "was due" in s. 46(7) has reference
to the tax which is due in accordance with the provisions in ss. 45 and 46.
In view of the demand notices issued in
September 1952 the sum became due when the assessees became defaulters, and
therefore the reconvey proceedings under the Act should have been initiated
before March 1954. The same having not been initiated before that date, the
proceedings in question must be held to have been barred. [478 AG; 479 FH]
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 564 to 571 of 1968.
Appeals by special leave from the judgments
and orders dated December 10, 1963 and November 24, 1964 of the Calcutta High
Court, in appeals from Original Orders Nos. 139 to 142 of 1959.
M. C. Chagla, P. N. Tiwari, J. B. Dadachanji,
0. C. Mathur and Ravinder Narain, for the appellants (in all the appeals).
Jagadish Swarup, SolicitorGeneral, R.
Gopalakrishnan and R. N. Sachthey, for the respondents (in all the appeals).
The Judgment of M. HIDAYATULLAH, C.J., J. C.
SHAH A.N GROVER, A. N. RAY and 1. D. DUA, JJ. was delivered by HIDAYATULLAH,
C.J., K. S. HEGDE, J. gave a dissenting opinion.
469 Hidayatullah, C.J.This judgment shall
dispose of Civil Appeals 564571 of 1968. of these, four are against the common
judgment and order of a Division Bench of the Calcutta High Court, December 10,
1963, dismissing 4 appeals (139142 of 1959) from the order of a learned single
Judge, April 23, 1959 in Writ Petitions 159162 of 1958. The remaining four
appeals are against the order, November 24, 1964, refusing to certify the case
as fit for appeal to this Court under Art. 133(1) of the Constitution.
The facts are as follows : One Dalchand Singh
held a pros pecting license in the erstwhile Koree State (now in Madhya
Pradesh). His son Bahadur Singh Singhi took a mining, lease and started a
colliery known as Jhagrakhand Colliery. In 1942 a private limited Company
called the Jhagrakhand Collieries Ltd. was started with an authorised capital
of Rs. 24 lakhs (2400 shares of Rs. 1,000 each). Bahadur Singh divided equally
the 2400 shares between himself and his 3 soils Rajendra Singh Singhi, Narendra
Singh Singhi and Birendra Singh Singhi. In 1943 the colliery business and its
assets were transferred by the joint family to the Company. In 1944 the father
and his 3 sons separated and partitioned the property. Bahadur Singh Singhi
died on July 7, 1944 leaving a willLetters of Administration with the will
annexed were granted in 1945. The register of Jhagrakhand Collieries Ltd. was
rectified and showed thereafter 900 shares in the name of Narendra Singh Singhi
and Rajendra Singh Singhi and 6600 shares in the name of Birendra Singh Singhi.
Birendra Singh Singhi died on December 12, 1950 leaving a widow Smt. Champa
Kumari and two minor soils Ashok Kumar Singhi, Chandra Kumar Singhi and also a
minor daughter. These minors have now attained majority, Under what is known as
the 'Tyagi Scheme' announced on May 19, 1951 a voluntary disclosure was made by
the Jhagrakhand Collieries Ltd. and the shareholders. The time limit for such
disclosure was August 31, 1951. Before this the Incometax Officer had filed a
complaint for certain offences and under a search warrant seized the books of
account of the company from 1945 to 1950. This was 'on July 3, 1951.
The shareholders and the company then
disclosed on July 31, 1951 a concealed income of Rs. 42,52,501 during the years
1945 to 1948.
On November 28, 1951 the Commissioner of
Incometax offered to withdraw prosecutions if the Company and the shareholders
agreed to pay taxes due on a total income of Rs. 90,00,000 to be distributed
over the years 19451950 (both inclusive) together with a penalty of 20% and
interest at 3% p.a. on unpaid tax. There we're certain other conditions with
which we need not concern ourselves. Certain representations followed and L 7
Sup. CI (NP)17015 470 finally on December 26, 1951 it was agreed that the
parties jointly and severally pay Rs. 67,48,841/11. It was also agreed that a
sum of Rs. 55,99,832/6 would be accepted in full satisfaction upon the parties
paying the amount in the following installments (a) By December 31, 1951 Rs.
7,50,000 (b) By March 31, 1952 Rs. 5,00,000 (c) By March 31, 1953 Rs. 9,50,000
(d) By March 31, 1954 Rs. 9,50,000 (e) By March 31, 1955 Rs. 9,50,000 (f) By
March 31, 1956 Rs. 9,50,000 (g) By March 31, 1957 the balance On the failure of
any of the installments the whole sum of Rs. 67,48,341/11 together with
interest would become due. A deed of Agreement, Guarantee and Equitable
Mortgage showing the total income and total net tax liability of each share
holder were shown. They were 1947/48 to 1951/52 Total tax Smt. Champa
Kumari's husband Rs. 5,28,81711 RajendrA Singh Singhi Rs. 9,30,49803 Narendra
Singh Singhi Rs. 9,93,81615 Jhagrakhand Collieries Ltd.Rs. 43,99,71211 The
Company paid the following sums by way of tax February 1, 1952 Rs. 3,50,000
April 1, 1952 Rs. 90,000 April 22, 1952 Rs. 1,22,000 NarendRa Singh Singhi paid
the following Sums by way of tax February 1, 1952 Rs.1,50,000 April 1, 1952
Rs.60,000 April 22, 1952 Rs.48,000 Smt. Champa Kumari paid the following sums
by way of tax April 1, 1952 Rs.1,00,000 April 1, 1952 Rs.40,000 April 22, 1952
Rs.32 ' 000 RaJendra Singh Singhi paid the following sums by way of tax April
1, 1952 Rs.1,50,000 April 1, 1452 Rs.60,000 April 22, 1952 Rs.48,000 .LM0 On
April 22, 1952 they signed the agreement. By that date the position in the
payment of installments had reached item (c) above showing Rs. 9,50,000 as due
on March 31, 1953.
471 On August 29, 1952 the IncomeTax Officer
made several assessment orders in respect of the assessment years 194748 to
195152. Each such order included the following :
"In accordance with the terms of the
Agreement dated 22nd April 1952, executed in connection with the petitions
dated 18the July, 1951 filed by the assessee and others under concessional
scheme for the settlement of disclosures announced by the Government of India,
the assessment is made as under :" and then follows the computation of
total income, the computation of tax and the total amount demanded.
On September 22, 1952 the Incometax Officer
(Companies District 1), Calcutta sent the following letter to each assessee.
The one sent to Smt Champa Kumari Singhi may alone be quoted here as an example
"From :
Sri V. Satyamurti, M.A., B.L., Income Tax
Officer, Companies District 1, Calcutta.
To Smt. Champa Kumari Singhi, 49 Garishat
Road, Calcutta.
Madam, I am sending today by separate post
(Regd. with A/D) copies of Assessment orders, Penalty Orders Demand notices and
challans etc. in regard to the amount of taxes and penalties payable by you in
accordance with the terms of the Agreement dated 22nd April, 1952 between you
and the Government drawn up in connection with, the disposal of the disclosure
petition filed by you under the concessional scheme.
In the Demand notices and challans, demands
have been shown to be payable on or before the 31st March 1953 when the next installment
of payment under this Agreement falls due.
Needless to say, if there is no default in
the matter of payment of that installment (viz., Rs. 9,50,000 with all interest
due thereon by 31st March, 1953) further extension of time for payment of the
balance will be granted by me.
Yours faithfully,
Sd/
Illegible Income Tax
Officer
." Dt. 22'952.
Sup CI(NP)706 472 With this letter were
forwarded the assessment orders and notices ,of demand under s. 29 of the
Incometax Act, 1922.
These notices of demand reached the several
appellants on 24 September 1952. Similar notices of demand for excess Profits
Act and Business Profits Tax were also served calling upon the assessee to pay
the dues on or before March 31, 1953.
On March 25, 1953 the appellants filed
applications for revision under s. 33A of the Income Tax Act against the orders
of assessment and application of s. 23A of, the Incometax Act, The Commissioner
held the assessments to be proper as they were made in accordance with the
settlement after the appellants' ,disclosures. The appellants next asked that
Rs. 1,00,000 be accepted instead of Rs. 9,50,000 payable on March 31, 1953 and
they be not treated as defaulters. The amount was appropriated towards the
current liability for the current financial year.
In February 1954, the Commissioner after
hearing the appellants, promised reference to the Board of Revenue for a
variation of the agreement of April 22, 1952. The main variation was to be that
the penalty would be reduced to half and the appellants would have to pay Rs.
5,60,000 on March 31, 1954, and similar installments each year for six years.
The agreement was revised on December 27, 1954. The company sent a cheque for
Rs. 5,60,000 on March 31, 1954 earmarking it as the said payment but it was
appropriated towards the demand on the company for 194748.
On March 14, 1956 certificates under s. 46(2)
of the Indian Income tax Act, 1922 were issued and notices under s. 7 of the
Bengal Public Demands Recovery Act, 1913 were served on the appellants in May,
1956. In June 1956 the appellants filed several petitions under s. 9 of the
Recovery Act contending inter alia that the proceedings were barred by
limitation. This objection was overruled on January 5, 1957.
The appellants appealed to the Commissioner
under S. 51 of the Recovery Act and the objection that the certificates were
barred by limitation under s. 46(7) of the Indian Income tax Act, 1922 was
accepted and the certificates were cancelled. The Union of India thereupon
filed several revisions before the Board of Revenue under s. 53 of the Public
Demands Recovery Act, against the order of the Commissioner. They were allowed
by a common order dated June. 27, 1958. The appellants were again called upon
to pay the amount on pain of distress warrants.
The above facts were necessary to understand
the background of the dispute from which the petitions under Art. 226 of the
Constitution arose. The appellants filed Writ Petitions 473 159162 of 1958
asking for a writ of certiorari to quash the orders of the Board of Revenue and
prohibiting the certificate Officer from enforcing the recovery certificates,
The writ petitions were heard by Sinha J, and were dismissed on April 23, 1959.
The recovery proceedings were held not barred by limitation. The appellants
then filed appeals in the High Court against the judgment and order of Sinha,
J. (.Nos. 139142 of 1959). These appeals were heard by Mookerji and Sen, JJ.
who, by the common _judgment now under appeal in four of these appeals,
dismissed them. The applications for certificate under Art.
13 3 (1) of the Constitution were also
rejected and have given rise to the other four appeals before us.
Mr. Chagla who argued these appeals
submitted. the question of limitation at the forefront and then attempted to
argue the merits such as the interpretation of the agreements and the reliance
placed on them in the High Court and distribution pro rata of the amounts paid
on March 31, 1954.
These points were not allowed to be raised by
us. These questions were not raised before Sinha, J. The Divisional Bench also
did not allow these points to be raised.
The short question, therefore, in one of
limitation applicable in this case. We are concerned in answering this question
with s. 46 of the Indian Income Tax Act, 1922. We are not required to consider
the entire section but only subss. 1 and 7 which are relevant. They read
"46. Mode and time of recovery. 1) When an assessee is in default in
making a payment of incometax the Incometax Officer may in his discretion direct
that in addition to the amount of the arrears, a sum not exceeding that amount
shall be recovered from the assessee by way of penalty." "(7) Save in
accordance with the provisions of subsection (1) of section 42, or to 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 the Act:
474 Provided that the period of one year
herein referred to shall (iv) where the sum payable is allowed to be paid by installments,
from the date on which the last of such installments was due Provided further
that nothing in the foregoing proviso shall have the effect of reducing the
period within which proceedings for recovery can be commenced, namely, after
the expiration of one year from the last day of the financial year in which the
demand is made.
Explanation A preceding for the recovery of
any sum shall be deemed to have commenced within the meaning of this section,
if some action is taken to recover the whole or any part of the sum, within the
period hereinbefore referred to, and for the removal of doubts It is hereby
declared that the several modes of recovery specified in this section are
neither mutually exclusive, nor affect in any way any other law for the time
being in force relating to the recovery of debts due to Government, and it
shall be lawful for the Income tax Officer, if for any special reasons to be
recorded he so thinks fit, to have recourse to any such mode of recovery
notwithstanding that the tax due is being recovered from an assessee by any
other mode." The contention of the appellants is that we have to find out
when they could be treated as defaulters within the first subsection and whether
under the main part of subs. (7) the proceedings for the recovery of the tax
with penalty could be commenced after the expiration of one year from the last
day of the financial year in which the demand was made. The argument of the
Department is that the matter is covered by clause (iv) of the first proviso
which allows limitation of one year to be calculated from the date on which the
last installment was due in the present case.
To begin with there is an error in the fourth
clause of the first proviso inasmuch as the words "be reckoned" have
been inadvertently left out in that clause. The intention to use these words is
obvious from the way, in which the first three clauses are worded. Supplying
those words because they were inadvertently omitted it is clear that one of two
limitations is applicable 475 to the present case, according to the
circumstances of the case If it is to be considered under the main clause of
sub s. (7), then we have to find out whether the whole of the amount was
payable by a particular date on which the assessee can be said to have become a
defaulter. If, however, the fourth clause of the proviso applies then we have
to see whether by reason of the grant of installments, limitation would only
commence to run from the date on which the last of the installments was
payable. In this connection reference has been made, by the High Court and the
Board of Revenue to the agreements and the letters written sending the
assessment orders and the notices of demand. The agreements set out a scheme of
payments by installments and the entire sum payable was Rs. 67,48,841/11/. This
was payable in different installments, from 1952 to 31st March, 1957.
It was, however, provided as follows:
"........ provided however that in the
event of due and punctual payment of all installments Government will give up
the sum of Rs. 11,49,019/5/ with interest thereon, from the last installment
and accept the sum of Rs. 55,99,822/6/ with interest thereon in full settlement
of the balance due provided further that in the event of any default in payment
of any sum on due date there from or in the event of it being found that the
guarantee hereby given or any part thereof is not enforceable for any reason
whatsoever there will be no abatement and the parties of the first and second
part will pay the full sum of Rs. 67,48,841/ll/.
The monies payable on 31st March, 1953, 31st
March, 1954, 31st March 1955, 31st March 1956 and 31st March 1957 shall be
applied pro rata towards the tax liability of the party of the first part and
the parties of the second part mentioned in Schedule "Y" here to.
The said parties shall however be at liberty
to make any part payment at any time towards the said installments not less
than Rs. 10,000/ (Rupees ten thousand) at a time.
4. in the event of any installment not being
paid within the time mentioned above (such time being deemed to be of the
essence of the arrangement) or in the event of it being found that the
guarantee hereby given or any part thereof is not enforceable for any reason
whatsoever the whole of the balance of the said sum of Rs. 67,48,841/11/ will
at once become due 476 and payable with interest at the rate aforesaid and Government
will (in addition to all rights for enforcement of this document) be entitled
to take ail steps to enforce payment including issue of certificate under
Section 46(2) of the Income Tax Act and proceedings under the West Bengal
Public Demands Recovery Act and Revenue Recovery Act." The contention of
the appellants is that the letters of the 22nd September, 1952 (one of which
has been reproduced above as a sample) were accompanied by the notices of
demand and on the breach of, the payment of the installment of Rs.
9,50,000/on 31st March, 1953, the appellants
became defaulters within the meaning of the Act in respect of the whole amount
of tax. Therefore recovery proceedings could only commence within the end of a
financial year commencing from 31st March, 1953 since the payment of the installment
'was coterminus with the end of the financial year. This, according to them,
was provided in the agreement itself in the extract _just reproduced from the
agreements above. The other side contends that cl. (iv) of the proviso to S.
46, subs. (7) takes no account of the exigibility of the whole amount under a
scheme of payment by installments. Whenever installments are granted the period
of limitation counts from the last installment and here it would be one year
from March 31, 1957. The default could be taken note of earlier also because
the whole amount remained exigible the moment the first default was made. In
the present case the certificate was issued on March 14, 1956 and, therefore,
it was well within the period of limitation.
The learned single Judge in the case (Sinha
J.) very rightly pointed out that under the agreements two things were done.
Firstly, the total liability of the parties
was calculated and each party became jointly and severally liable for the whole
sum. Then installments were fixed and on the breach of a single installment the
whole of the amount became exigible.
The assessment order reproduced the agreement
as part of it and the agreement therefore became the assessment order.
Under the assessment order a notice of demand
was sent to pay the money of the first installment of Rs. 9,50,000/ by March
31, 1953. On breach of it the whole amount was said to be exigible and the
demand in respect of that was also made. The appellants therefore, rightly
concluded the Judge, became defaulters on the failure to pay the first installment.
Since installments were granted, cl. (iv) of the proviso to subs. (7) of s. 46
applied to the case. This conclusion is correct. That clause does not mention
about the exigibility of the whole amount or exigibility of any particular installment.
It only says that if 477 installments are granted time of one year ending with
the end of the financial years is to be calculated from the date on which the
last installment is payable. The language of cl.
(iv) of the proviso was unfortunate in
expressing this intent and has now been corrected in the new Act but the
intention was always obvious. Even in the second agreement which replaced the
first agreement the same condition obtained. There was a concession shown in
the matter of penalty and smaller installments were fixed. But the Central
Board of Revenue had stipulated even then that the concession mentioned above
would only be available if the revised scheme of payment was strictly followed.
In other words, payment was to be made by installments and this concession
therefore attracted the provisions of cl. (iv).
The Government could always accept any installment
even if paid late without having to worry about the period of limitation of one
year from the date of demand, since cl.
(iv) of the first proviso gave them an option
to wait till the last installment was payable. The scheme of the installments
took the matter out of the main part of subs.
(7) and brought it within the proviso to
clause (iv). We are, therefore, satisfied that the High Court was right in
holding that the certificates were issued within the period of limitation
prescribed by law and were not barred by time.
The first four appeals therefore fail and are
dismissed with costs. The other appeals need not be considered since special
leave was granted against the main order and those appeals themselves have
failed. The remaining four appeals against order refusing certificate are
accordingly dismissed as infructuous with no separate order as to costs.
Hegde, J.These appeals should be allowed, as
in my opinion the impugned certificate is barred under subs. (1) of s. 46 of
the Indian Income Tax Act, 1922 (in short 'the Act').
The facts of the case are fully set out in
the judgment of my Lord, the Chief Justice. Hence there is no need to state
them over again.
Under the agreement entered into between the
assessees and the department, if the assessees fail to pay any one or more of
the installments fixed, the entire tax became recoverable forthwith. Admittedly
the assessees failed to pay the installments as stipulated in the agreement and
therefore it was open to the department to recover the entire arrears of tax.
It is true that the default clause in the agreement was intended for the
benefit of the department and therefore under the law of contract, it was open
to the department to waive that clause and sue for the recovery of the various installments
as and when they fell due. But that aspect of the question is not relevant for
considering the true 478 scope of subs. (7) of S. 46. Section 46 creates a
special machinery for the recovery of arrears of tax. Section 46 is found in
Ch. IV of the Act which deals with recovey of tax and penalties. Section 45
prescribes, when an assessee becomes a defaulter. The main part of that section
says :
"Any amount specified as payable in a notice
of demand under subsection (3) of section 23A or under section 29 or an order
under section 31 or section 33, shall be paid within the time, at the place and
to the person mentioned in the notice or order or if a time is not so
mentioned, then on or before the first day of the second month following the
date of the service of the notice or order, and any assessee failing so to pay
shall be deemed to be in default, provided that, when an assessee has presented
an appeal under section 30, the Income tax Officer may in his discretion treat
the assessee as not being in default as long as such appeal is undisposed
of." (The proviso to that section and the explanation are not relevant for
our present purpose).
For finding out whether an assessee is a
defaulter or not, all that we have to see is whether he has failed to comply
with the provisions of s. 45. If he has failed to comply with the demand made
in accordance with the provisions in S. 45 within the time mentioned therein
then he is 'defaulter' within the meaning of 'the Act'. Unless the assessee is
a defaulter, no action can be taken against him under s. 46.
Nonfulfilment of the terms of the agreement
does not amount to a. default under S. 45. Therefore the first thing we have to
see is when the assessees became defaulters. For deciding that question
reference to the agreement is irrelevant. Admittedly demand notices under S. 29
had been issued to the assessees 'on September 22, 1952 in respect of the
entire tax due from them. Therefore they became defaulters as soon as they
failed to comply with those demands.
This takes us to S. 46. Subs. (1) of S. 46
says "When an assessee is in default in making a payment of income tax,
the Income tax Officer may in his discretion direct that, in addition to the amount
of the arrears, a sum not exceeding that amount shall be recovered from the
assessee by way of penalty." The default referred to in this subsection is
necessarily a default under s. 45. That much is obvious from the scheme of Ch.
VI. Now let us read subs. (7) of s. 46. It is as follows 479 "Save in
accordance with the provisions of subsection (1) of section 42 or to 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:
Provided that the period of one year herein
referred to shall (iv) where the sum payable is allowed to be paid by installments,
from the date on which the last of such installments was due".
If we read the impugned subs. (7) of s. 46,
it is clear that no proceedings for the recovery of any sum payable under the
Act can be commenced after the expiration of one year from the last day of the
financial year in which any demand is made under the Act. In the instant case,
the demands in question were made on September 22, 1952.
Therefore the recovery proceedings should
have been commenced before 31st March 1953 but actually they were commenced on
March 14, 1956. Hence they are prima facie barred.
This takes us to subcl. (iv) of the proviso
to subs. (7) of s. 46. Under that proviso where the sum payable is allowed to.
be paid by installments, the one year prescribed in subs. (7) of s. 46 will be
computed from the date on which the last of such installments was due. The
expression "was due" does not appear to be grammatically correct. It
should have been "is due". This correction has been made in the
corresponding provision of the 1961 Indian Income Tax Act; but that error is
immaterial for our present purpose.
The words "was due" can only mean
"is due" even under the Act. For finding out when the sum claimed
'was due', we must again go back to s. 45. In view of the demand notices issued
in September 1952 and sum became due when the assessees became defaulters and
therefore the recovery proceedings under the Act should have been initiated
before March, 1954. The same having not been initiated before that date, the
proceedings in question must be held to have been barred. In my opinion for
finding out the date on which the last installment was due, we cannot fall back
on the agreement between the assessees and the revenue. Chapter V of the Act
has nothing to do with the agreement between the assessees and the revenue. The
expression "was due" in s.
46(7) has reference to the tax which is due
in accordance with the provisions in ss. 45 and 46, 480 For the reasons
mentioned above I allow these appeals.
ORDER In accordance with the opinion of the
majority, Civil Appeals Nos. 564, 566, 568 and 570 of 1966 (arising from the
common judgment and order of the Division Bench of the Calcutta High Court,
December 10, 1963) are dismissed with costs. The other appeals are also
dismissed as infructuous with no separate order as to costs.
Y.P.
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