9911796707
TMI Blog1965 (11) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... as reported to have been looted. On and with effect from August 14, 1947, the bank abandoned all its assets in the territory now known as Pakistan and has not thereafter been able to resume work in those branches. On account of the restrictions imposed by the Foreign Exchange Regulation Act, 1947, no money could be transferred out of India to Pakistan or to any other country without the permission of the Reserve Bank of India after the passing of that Act in 1947. The Indian branches of the bank continued to do normal business including the meeting of liabilities towards its Muslim customers till May 6, 1948. On or about May 11, 1948, the bank submitted an application under section 153 of the Companies Act, 1913, to the East Punjab High Court at Simla for the sanction of a scheme framed by it. The High Court duly sanctioned the scheme on or about July 16, 1948, copy whereof is annexare "A" to the writ petition. Admittedly, the manner of disposal of the deposits of the Muslim evacuees in the Indian branches of of the bank was not specifically dealt with in the scheme. Regarding the deposits in the Pakistan branches of the bank by persons other than Hindus and Sikhs, the directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Collector, Ludhiana, for the recovery of the abovesaid arrears. Recovery proceedings against the above named assessees have been pending since then. Mohammad Akram alias Akram Ullah had also been carrying on business in Ludhiana under the style of Messrs. Akram Ullah and Sons. On July 28, 1959, the Income-tax Officer, Ludhiana, wrote to the manager of the bank in exercise of his powers under section 38(5) of the 1922 Act to intimate to the Income-tax Officer if Mohammad Akram or Akram Ullah, Proprietor of Messrs. Akram Ullah and Sons, had any account with the bank and, if so, to intimate the amount to the credit of that party. By letter dated August 4, 1959, the bank replied to the Income-tax Officer as follows: " We have to advise that we do not appear to have any account in our books in the name of Shri Mohammad Akram or Akram Ullah, Proprietor, Messrs. Akram Ullah and Sons, Ludhiana." On December 24, 1959, the Income-tax Officer again addressed the bank. In that communication it was stated that from enquiries made by the Income-tax Officer it had transpired that Akram Ullah maintained a current account with them in the name of Messrs. Army Stores Supplying Company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat nothing is due or held by us relating to the above party and, therefore, the demand made by you under section 46(5A) is inoperative. Your attention is invited to the provisions of section 46(5A), last paragraph of which states that where a person to whom a notice under this sub-section is sent, objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for and on account of the assessee, then nothing contained in this section shall be deemed to require such persons to pay any sum or part thereof, as the case may be, to the Income-tax Officer. Since there is no amount due to the said defaulter from us, you have no jurisdiction to demand an assumed sum from us or to take any action under section 46 of the Income-tax Act. We, therefore, request you to kindly cancel all the proceedings contemplated by you under section 46." It is significant to note that even in this letter containing the final objections of the bank the factual stand taken by it was the same as in its earlier letter dated 24th December, 1959 to which specific reference had been made again. The rest of the contents of the letter were mere ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e undersigned was busy in some domestic work so it could not be dealt with earlier. We are contacting our legal adviser in this matter and on receiving his advice the needful will be done as per his instructions. " Tired of the manner in which the bank was behaving, the Income-tax Officer sent a letter dated October 29, 1961, to the bank wherein it was stated that the Income-tax Officer was satisfied that the amount to the credit of the assessee in question still lay in the custody of the bank which the bank had not paid in spite of service of the notice under section 46(5A) of the 1922 Act and, therefore, calling upon the bank to pay Rs. 10,000 to the Government, out of the said account. The bank again remained silent. By letter dated December 6, 7, 1961, the Income-tax Officer afforded the bank a final opportunity to pay the amount in question or to convince the Income-tax Officer with necessary evidence on or before December 13, 1961, that no amount was due by the bank to Shri Mohammad Akram of Messrs. Army Stores Supplying Company. It was added in the letter that, in the absence of any satisfactory explanation or keeping silent over the matter, it would be presumed by the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r objections that no amount is due to Shri Mohammad Akram from the bank in India within the terms of the scheme of the Punjab High Court sanctioned on 15th July, 1948. As we have repeatedly denied our liability and hold no money on behalf of Shri Mohammad Akram in India we submit that the provisions of section 46(5A) are not applicable." In the bank's reply (annexure " I ") dated February 16, 1962, to the Special Assistant Collector, it again raised the objection that the notice of the Income-tax Officer was inoperative " because the bank had never accepted any liability in India of any amount due to a Shri Mohammad Akram of Messrs. Army Stores Supplying Company, Ludhiana." In the same letter it was again repeated that reference to the bank's balance-sheet would show that there was no such account in the bank's "books in its Indian branches." The Special Assistant Collector, 1st Grade, wrote to the bank on December 6, 1962, to pay up the amount in question failing which action under section 221 of the Income-tax Act, 1961 (hereinafter called the 1961 Act), would be taken against it. Copy of that letter is annexure " F " to the writ petition. The bank did not comply with the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When this case came up before my learned brother Dua J. on November 26, 1965, it was ordered to be heard by a larger Bench as the points raised by the petitioner are of some importance and are also bare of authority. Before noticing the rival contentions of the parties, it is necessary to state that the learned counsel for both sides expressly agreed that the question of validity and legality of the entire impugned proceedings and orders had to be decided in this case according to the provisions of the 1922 Act and that the 1961 Act is not relevant for that purpose. It is on the basis of this assumption, which even otherwise does not appear to be incorrect, that we have proceeded to decide this petition. At the time of the issue of the impugned notices, it was the 1922 Act which was in force. By operation of section 1(3) of the Act of 1961, the latter Act (Act 43 of 1961) came into force only on and with effect from April 1, 1962. By section 297(1) of the new Act, the 1922 Act was repealed. Section 297(2)(j) of the 1961 Act provides that, notwithstanding the repeal of the 1922 Act, any sum payable by way of income-tax, etc., may be recovered under the new Act but without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso 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 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." There is no doubt that if no recovery proceedings had been commenced against the assessee prior to March 31, 1953, the impugned proceedings and notices would have been ultra vires section 46(7) of the 1922 Act and would have been liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount . . . . . (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Income-tax Officer, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear of tax due from him, in the manner provided in sections 222 to 225 and the notice shall have the same effect as an attachment of a debt by the Tax Recovery Officer in exercise of his powers under section 222. 231. Save in accordance with the provisions of section 173 or sub-section (7) of section 220, 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 the demand is made, or, in the case of a person who is deemed to be an assessee in default under any provision of this Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st day of the financial year before the issue of the recovery certificate. From whatever angle the argument is tested, it has no force. A third argument was then sought to be advanced by Mr. Chiranjiv Lal to show that the proceedings against the bank are beyond time. This argument is based on the provisions of section 34(3) of the 1922 Act, which sub-section reads as follows: "(3) No order of assessment or reassessment, other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1A) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable : Provided that where a notice under clause (b) of sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice, even if at the time of the assessment or reassessment the four years aforesaid have already elapsed: Provided further that not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient to pay the amount due by the taxpayer in respect of arrears of income-tax and penalty or the whole of the money when it is equal to or less than that amount. The Income-tax Officer may at any time or from time to time amend or revoke any such notice or extend the time for making any payment in pursuance of the notice. Any person making any payment in compliance with a notice under this sub-section shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in the receipt. Any person discharging any liability to the assessee after receipt of the notice referred to in this sub-section shall be personally liable to the Income-tax Officer to the extent of the liability discharged or to the extent of the liability of the assessee for tax and penalties, whichever is less. If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Income-tax Officer, further proceedings may be taken by and before the Collector on the footing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . Where, however, the person to whom the notice is sent denies that any money is due from him, then the Income-tax Officer cannot take any further proceedings under this sub-section even though the denial may not be true. Mr. Kondaiah's contention is that the last clause applies only to cases where the person to whom the notice is sent is raising a bona fide objection, an objection which is true and not false to his knowledge. Insuch a case, he contends, it is open to the authorities to ascertain and find whether, as a matter of fact, any money is or is not due to the assessee and resort to the coercive processes if it be found that there is a debt due to the assessee. I am not prepared to accede to this contention. If the position taken up by Mr. Kondaiah were right, then the authorities acting under the Act would be armed with what seems to me a very extraordinary power; they would be able to decide questions of liability of third persons to the assessee. There is nothing in the language of the sub-section which points to such a result. It seems to me that the interpretation I am inclined to put is also in consonance with principle because the legislature could hardly have mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned judge of the Andhra Pradesh High Court in P. Rajeswaramma's case, though I may not be prepared to go to the extent to which that judgment is capable of being understood. It appears to be correct that the phraseology of sub-section (5A) of section 46 of the 1922 Act does not appear to arm the income-tax authorities with jurisdiction to decide factually disputed questions of liability of the garnishee to the original assessee. That does not, however, mean that the provision exonerates a garnishee of his liability to the income-tax authorities by merely denying his liability to the assessee though expressly admitting that he holds the requisite amount of the assessee in his hands which he does not owe to any other person and in which the garnishee claims no personal interest. In any case, it is no defence whatever to a notice under section 46(5A) of the old Act to say that the assessee's amount is held by the garnishee but, by a transfer entry, the garnishee has taken the amount out of its books at the station at which the attachment is sought to be effected, to its books, at the same station, relating to a branch outside the country. That precisely is the sum total of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a Division Bench judgment of this court (G. D. Khosla C. J. and Mahajan J.) in Okara Grain Buyers Syndicate Ltd. v. United Commercial Bank Ltd., wherein it was held that, when a bank closes its branch, the assets and liabilities of that branch go over to the head office and the persons who have claims on the branch have to lodge those claims with the head office. The learned judges further held that in the case of a bank deposit, whether current or otherwise, the demand for its return has to be made at the branch where the deposit was made and, if such branch is no longer functioning, then the demand has to be made at the head office of the bank. The original assessee had made the deposit at Ludhiana. The head office of the bank is also at Ludhiana. In any case, the Pakistan branches of the bank have ceased to function. It is, therefore, wholly futile for the bank to contend that, merely by making a book entry, the amount had ceased to be due to the original assessee at Ludhiana but has started being due to him at Lyallpur in Pakistan. The bank has never taken up the position in its written objections at any stage that the sum demanded from it is not due to the assessee but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 5, 1960 (annexure " G "), the bank had denied its liability. Mr. Awasthy rightly points out that even in the written objections dated March 5, 1960, the bank has clearly based itself for the factual position on its communication dated December 24, 1959. On the admitted facts of this case it is necessary to read the two communications (letters dated December 24, 1959, and March 5, 1960) together. Both these letters taken together imply a clear admission of the bank to the assessee and a further admission that the bank holds the said amount but it is sought to be stated that the amount is not payable in India but in Pakistan. This does not amount to a valid objection within the scope of sub-section (5A) of section 46 of the 1922 Act and does not exonerate the bank from its liability to the income-tax department for the amount of the assessee held by it. In paragraph 17 of the writ petition it has been stated by the bank that as soon as it had raised an objection about its liability, the Income-tax Officer should have got the question decided from a competent civil court. On the other side it is also admitted by Mr. Awasthy that in case some valid objections which fall within t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
