TMI Blog1970 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... gle judge (April 23, 1959) in Writ Petitions Nos. 159 to 162 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 article 133(1) of the Constitution. The facts are as follows: One Dalchand Singhi held a prospecting license in the erstwhile Korea 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 (2,400 shares of Rs. 1,000 each). Bahadur Singh divided equally the 2,400 shares between himself and his 3 sons, 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 will. Letters 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jhagrakhand Collieries Ltd 43,99,712-11-0 The company paid the following sums by way of tax: Rs. February 1,1952 3,50,000 April 1, 1952 90,000 April 22, 1952 1,22,000 Narendra Singh Singhi paid the following sums by way of tax: Rs. February 1,1952 1,50,000 April 1, 1952 60,000 April 22, 1952 48,000 Smt. Champa Kumari paid the following sums by way of tax: Rs. April 1, 1952 1,00,000 April 1, 1952 40,000 April 1, 1952 32,000 Rajendra Singh Singhi paid the following sums by way of tax: Rs. April 1, 1952 1,50,000 April 1, 1952 60,000 April 22, 1952 48,000 On April 22, 1952, they signed the agreement. By that date the position in the payment of instalments had reached item (c) above showing Rs. 9,50,000 as due on March 31, 1953. On August 29, 1952, the Income-tax Officer made several assessment orders in respect of the assessment years 1947-48 to 1951-52. Each such order included the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 instalments 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 1947-48. On March 14, 1956, certificates under section 46(2) of the Indian Income-tax Act, 1922, were issued and notices under section 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 section 9 of the Recovery Act contending, inter alia, that the proceedings were barred by limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-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..... (7) Save in accordance with the provisions of sub-section (1) of section 42, or of 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 instalments, from the date on which the last of such instalments 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 proceeding 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 referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .provided however that in the event of due and punctual payment of all instalments Government will give up the sum of Rs. 11,49,019-5-0 with interest thereon, from the last instalment and accept the sum of Rs. 55,99,822-6-0 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 therefrom or in the event of it being found that the guarantee hereby given or any part there of 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. 67,48,841-11-0. 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' hereto. The said parties shall however be at liberty to make any part payment at any time towards the said instalments not less than Rs. 10,000 (Rupees ten thousand) at a time. 4. In the event of any instalment not being paid within the time mentioned above (such time being deemed to be of the essence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the money of the first instalment 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 instalment. Since instalments were granted, clause (iv) of the proviso to sub-section (7) of section 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 instalment. It only says that if instalments are granted time of one year ending with the end of a financial year is to be calculated from the date on which the last instalment is payable. The language of clause (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 instalments were fixed. But the Central Board of Revenue had stipulated even then that the concession mentioned above would only be available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes a defaulter. The main part of that section says: " Any amount specified as payable in a notice of demand under sub-section (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 section 45. If he has failed to comply with the demand made in accordance with the provisions in section 45 within the time mentioned therein, then he is "defaulter" within the meaning of "the Act". Unless the assessee is a default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 45. In view of the demand notices issued in September, 1952, the 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 instalment was due, we cannot fall back on the agreement between the assessees and the revenue. Chapter VI of the Act has nothing to do with the agreement between the assessees and the revenue. The expression "was due" in section 46(7) has reference to the tax which is due in accordance with the provisions in sections 45 and 46. For the reasons mentioned above I allow these appeals. ORDER.- In ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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