TMI Blog1960 (8) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of notices by the Income Tax Officer on July 26, 1957, to the Bank of India Ltd., Madras under section 46(5A) restraining the Bank of India from paying moneys standing to the credit of the assessee company in current account with the bank and calling upon the bank to pay the amounts to the Income Tax Department in discharge of the Income Tax demands against the assessee. According to the assessee, the limitation for taking proceedings under section 46 of the Act against the assessee had expired by the end of 1955 and the impugned proceedings started against the assessee in 1957 are barred. On this basis, these petition praying for writs of prohibition have been filed. 3. In order to deal with the merits of the case, it is necessary to set out the following facts which emerge from the petition, the counter thereto, the reply affidavit of the petitioner and the supplemental counter affidavit filed by the Department. It has been stated that the assessments for the two years were completed on March 23, 1953. It is common ground that notices of demand were issued on March 25, 1953, under section 29 of the Act. Appeals to the Appellate Assistant Commissioner filed on April 15, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 46(2) of the Act had been issued to the Collector of Madras for recovery of the arrears of the tax from the petitioner-assessee. In his reply affidavit, the petitioner claimed that he was not aware of any such certificate having been issued and that if such a certificate had been issued as long back as October, 1953, the inaction of the Collector in taking steps on the basis of such a certificate remains unexplained. The Department states that, though there is evidence to show that this certificate was forwarded to the Collector, it subsequently transpired that it was untraceable in the office of the Collector. But, nevertheless, it is claimed that the issue of this certificate is an action towards the recovery of arrears within the meaning of the Explanation to section 46(7) of the Act, and that it would save limitation in respect of the subsequent proceedings under section 46(5A). On this point, therefore, two questions arise for examination : (1) whether a certificate was in fact forwarded to the Collector within the meaning of section 46(2) of the Act and whether the issue thereof amounts to the commencement of a proceeding for recovery; and (2) if so, whether the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The circumstance that even in May, 1954, the Income Tax Officer addressed the Collector for a report of the action taken on the certificate forwarded to him is strongly in support of the conclusion, that a certificate did in fact issue on October 29, 1953, as claimed by the Department. This query by the Income Tax Officer was made long before any dispute regarding the present proceedings arose, and at or about the time when the earlier writ petition, W.P. No. 868 of 1953, was disposed of. Immediately after the stay of the recovery proceedings was vacated by the High Court in that writ proceedings, this enquiry appears to have been made. That is a clear indication that the Department was at that time aware that a certificate had been issued and that further action by the Collector on that certificate was pending. We are, therefore, justified in inferring that notwithstanding the long inaction on the part of the Department and the Collector, the factum of the issue of the certificate under section 46(2) cannot be disputed. 7. On this point the petitioner has another contention to put forward. It is claimed that the mere forwarding of a certificate under section 46(2) does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... piry of one year from the last day of the financial year in which the demand was issued under section 29. The fact that the Collector failed or was unable to take further action on the certificate or that it proved infructuous does not militate against the view, that the issue of the certificate itself was a proceeding for recovery within the meaning of the explanation to section 46(7) of the Act. 9. It has been noted that the validity of the issue of the notice under section 46(5A) to the Bank of India Ltd. is sought to be sustained by the Department by reference to the other notices also under that provision issued in December, 1954, to certain other constituents of the petitioner. On this point, it has been contended by the petitioner, firstly, that it was beyond the period of limitation; secondly, that as they proved futile and no action against the constituents was taken, they cannot be used as steps in aid to prevent limitation running; and, thirdly, that those notices themselves do not amount to proceedings in recovery. We shall disregard for the present the question whether the proceedings under section 46(5A) will be unaffected by the bar of limitation, in view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidity of the action taken under section 46(5A). 13. Nor are we able to appreciate the argument that the notices do not amount to recovery proceedings. One of the modes of recovery contemplated by section 46 of the Act is by requiring any person from whom money is due or may become due to the assessee to pay it over to the Department in full or partial discharge of the Income Tax demand against the assessee. Two results are possible : either the party to whom the notice is issued complies with the demand or he denies possession of funds belonging to the assessee. In either case, the notice may be said to discharge itself and no further action by the Department is either called for or is possible. That being so, we fail to understand how the action of the Department in issuing the notice under section 46(5A) loses its character as a recovery proceeding, solely for the reason that no positive results flowed therefrom. 14. We shall now deal with the further contention of the petitioner, that the issue of notices under section 46(5A) to other persons in 1954 will not save limitation running against the Department in so far as the notice, also under section 46(5A) issued to the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dues by other means outside the scope of the Income Tax Act. This explanation clearly contemplates each mode of recovery, that is, the modes which are provided by the several sub-sections of section 46, as a distinct proceeding. By no possible means of interpretation can we arrive at the result, that each mode is itself severable into distinct transactions, and that any action taken under one particular mode does not mark the commencement of a proceeding for recovery with respect to some other action also taken under that mode. That is exactly what the learned counsel for the petitioner contends for, in claiming that the notices issued in December, 1954, under section 46(5A) to some debtors of the assessee will not mark the commencement of a proceeding for recovery in so far as the notice issued to the Bank of India in 1957 is concerned. It seems to us that not only is this interpretation in conflict with the clear wording of the provision, but such a view would also lead to enormous practical difficulties. In the very nature of things, resort to section 46(5A) depends upon the knowledge secured by the Department that the money of the assessee are in the hands of this or that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices in December, 1954, which independently of the action under section 46(2) was also within the extended period of limitation. We have found that in so far as the notice under section 46(5A) to the Bank of India Ltd. is concerned, it is in pursuit of the same mode, that is, the mode under section 46(5A) which had been commenced even in December, 1954. But the important point to consider is whether having resorted to the mode of recovery contemplated by section 46(2) of the Act, the Income Tax Officer could not resort to the mode of recovery under section 46(5A) without recording special reasons as required in the explanation. This part of the explanation makes it clear beyond doubt that, in the absence of any such special reasons, it shall not be lawful to resort to an additional mode of recovery. On behalf of the Department, Sri Rama Rao Sahib argued that this restriction upon the adoption of more that one mode is designed to operate only against the adoption of methods of recovery under any other law for the time being in force relating to the recovery of debts due to the Government, and that this requirement of special reasons to be recorded does not apply to the adoption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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