TMI Blog1971 (6) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 should not be made; 3.Notices under section 274 read with section 273 relating to the assessment years 1963-64 to 1968-69 requiring the applicant to show cause why an order imposing penalty under section 273 should not be made; and 4.Notice under section 148 to reassess the income said to have escaped assessment for the year 1962-63." In Application No. 138, the applicant submits that there is conflict of judicial opinion on the question whether section 446(1) of the Companies Act, 1956, would apply to proceedings of the kind which the respondent has initiated by the above notices. He has referred to the various decisions on this question, and has sought the direction of this court in respect of the action taken against him. He prays that the proceedings initiated by notices mentioned as items (1) to (3) above may be declared to be void and set aside, in case it is found that section 446(1) of the Companies Act would apply to such proceedings. In Application No. 148, the applicant prays for staying the proceedings initiated by the notice mentioned as item (4) above, for the reasons stated in Application No. 138. Both these applications are opposed by the respondent. His c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Supreme Court or a High Court." The controversy is regarding the true meaning of the expression "other legal proceeding" occurring in section 446(1) in the context it is used therein. It is not disputed that the term "legal proceeding" would embrace any proceeding taken under any law; but counsel for the respondent submits that in the context it occurs in the above section, "legal proceeding" means a proceeding which, under law, a court has jurisdiction to entertain and dispose of. The first decision to be considered is that of the Federal Court in Governor-General in Council v. Shiromani Sugar Mills Ltd. (In liquidation) [1946] 14 ITR 248, 257 ; 16 Comp. Cas. 71 ; AIR 1946 FC 16 . In that case the question was whether an Income-tax Officer was entitled to take proceedings against an official liquidator under section 46(2) of the Indian Income-tax Act, 1922, to recover arrears of Income-tax due from the company in liquidation as an arrear of land revenue, without the leave of the winding-up court under section 171 of the Indian Companies Act, 1913. This section corresponds to section 446 of the Companies Act, 1956. It was contended that a proceeding to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawn and disposed of by the winding-up court. It was accordingly held that leave of the winding-up court was not necessary for continuance of the adjudication proceeding. Another decision brought to my notice is a single Bench decision of the Punjab High Court in Union of India v. Seth Spinning Mills Ltd. [1962] 46 ITR 193 ; 32 Comp. Cas 801 (Punj) , which held that a penalty imposed by the Income-tax Officer against a company in liquidation without obtaining the leave of the winding-up court under section 171 of the Indian Companies Act, 1913, was void. It stated that the language of this section was wide enough to include proceedings under the Income-tax Act. There is no discussion of the question in this decision. The next decision is that of a single Bench of the Allahabad High Court in Tika Ram Sons (P.) Ltd. v. Commissioner of Income-tax [1964] 51 ITR 403 ; 34 Comp. Cas. 151 (All). It held that section 446 of the Companies Act does not apply to income-tax proceedings prior to the stage of assessment. The question whether the section would apply to a proceeding for recovery of the tax was left open, as it did not arise for decision in that case. The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( surpa ), distinguished the decision of the Supreme Court in Damji Valji Shah's case ( surpa ), and held that the income-tax authorities are not entitled, in view of the provisions in section 446(1) of the Companies Act, to commence or continue assessment or reassessment proceedings against a company which is ordered to be wound up without the leave of the court. This decision was set aside by the Division Bench which held that the decision of the Supreme Court in Damji Valji Shah's case ( surpa ) applied to proceedings under the Income-tax Act and that such proceedings were not affected by section 446(1) of the Companies Act. The last decision cited before me is a Single Bench decision of the Calcutta High Court in Official Liquidator v. Commissioner of Income-tax [1971] 80 ITR 108 ; 41 Comp. Cas. 477 (Cal). There is an elaborate and useful discussion of the whole case law in this decision ; and the learned judge held that an assessment proceeding under the Income-tax Act would not come within the scope of section 446(1) of the Companies Act. It is firmly established on the authority of the decision of the Supreme Court in Damji Valji Shah's case ( surpa ) that sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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