Report No. 12
80. Action proposed (Revenue laws).-
We have therefore thought it incumbent upon us to codify the law in this respect and include it in a separate Schedule. The judgment of the Supreme Court also gives an authoritative interpretation of the proviso to section 46(2). The meaning of the proviso may be stated, in the words of the Supreme Court, as follows:-
"On a proper reading, that sub-section 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 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 Sai Ali Ahmed v. Collector of Bombay, ILR 1950 Bom 150 (155). does not appear to us to be correct. In our opinion, the proviso does not indicate a different and alternative mode of recovery of the certified amount of the 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".
81. A power is distinct from the procedure for the exercise of the power. The procedure laid down by the Code for the exercise of the powers enumerated in section 51 is contained in Order 21 of the Code. The revenue laws of each state lay down the powers as well as the procedure. As held by the Supreme Court, the Proviso confers only 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.
The only additional power contained in section 51, CPC is the power to appoint a receiver in execution of a decree. In some of the Revenue Acts, the Collector possesses the power to attach an estate or a village or a part of it and manage such attached property through his agent. Section 51 of the Civil Procedure Code is not restricted in its scope and a receiver may be appointed in any case even without attachment of the property. This additional power is also now included by us in the proposed draft.
82. Action Proposed (Municipal laws).-
The process enforceable for the recovery of an arrear of municipal tax and local rate, referred to in sub-sections (3) and (4) of, section 46, has nothing to do with the Collector. Distraint and sale of moveable property (and in some states attachment and sale of immoveable property also) or prosecution before a Magistrate treating the default in payment of the tax or the rate as an offence and imposing a fine and recovery of the arrear and the fine under the provisions of the Criminal Procedure Code (section 386) or recovery of the arrear as if it were a fine imposed by a criminal court, are the modes laid down. The Acts which contain provisions for prosecution before a Magistrate or recovery of the arrears by application to the Magistrate for distraint and sale of moveable property are detailed below:-
1. Rajasthan Town Municipalities Act (XXIII of 1951) section 97 (Only if there is suspension of the other powers by the Government).
2. Calcutta Municipal Act (33 of 1951).
3. Punjab Municipal Act (III of 1911), (Section 81 application to Magistrate).
4. Madras City Municipal Act (IV of 1919) Rules 21(2) and 29B of Schedule IV to the Act.
5. Madras District Municipalities Act (V of 1920), Rules 21(2) and 36 of Schedule IV.
6. City of Bangalore Municipal Corporation Act (LXIX of 1949) [Rules 30(2) and 39 of Schedule III].
7. Mysore Town Municipalities Act (XXII of 1951) section 96.
8 Bombay District Municipal Act (III of 1901) section 88 (Only if there is suspension of the other powers of recovery by the Government).
9. Bombay Local Boards Act (VI of 1923) section 115 (Only if the other powers of recovery are suspended by the State Government).
10. Madras District Boards Act (XIV of 1920), Rules 33(2) and 39 of Schedule IV.
11. Punjab District Boards Act (XX of 1883) section 58B [Only in the case of other sums (other than local rates and taxes) duet
12. Central Provinces and Berar Municipalities Act (II of 1922). Section 77.
83. All the processes are enforceable by the Income-tax Officer if the requirements of sub-sections (3) and (4) of section 46 are satisfied.
84. In the draft we have restricted the power of the Income-tax Officer to the mode of recovery by distraint and sale of moveable property. Even this power is, we are told, seldom invoked except in a few places. We have omitted the power to approach the magistrate either to recover the arrears as a fine or to prosecute the defaulter, as such a power is never in practice exercised. The procedure is circumlocutary and is not suited to modern conditions of society. The existing power of the Income-tax Officer to make a garnishee order is retained.
85. Remedies in other countries.-
It may be of interest in this connection to mention that in other countries the remedies for recovery of Income-tax are very simple as could be seen from the following analysis:-
United Kingdom-U.K. Income-tax Act, 1952
(a) Distraint by Collector (section 76).
(b) Recovery of small amounts of tax in court of Summary Jurisdiction as if it were a civil debt (section 78).
(c) Suit in the High Court (section 79).
United States
Internal Revenue Code, 1954
Chapter 64-Collection
Section 6331.-Levy and dikiaint and sale of property whether real, or personal; tangible or intangible.
Commonwealth of Australia
Income-tax and Social Services Contribution
Assessment Act, 1936-53
(a) Section 209-Suit.
(b) Garnishee Order by the Commissioner-section 218.
Canada
Income-tax Act, 1948 (Sections 118 to 121)
(a) Certificate by the Minister is registered in the Exchequer Court and such registration has the force of decree and is executable by the Court (section 119),
(b) Garnishment (section 120).
(c) Seizure of Chattels (section 121).
South Africa
The Income-tax Act, 1941 (Section 85)
(a) Statement by the Commissioner of the tax duly filed with a clerk or registrar of a court is treated as a judgment and enforced by the Court as such.
(b) Proceedings by the Commissioner for the sequestration of the estate of the tax-payer.
(c) Enforcement by a Magistrate.
Ceylon
The Income-tax Ordinance (Section 79)
(a) Commissioner issues a certificate and is enforced by seizure and sale of moveable property.
(b) Certificate to the District Court who would enforce it by way of execution against the moveable and immoveable property of the defaulter.
(c) Proceedings for recovery before a magistrate
(d) Garnishee Order.
86. Chapter XIX: Tax deemed to have been paid on dividends.-
A portion of the tax paid by the company is deemed to have been paid by the shareholder under sections 18(5) and 49B. The tax paid by the company in respect of dividends is thus given a special treatment in the Act in the assessment of the shareholder. We felt that it would be useful and convenient to bring together the various provisions of the Act pertaining to such treatment. The provisions of the Act pertaining to the tax deemed to have been paid in dividends have, therefore, been gathered together in this chapter.
87. Chapter XX: Refunds.-
The provisions of the present Act pertaining to refunds, have been grouped together in this Chapter.
To avoid delay in refunds, we have inserted a provision1 [on the analogy of section 57(3) of the Canadian Act] that where the refund order is made more than three months after the application for refund, the Central Government shall pay interest at the rate of 2%. A similar recommendation was made by the Income-tax Investigation Commission.2 We have also made it clear3 that where refund is due as a result of an appellate order or as a result of decision by the High Court, no separate application is necessary.
1. Vide clause 252, App, I.
2. Para. 279, pp. 125, 126, I.T.I.C. Report, 1948.
3. Vide clause 250, App, I.
88. Chapter XXI: Appeals and Revisions.-
All the provisions pertaining to appeals have been brought together in this Chapter.
89. Desirability of appeals being heard by Appellate Assistant Commissioners.-
On principle, it may appear objectionable that an agency which is under the direct control of the Central Board of Revenue should be vested with jurisdiction to hear appeals from the orders of the Income-tax Officer. Justice should not only be done, but should appear to be done and should inspire confidence in the persons concerned. It is an elementary principle of the law that a person should not be a judge in his own cause. The Appellate Assistant Commissioner, being under the direct control of the Central Board of Revenue, may not be considered as a satisfactory authority to hear and dispose of appeals against the orders of the Income-tax Officer. One suggestion that was made long ago was that the Appellate Assistant Commissioner should be placed under the control of the Income-tax Appellate Tribunal, so as to make him independent of the authority and influence of the Central Board of Revenue.
This question was examined by the Income-tax Investigation Commission, and that Commission observe1 that there was no reason to think that by reason of the subordination of the Appellate Assistant Commissioners to the Central Board of Revenue, they were influenced by the Central Board of Revenue in their decisions or that they were in any manner partial in the discharge of their duties, or that their judgments were affected by any considerations irrelevant to the decisions of the appeal. No doubt, in spite of this conclusion the Commission did make a recommendation that there should be an alteration in the then existing system and that Appellate Assistant Commissioners should be removed from the control of the Central Board of Revenue and placed under the Appellate Tribunal.
But this recommendation was not accepted by the Select Committee constituted in connection with the Income-tax Amendment Bill of 1952, which examined the question in the light of the recommendations made by the Income-tax Investigation Commission. The Select Committee was not in favour of any change in the existing system. The Taxation Enquiry Commission2 again examined the question in greater detail and also came to the conclusion that no change was necessary. In support of their conclusion, the Taxation Enquiry Commission gave figures to show that in nearly 90% of the appeals disposed of by the Appellate Assistant Commissioners the orders of the Appellate Assistant Commissioners were either accepted by the assessee or confirmed by the Tribunal.
We have examined the further figures for the years 1953-54, 1954-55 and 1955-1956 furnished to us by the Central Board of Revenue and they establish that 92% of the orders of the Appellate Assistant Commissioners have either been accepted by the assessee or confirmed by the Tribunal. From this it follows that only about 8% of the appeals disposed of by the Appellate Assistant Commissioners are reversed on appeal to the Appellate Tribunal. The value of the filtration made by the Appellate Assistant Commissioners cannot be ignored, and if the decisions in 92% of the appeals disposed of by them are accepted by the assessee or confirmed by the Appellate Tribunal, it follows that the disposals are not affected or vitiated by any extraneous influence and give satisfaction to the assssees concerned.
Though we feel the force of the principle that appeals should be disposed of by an independent agency other than the one which is subordinate to the Central Board of Revenue, the figures furnished to us do not justify any alteration in the existing system. We therefore agree with the conclusion of the Taxation Enquiry Commission that a change in this behalf is neither necessary nor justified. We consider, therefore, that the Appellate Assistant Commissioners should continue to function as at present.
1. Para. 319, pp. 142, 143, I.T.I.C. Report, 1948.
2. T.E.C. Report , 1953-54, Vol. II, pp. 232 to 234, paras. 62-66.
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