Union of India Vs. Jardine Henderson
& Ors [1979] INSC 70 (16 March 1979)
UNTWALIA, N.L.
UNTWALIA, N.L.
PATHAK, R.S.
CITATION: 1979 AIR 972 1979 SCR (3) 555 1979
SCC (2) 258
ACT:
Bengal Public Demands Recovery Act, 1913,
Sections 7 to 10 read with Rule 46(2) under the Act, Scope of-Locus standi of
the Purchaser of the property of certificate debtor to prefer a claim objecting
to the sale of property under the Act.
Taxation Laws (Continuation and Validation of
Recovery Proceedings) Act, 1964, Section 3(1)(a) & (b) read with sub-
section (4) section 35 of the Income Tax Act, 1962-When a fresh notice of demand
is necessary, explained.
HEADNOTE:
In Income Tax Officer, Kolar Circle and Anr.
v. Seghu Buchiah Setty. 52 I.T.R. 538, this Court held that the recovery
proceedings initiated against the assessee- respondent on the basis of the
original demand notice were had as it was of the view that the amount of tax
assessed when reduced as a result of the appellate orders a fresh demand notice
had to be served on the respondent before he could be treated as a defaulter.
To get over the difficulties in the collection of income tax and other direct
taxes created by the decision in Seghu Chetty's case, the Taxation Laws
(Continuation and Validation of Recovery Proceedings) Act, 1964 was passed with
retrospective effect by an express provision in section 5.
The property belonging to two brothers, the
certificate debtors in C.A. 1575(NT) 71 and C.A. 1965 (NT) of 1963 respectively
were purchased by M/s Jurdine Henderson (Ltd.) on September 20, 1954, i.e.
after service of notices under section 7 of the Bengal Public Demands Recovery
Act, 1913.
The objections raised by the certificate
debtors were rejected and the property came to be sold. In both cases the
Company received a notice on August 6, 1956 fixing a date for settling the
terms of the sale proclamation in respect of the respective one half share of
each of the two Certificate-debtors. Immediately thereafter the respondent-
company made an application in each of the two cases that it had purchased the
property being unaware of the pendency of any Certificate case against any of
its vendors for realization of incometax dues and that the Company was the
owner of the property and it was not liable to be sold as that of the
Certificate-debtor. The Certificate Officer rejected the objection holding that
the purchase having been made after service of notice under section 7 of the
Bengal Act on the Certificate-debtor, was void as against any claim enforceable
in execution of the Certificate and hence the Company had no right to object to
the sale. The Company went up in appeal before the Commissioner and succeeded
in both the cases. Two revisions were filed before the Board of Revenue which
were allowed. The respondent-company then moved the High Court under Article
227 of the Constitution.
The petition giving rise to Civil Appeal No.
1575 was allowed. The other petition giving rise to C.A. 1965 of 1971 was
dismissed by the same Bench.
556 Two questions, namely (a) the locus
standi of the purchaser-Company to prefer a claim objecting to the sale of the
property and (b) the effect of section 3(1)(a) and (b) of the Validation Act,
1964 read with Section 35(4) of the Income Tax Act, 1962 arose for decision in
these appeals.
Allowing C.A. 1575/71 and dismissing C.A.
1965/71 (both by certificates) the Court.
HELD: 1. The Company as a purchaser of the
property of the certificate debtors had locus standi to prefer the claim. The
company preferred a claim objecting to the sale of property on the ground that
it was not liable to be sold as it had purchased the property from the two
certificate debtors. In the Bengal Public Demands Recovery Act, 1913, there is
no express provision enabling a person other than the Certificate debtor
claiming an interest in the property to be sold to file any objection. He, of
course, under section 22 can take recourse to the said provision by filing an
application to set aside the sale of immovable property on deposit of the
amounts provided therein. But the rules in Schedule II under section 38 have
the effect as if enacted in the body of the Act. In Schedule II is to be found
rule 39 which is very much like rule 58 of Order 21 of the Code of Civil Procedure,
1908. [561 F-G] (a) It was open to it to show under rule 40 that at the date of
the service of notice under section 7 it had some interest in the property in
dispute. If the notice served at the beginning of the two Certificate cases
under section 7 on the two Certificate-debtors was not a valid notice in the
sense that in one case on the reduction of the amount of the Certificate it
became necessary to give a fresh notice and in the other without a fresh demand
notice under the Income- tax Act for the enhanced amount, the Certificate case
could not proceed, then the Company had validly purchased the property and its
purchase was not void. The property purchased by it could not then be sold for
realization of the income-tax dues against the two brothers. If, however, no
fresh notice was necessary to be served in either of the two cases then it is
plain that the Company's purchase was void as against the claim enforceable in
execution of the Certificate. [561 H, 562 A-C] (b) It is clear from sections 7,
8, 9 and 10 of the Bengal Public Demands Recovery Act, 1913, that if the
Certificate is modified or varied by the certificate officer under Section 10,
while disposing of the petition of objection filed by the Certificate-debtor
under section 9, then the Certificate case proceeds further without a fresh
notice under section 7.[561 D-E] In the instant case, the amount was not
reduced on the objection of the Certificate-debtor but it was reduced on
receipt of the information from the Income Tax Officer. [561 E]
2. The transfer was void against the
Certificate claims in both cases under section 8(a) of the Bengal Public
Demands Recovery Act, 1913. In both the cases notices under section 7 of the
Bengal Act had been served upon the Certificate debtor before the property in
question was transferred by them to the company. In neither of the two cases
did the certificate proceeding became invalid, in one case by reduction of the
demand and in the other by an enhancement, since clause (c) of section 3(1) of
the Validation Act clearly and expressly provides that no proceedings in
relation to Government dues 557 shall be invalid merely because no fresh notice
was served upon the assessee, after the dues were enhanced or reduced in any
appeal or proceeding. [566 E-F] Ram Swarup Gupta v. Behari Lal Baldeo Prasad
and Ors., 95 I.T.R. 339; Distinguished.
3. (a) On a plain reading of clause (a) of
section 3 of the Validation Act, it is clear that the intention of the
Legislature is not to allow the nullification of the proceedings which were
initiated for recovery of the original demand. On the basis of another notice
of demand for the enhanced amount two courses are open to the department (i) to
initiate another proceedings for the recovery of the amount by which the dues are
enhanced treating it as a separate demand or (2) to cancel the first
proceedings and start a fresh one for the recovery of the entire amount
including the enhanced one. In the latter case, the first proceedings started
for the recovery of the original amount will lose its force and the fresh
proceedings will have to proceed de novo. But in the former, the proceedings
are not affected at all. [564 E-G]
3. (b) The argument that the effect of
sub-section (4) of section 35 of the Income Tax Act has not been done away with
by clause (a) of section 3 of the Validation Act, 1964 is not correct. Firstly
on a correct interpretation of sub- section (4) of section 35 it would be
noticed that though the expression used is "the sum payable" but in
the context it would mean only the "extra enhanced sum payable" and
not the whole of the enhanced amount. The expression "sum payable"
had to be used in sub section (4) because that sub section was also providing
for a contingency where by the rectification order the amount of refund was
reduced. In such a case the expression "the sum payable" would
obviously mean the difference between the amount refunded and the reduced
amount which was liable to be refunded. Secondly, even if it were to be held
that in the case of enhancement the expression "the sum payable" in
sub section (4) means the whole of the enhanced amount by a rule of harmonious
construction it has got to be held that in view of section 3(1)(a) of the
Validation Act even in the case of a rectification a notice of demand is to be
served now only in respect of the amount by which the Government dues are
enhanced. [565 B-E]
4. Sub clause (i) of clause (b) of sub
section (1) of section 3 of the Validation Act clearly provides that it is not
necessary for the Taxing Authority to serve upon the assessee a fresh notice of
demand. The only thing which he is required to do that he has to give
intimation of the fact of such deduction to the assessee and to the Tax
Recovery officer. The purpose of giving intimation to the assessee is to bring
it to his pointed knowledge that the demand against him has been reduced,
although by other methods also such as by service of a copy of the Appellate
Order or the revisional order being served on him he may be made aware of that.
The intimation to the Tax Recovery Officer is essential as without that
intimation from the Taxing Authority he cannot reduce the amount of the
Certificate debt in the proceedings already commenced. [565 E-H] (a) The view
of the High Court that the provision contained in sub-clause (ii) of clause (b)
of section 3(1) of the Validation Act is mandatory and in absence of a formal
intimation to the assessee and to the Tax Recovery Officer as required by the
said provision the proceedings initially started could not be continued under
sub-clause (iii), is not sustainable in law. [565 H, 566 A] 558 (b) On the
facts of the case in C.A. 1575(NT)/71, the requirement of sub-clause (ii) stood
fulfilled and nothing further had to be done in the matter by the Taxing
Authority. That being so the proceedings initiated on the basis of the notice
of demand served upon the assessee before the reduction of the amount in appeal
could be continued in relation to the amount so reduced from the stage at which
such proceedings stood immediately before such disposal as provided for in
sub-clause (iii). [566 C-D]
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 1575 and 1965 of 1971.
From the Judgment and Order dated 12-1-1968
of the Calcutta High Court in Civil Rule No. 2523 and 2527 of 1960.
V. S. Desai, S. P. Nayar and Miss A.
Subhashini for the Appellant.
S. T. Desai, J. Ramamurthi and D. N. Gupta
for the Respondents and Vice-Versa.
The Judgment of the Court was delivered by
UNTWALIA, J.-These two appeals one by the Union of India and the other by M/s
Jardine Henderson Ltd. are by certificate granted by the Calcutta High Court.
Since the facts in both the cases are very much similar involving the
interpretation of the various clauses of section 3(1) of The Taxation Laws
(Continuation and Validation of Recovery Proceedings) Act, 1964, hereinafter
referred to as the Validation Act, the two appeals have been heard together and
are being disposed of by this judgment.
There were two brothers named Basanta Kumar
Daw, respondent no. 2 in Civil Appeal No. 1575 of 1971 and Haridhan Daw,
respondent no. 2 in Civil Appeal No. 1965 of 1971. The facts of Civil Appeal
No. 1575 of 1971 are these:
For realization of arrears of income-tax dues
the Certificate Officer of 24 Parganas forwarded to the Collector a Certificate
in accordance with Section 46(2) of the Indian Income-tax Act, 1922 specifying
the amount of arrears due from respondent no. 2. Thereupon a Certificate case
was started against him (Basanta Kumar Daw) under the Bengal Public Demands
Recovery Act, 1913, hereinafter called the Bengal Act, by the Certificate
Officer acting as a Collector. Notice under section 7 was served on the
Certificate-debtor on 31-10-1949. Basanta Kumar Daw entered appearance and
filed an objection under section 9 of the Bengal Act. This objection was
rejected by the Certificate Officer by his Order dated March 8, 1951. On April
2, 1951 the Certificate-debtor made an application for review of the said order
dated 8-3-1951 stating therein, inter alia that the appeal preferred by him
before the Income-tax Appellate Tribunal had been allowed in part and some
payments also had 559 been made since then; the Certificate case, therefore,
could not proceed for the recovery of the sum of Rs. 36,874.10 annas, the
original amount mentioned in the Certificate. The Certificate Officer declined
to review his previous order and rejected the review petition. But he made
certain enquiries from the Income-tax Officer whether the amount of the
Certificate had to be reduced. The Income-tax Officer informed him that the
Tribunal had reduced the demand on appeal on 13-9-1950 and after adjustment of the
previous payments made by the Certificate-debtor the revised demand stood at
Rs. 19,001.3 annas only. Thereupon the Certificate Officer amended the
Certificate on the basis of the information received from the Income-tax
Officer and reduced the demand. On July 18, 1956 he directed the issue of sale
notice under Rule 46(2) framed under the Bengal Act in respect of the half
share of Basanta Kumar Daw (the other half belonging to his brother Haridhan
Daw) in premises nos. 201 to 205/1, Old China Bazar Street, Calcutta.
Now a few facts of the other appeal being
Civil Appeal No. 1965 of 1971 may be stated. The Income-tax officer sent a
requisition to the Certificate officer of 24 Parganas for the recovery of a sum
of Rs. 59,541.15 annas against Haridhan Daw, respondent no. 2 in this appeal. A
Certificate case was started. A notice under section 7 of the Bengal Act was
served on the Certificate-debtor on January 30, 1951. He also filed a petition
of objection under section 9. But the Certificate Officer by his order dated
January 13, 1954 rejected the objection filed by the Certificate-debtor under
the Bengal Act. A review application was also rejected in this case on January
27, 1954. On March 2, 1954, the Income- tax Officer informed the Certificate
Officer that the original demand of Rs. 59,541.15 annas had been enhanced to
Rs. 59,604.7 annas under section 35 of the Income-tax Act and requested him to
realize the enhanced amount. The order under section 35 was passed on March 2,
1953. The Certificate Officer thereupon informed the Income-tax Officer that
the Bengal Act did not provide for enhancing the demand of the existing
Certificate and asked him to file a separate Certificate for the additional
amount. He, however, continued the Certificate proceedings for the recovery of
the original amount.
M/s. Jardine Henderson Ltd., respondent in
Civil Appeal No. 1575 of 1971 and appellant in Civil Appeal No. 1965 of 1971
purchased the whole of the premises in question on September 20, 1954 for a
total sum of Rs. 3,00,100/- purchasing one half of the undivided share from
each of the two brothers.
560 In both the cases the Company received a
notice on August 6, 1956 fixing a date for settling the terms of the sale
proclamations in respect of the respective one half share of each of the two
Certificate-debtors. Immediately thereafter the respondent-company made an
application in each of the two cases that it had purchased the property being
unaware of the pendency of any Certificate case against any of its vendors for realization
of income-tax dues and that the Company was the owner of the property and it
was not liable to be sold as that of the Certificate- debtor. The Certificate
Officer rejected the objection holding that the purchase having been made after
service of notice under section 7 of the Bengal Act on the Certificate- debtor,
was void as against any claim enforceable in execution of the Certificate and
hence the Company had no right to object to the sale. The Company went up in
appeal before the Commissioner and succeeded in both the cases. Two revisions
were filed before the Board of Revenue which were allowed. The
respondent-company then moved the High Court under Article 227 of the
Constitution. The petition giving rise to Civil Appeal No. 1575 was allowed and
hence the Union of India has come up in appeal. The other petition giving rise
to Civil Appeal No. 1965 of 1971 was dismissed by the same Bench and the
Company has, therefore, come up in appeal.
The Validation Act was not there when the
orders were passed either by the Commissioner or the Board of Revenue.
But in the High Court as also here the main
controversy between the parties was the effect of the Validation Act on the two
Certificate proceedings.
Mr. V. S. Desai, appearing for the Union of
India, in the first instance submitted that the order reducing the amount of
the Certificate in Civil Appeal No. 1575 was an order under section 10 of the
Bengal Act. Hence the notice served under section 7 on the Certificate-debtor
continued to have its effect in spite of the reduction of the amount and no
fresh notice under section 7 was necessary to be served. In agreement with the
High Court we have no difficulty in rejecting this argument.
We may first read some of the relevant
provisions of the Bengal Act. Section 7 reads as follows:- "When a
certificate has been filed in the office of a Certificate-officer under section
4 or section 6, he shall cause to be served upon the certificate- debtor, in
the prescribed manner, a notice in the prescribed form and a copy of the
certificate." 561 The effect of service of notice of certificate is
provided in section 8 which provides :- "From and after the service of
notice of any certificate under section 7 upon a certificate-debtor- (a) any
private transfer or delivery of any of his immovable property situated in the
district in which the certificate is filed, or of any interest in any such
property, shall be void against any claim enforceable in execution of the
certificate." Under Section 9 the Certificate-debtor may file a petition
of objection denying his liability in whole or in part.
Under section 10 it is provided:- "The
Certificate-officer in whose office the original certificate is filed shall
hear the petition, take evidence (if necessary), and determine whether the
certificate-debtor is liable for the whole or any part of the amount for which
the certificate was signed; and may set aside, modify or vary the certificate
accordingly :" On reading the provisions aforesaid it is clear that if the
Certificate is modified or varied by the Certificate Officer under section 10
while disposing of the petition of objection filed by the certificate-debtor
under section 9, then the Certificate case proceeds further without a fresh
notice under section 7. But in the instant case the amount was not reduced on
the objection of the Certificate-debtor but it was reduced on receipt of the
information from the Income-tax Officer.
In the Bengal Act itself there is no express
provision enabling a person other than the Certificate-debtor claiming an
interest in the property to be sold to file any objection. He, of course, under
section 22 can take recourse to the said provision by filing an application to
set aside the sale of immovable property on deposit of the amounts provided therein.
But the rules in Schedule II under section 38 have the effect as if enacted in
the body of the Act. In Schedule II is to be found rule 39 which is very much
like rule 58 of Order 21 of the Code of Civil Procedure, 1908.
The Company preferred a claim objecting to
the sale of property on the ground that it was not liable to sale as it had
purchased the property from the two Certificate-debtors.
It was, therefore, not quite accurate to say
that the Company had no locus standi to prefer the claim. It was open to it to
show under rule 40 that at the date of the service of notice under section 7 it
had some interest in the property in dispute. If the notice served at the
beginning 562 of the two Certificate cases under section 7 on the two
Certificate debtors was not a valid notice in the sense that in one case on the
reduction of the amount of the Certificate it became necessary to give a fresh
notice and in the other without a fresh demand notice under the Income- tax Act
for the enhanced amount, the Certificate case could not proceed, then the
Company had validly purchased the property and its purchase was not void. The
property purchased by it could not then be sold for realization of the
income-tax dues against the two brothers. If, however, no fresh notice was
necessary to be served in either of the two cases then it is plain that the
Company's purchase was void as against the claim enforceable in execution of
the Certificate. The answer in both the cases has got to be given with
reference to the Validation Act and no other point of any consequence was
argued or could be pressed with any success in either of the two appeals.
In Income-tax Officer, Kolar Circle, and
another v. Seghu Buchiah Setty(1) best Judgment assessments had been made for
the assessment years 1953-54 and 1954-55. A notice of demand for each of the
two years was served upon the assessee under section 29 of the Income-tax Act,
1922. The assessee preferred appeals. In the meantime for non-payment tax he
was treated as a defaulter and a Certificate was forwarded to the Collector
under section 46(2). Thereafter the tax payable by the assessee was
substantially reduced in appeal. The Income-tax Officer informed the assessee
of the reduced tax liability and called upon him to pay the reduced amount. No
fresh notice of demand was issued under section
29. Pending further appeals to the Appellate
Tribunal the assessee wanted the Certificate proceedings to be stayed and on
his request being rejected he moved the High Court under Article 226 of the
Constitution. The High Court held that the department was not entitled to treat
the respondent as a defaulter in the absence of a fresh notice of demand and
quashed the recovery proceedings. On appeal to this Court the majority view
expressed was that the amount of tax assessed being reduced as a result of the
orders of the Appellate Assistant Commissioner, a fresh demand notice had to be
served on the respondent before he could be treated as a defaulter. The
recovery proceedings initiated against him on the basis of the original demand
notice were therefore rightly quashed by the High Court.
The Statement of Objects and Reasons which
led to the introduction and passing of the Validation Act would show that it
was to get over the difficulties in the collection of income-tax and other
direct taxes created by the Supreme Court decision in Seghu Buchiah Setty's
case 563 (supra) that the Validation Act was passed with retrospective effect.
The interpretation of this Act falls for our consideration for the first time
in this Court.
This is an Act "to provide for the
continuation and validation of proceedings in relation to Government dues and
for matters connected therewith." In the Schedule appended to the Act are
enumerated various tax statutes including the Income-tax Act. "Taxing
Authority" has been defined in clause (d) of section 2 and clause (e)
defines "Tax Recovery Officer" to mean an officer to whom a
certificate for the recovery of arrears of Government dues may be issued under
this Act. Section 3 without the proviso may be read as a whole:-
"Continuation and validation of certain proceedings.- (1) Where any notice
of demand in respect of any Government dues is served upon an assessee by a
Taxing Authority under any scheduled Act, and any appeal or other proceeding is
filed or taken in respect such Government dues, then,- (a) where such
Government dues are enhanced in such appeal or proceeding, the Taxing Authority
shall serve upon the assessee another notice of demand only in respect of the
amount by which such Government dues are enhanced and any proceedings in
relation to such Government dues as are covered by the notice or notices of
demand served upon him before the disposal of such appeal or proceeding may,
without the service of any fresh notice of demand, be continued from the stage
at which such proceedings stood immediately before such disposal;
(b) 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 act 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;
564 (iii)any proceedings 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 in relation to the
amount so reduced from the stage at which such proceedings stood immediately
before such disposal;
(c) 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
:" The Act was made retrospective by an express provision in section 5. Clause
(a) deals with the case of an enhancement of Government dues and provides that
the proceedings initiated may be continued from the stage at which such
proceedings stood immediately before the disposal of the appeal or proceedings
in which the enhancement was made. Another notice of demand is required to be served
in respect of the amount by which the dues are enhanced. On a plain reading of
clause (a) of section 3 it is clear that the intention of the legislature is
not to allow the nullification of the proceedings which were initiated for
recovery of the original demand. On the basis of another notice of demand for
the enhanced amount, two courses are open to the department-(1) to initiate
another proceeding for the recovery of the amount by which the dues are
enhanced treating it as a separate demand or (2) to cancel the first
proceedings and start a fresh one for the recovery of the entire amount
including the enhanced one. In the latter case the first proceedings started
for the recovery of the original amount will lose its force and the fresh
proceeding will have to proceed de novo. But in the former the first
proceedings are not affected at all. In Civil Appeal No. 1965 of 1971 this is
exactly the view taken by the High Court and in our opinion rightly.
Mr. S. T. Desai appearing for the Company
submitted that where the amount was enhanced in appeal or revision there was no
express provision in the Income-tax Act for service of a fresh or another
notice of demand for the additional amount. But if the amount was enhanced
under the power of rectification under section 35 then sub-section (4) thereof
requires:- 565 "Where any such rectification has the effect of enhancing
the assessment or reducing a refund the Income-tax Officer shall serve on the
assessee a notice of demand in the prescribed form specifying the sum payable,
and such notice of demand shall be deemed to be issued under section 29, and
the provisions of this Act shall apply accordingly." The effect of this
sub-section, according to the counsel, has not been done away with by clause
(a) of section 3 of the Validation Act. We reject this argument as being
unsound and for two reasons. Firstly, on a correct interpretation of
sub-section (4) of section 35 it would be noticed that though the expression
used is "the sum payable" but in the context it would mean only the
"extra enhanced sum payable" and not the whole of the enhanced
amount. The expression "sum payable" had to be used in sub-section
(4) because that sub-section was also providing for a contingency where by the
rectification order the amount of refund was reduced. In such a case the
expression "the sum payable" would obviously mean the difference
between the amount refunded and the reduced amount which was liable to be
refunded. The second reason is that even if it were to be held that in the case
of enhancement the expression "the sum payable" in sub- section (4)
means the whole of the enhanced amount by a rule of harmonious construction it
has got to be held that in view of section 3(1) (a) of the Validation Act even
in the case of a rectification a notice of demand is to be served now only in
respect of the amount by which the Government dues are enhanced.
Now coming to the case of reduction dealt
with in clause (b) of sub-section (1) of section 3 of the Validation Act it
would be seen that sub-clause (i) clearly provides that it is not necessary for
the Taxing Authority to serve upon the assessee a fresh notice of demand. The
only thing which he is required to do is that he has to give intimation of the
fact of such deduction to the assessee and to the Tax Recovery Officer. The
purpose of giving intimation to the assessee is to bring it to his pointed
knowledge that the demand against him has been reduced, although by other
methods also such as by service of a copy of the Appellate Order or the
revisional order being served on him he may be made aware of that. The
intimation to the Tax Recovery Officer is essential as without that intimation
from the Taxing Authority he cannot reduce the amount of the Certificate debt
in the proceedings already commenced. The High Court has taken the view that
the provision contained in sub-clause (ii) of clause (b) of section 3(1) of the
Validation Act is mandatory and in absence of a formal intimation to the
assessee and to the Tax Recovery Officer as required by the said provision the
proceedings initially started could not be continued under sub-clause (iii). In
our opinion the view of the High Court is not sustainable in law. On the facts
of this case the assessee himself in his review application had clearly
mentioned that the demand against him stood reduced in appeal. He also claimed
that he had made certain payments. Although the Tax Recovery Officer rejected
his review petition, as, probably, he had no power of review, he took the
precautionary measure of making inquiry from the Taxing Authority. Thereupon
the Taxing Authority gave him the information and the amount of the Certificate
debt was substantially reduced. We, therefore, hold that on the facts of this
case the requirement of sub- clause (ii) stood fulfilled and nothing further
had to be done in the matter by the Taxing Authority. That being so the
proceedings initiated on the basis of the notice of demand served upon the
assessee before the reduction of the amount in appeal could be continued in
relation to the amount so reduced from the stage at which such proceedings
stood immediately before such disposal as provided for in sub-clause (iii).
Clause (c) of section 3(1) of the Validation
Act is also important and it clearly and expressly provides that no proceedings
in relation to Government dues shall be invalid merely because no fresh notice
of demand was served upon the assessee after the dues were enhanced or reduced
in any appeal or proceeding. It is, therefore, plain that in neither of the two
cases did the Certificate proceeding become invalid, in one case by reduction
of the demand and in the other by an enhancement. In both the cases notices
under section 7 of the Bengal Act had been served upon the Certificate-debtors
before the property in question was transferred by them to the Company. The
transfer was, therefore, void against the Certificate claims in both the cases
under section 8(a) of the Bengal Act.
Mr. S. T. Desai called our attention to the
decision of the Allahabad High Court in Ram Swarup Gupta v. Behari Lal Baldeo
Prasad and others.(1). That case is, however, clearly distinguishable as in
that the property was sold in Certificate proceedings started for the
realization of the original amount even after the amount had been reduced in
appeal. It is obvious that that sale was illegal and invalid as rightly held by
the High Court because after reduction the demand had to be reduced on
intimation by the Taxing Authority and the property could not be sold for the
original amount.
567 For the reasons stated above, Civil
Appeal No. 1575 of 1971 is allowed with costs payable by the respondent-
company, the Judgment and Order of the High Court are set aside and it is
directed that the Certificate case shall proceed to disposal in accordance with
law as expeditiously as possible. Civil Appeal No. 1965 of 1971 is dismissed
but we make no order as to costs in this appeal.
V. D. K. C.A. No. 1965/71 dismissed.
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