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TMI Blog1970 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 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 Narendra Singh Singhi and Rajendra Singh Singhi and 600 shares in the name of Birendra Singh Singhi Birendra Singh Singhi died on December 12, 1950, leaving a widow, Smt. Champa Kumari, and two minor sons, Ashok Kumar Singhi, Chandra Kumar Singhi, and also a minor daughter. These minors have now attained majority. Under what is known as the "Tyagi Scheme" announced on May 19, 1951, a voluntary disclosure was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 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 following: " In accordance with the terms of the agreement dated 22nd April, 1952, executed in connection with the petitions dated 18th July, 1951, filed by the assessee and others under concessional scheme for the settlement of disclosures announced by the Government of India, the assessment is made as under:" and then follows the computation of total income the computation of tax and the total amount demanded. On September 22, 1952, the Income-tax Officer (Companies District 1), Calcutta, sent the following letter to each assessee. The one sent to Smt. Champa Kumari Singhi may alone be quoted here as an example: "From: Shri V. Satyamurthi, M.A., B.L., Income Tax Officer, Companies District I, Calcutta. To Smt. Champa Kumari Singhi, 49, Gariahat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 limitation. This objection was overruled on January 5, 1957. The appellants appealed to the Commissioner under section 51 of the Recovery Act and the objection that the certificates were barred by limitation under section 46(7) of the Indian Income-tax Act, 1922, was accepted and the certificates were cancelled. The Union of India thereupon filed several revisions before the Board of Revenue under section 53 of the Public Demands Recovery Act, against the order of the Commissioner. They were allowed by a common order dated June 27, 1958. The appellants were again called upon to pay the amount on pain of distress warrants. The above facts were necessary to understand the background of the dispute from which the petitions under article 226 of the Constitution arose. The appellants filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 referred to, and for the removal of doubts it is hereby declared that the several modes of recovery specified in this section are neither mutually exclusive, nor affect in any way any other law for the time being in force relating to the recovery of debts due to Government, and it shall be lawful for the Income-tax Officer, if for any special reasons to be recorded he so thinks fit, to have recourse to any such mode of recovery notwithstanding that the tax due is being recovered from an assessee by any other mode." The contention of the appellants is that we have to find out when they could be treated as defaulters within the first sub-section and whether under the main part of sub-section (7) the proceedings for the recovery of the tax with penalty could be commenced after the expiration of one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty 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 of the arrangement) or in the event of it being found that the guarantee hereby given or any part thereof is not enforceable for any reason whatsoever the whole of the balance of the said sum of Rs. 67,48,841-11-0 will at once become due and payable with interest at the rate aforesaid and Government will (in addition to all rights for enforcement of this document) be entitled to take all steps to enforce payment including issue of certificate under section 46(2) of the Income-tax Act and proceedings under the West Bengal Public Demands Recovery Act and Revenue Recovery Act." The contention of the appellants is that the letters of the 22nd September, 1952 (one of which has been reproduced above as a sample) were accompanied by the notices of demand and on the breach of the payment of the instalmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 if the revised scheme of payment was strictly followed. In other words, payment was to be made by instalments and this concession, therefore, attracted the provisions of clause (iv). The Government could always accept any instalment even if paid late without having to worry about the period of limitation of one year from the date of demand, since clause (iv) of the first proviso gave them an option to wait till the last instalment was payable. The scheme of the instalments took the matter out of the main part of sub-section (7) and brought it within the proviso to clause (iv). We are, therefore, satisfied that the High Court was right in holding that the certificates were issued within the period of limitation prescribed by law and were not barred by time. The first four appeals therefore fail and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose). 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 defaulter, no action can be taken against him under section 46. Non-fulfilment of the terms of the agreement does not amount to a default under section 45. Therefore, the first thing we have to see is when the assessees became defaulters. For deciding that question reference to the agreement is irrelevant. Admittedly, demand notices under section 29 had been issued to the assessees on September 22, 1952, in respect of the entire tax due from them. Therefore, they became defaulters as soon as they failed to comply with those demands. This takes us to section 46. Sub-section (1) of section 46 says: " When an assessee is in default in making a payment of income-tax, the Income-tax Officer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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