1974 (9) TMI 50 - HC - Income Tax

Summary

Issues:
1. Interpretation of Rule 16(1) of the Second Schedule to the Income-tax Act, 1961 regarding the power of the court to issue process in execution of a decree against the property of a defaulter.
2. Whether a notice under Rule 2 automatically results in the attachment of the defaulter's property.
3. Determining the impact of the notice under Rule 2 on the competence of the defaulter to deal with their property and the jurisdiction of civil courts in issuing process against such property.

Detailed Analysis:
1. The judgment addressed the interpretation of Rule 16(1) of the Second Schedule to the Income-tax Act, 1961. The petitioner argued that once a notice under Rule 2 is issued to a defaulter, they become disentitled to deal with their property, and no civil court can issue process against such property. The respondent contended that until the property is attached by the income-tax authorities under Rule 3, the civil court is not debarred from issuing any process against the defaulter's property.
2. The court analyzed the provisions of Rule 2, Rule 3, and Rule 16. Rule 2 mandates a notice to be served on the defaulter for payment, while Rule 3 provides for a waiting period before execution of the certificate. The court noted that Rule 16(1) disentitles the defaulter to deal with their property and prohibits civil courts from issuing process against such property. The court highlighted the distinction between property mentioned in Rule 16(1) and property attached under Rule 3.
3. The judgment emphasized that the purpose of Rule 16(1) is to prevent private alienation of the defaulter's property. The court held that the notice under Rule 2 renders the defaulter incompetent to deal with their property, leading to a bar on any civil court process against that property. The court concluded that actual attachment under Rule 3 was not necessary to trigger the application of the bar in Rule 16(1, making the execution proceedings incompetent.
4. Consequently, the court allowed the petition, setting aside the orders of the executing court and adjourning the execution application. The respondent was granted the right to proceed after compliance with or cancellation of the notices under Rule 2. No costs were awarded, and the records were to be transmitted back to the executing court promptly.