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TMI Blog1969 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... 961. Thangal Kunju Musaliar had before his death executed gift deeds of immovable properties in 1947, 1953, 1954 and 1956 in favour of his wives and children. He had also executed a mortgage, exhibit D-4, on March 17, 1957, in favour of the Governor of the State of Kerala, for 20 lakhs of rupees in consideration of the State Government guaranteeing an overdraft accommodation for the amount by the Central Bank of India in order to enable him to reopen his factories which were closed at the time. By the writ petitions in question the appellants challenged the validity of exhibit P-1 order and prayed for an appropriate direction or order quashing the order, and restraining the respondents from proceeding further on the basis of the attachment. The main contentions in the writ petitions were : (1) that the attachment was for recovery of arrears of income-tax due from Thangal Kunju Musaliar both under the Travancore Income-tax Act and the Indian Income-tax Act, 1922, that so far as the arrears due under the Travancore Income-tax Act were concerned, they could be recovered only under the provisions of that Act, and, therefore, the proceedings for attachment under the Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object to the validity of the certificates on this ground when notices were served upon them under rule 85 of the Second Schedule to the Income-tax Act, 1961, they were precluded from taking the ground in the writ petitions. And in respect of the third contention, the learned judge said that since the appellants had resorted to the alternative remedy of suits in respect of some of the properties attached under exhibit P-1, and as it is still open to them to file claim petitions in respect of the other properties under rule 11 of the Second Schedule to the Income-tax Act, 1961, it was not proper that the writ court should entertain the objection especially as it involved resolution of disputed questions of fact. Counsel for the appellants contended that, for recovery of arrears of income-tax due under the Travancore income-tax Act, proceedings can be taken only under the provisions of that Act, and since the respondents maintain that the attachment was made under rule 48 of the Second Schedule to the Income-tax Act, 1961, the order of attachment was bad. He further submitted that the view of the learned judge that the Tax Recovery Officer who passed exhibit P-1 had authority to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 46(2) of that Act provides : " The Income-tax Officer may forward to the Collector a certificate under his signature specifying the amount (if arrears due from an assessee, and the Collector, on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein as if it were an arrear of land revenue : Provided that without prejudice to any other powers of the Collector in this behalf, he shall, for the purpose of recovering the said amount, have the powers which under the Code of Civil Procedure, 1908 (V of 1908), a civil court has for the purpose of the recovery of an amount due under a decree. " The word " assessee " has been defined in the Act as follows : " 'Assessee' means a person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him." [See sec. 2(2).] Sub-section (2) of section 46 only enables the collection of the arrears of income-tax due under that Act, and not arrears due under the Travancore Income-tax Act. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities because they were invested with part of the sovereign power of the State, namely, the power to collect tax. (See the decision in Rajasthan State Electricity Board v. Mohan Lal). Since the Income-tax Act, 1961, repealed and re-enacted with modifications the provisions of the Income-tax Act, 1922. the authority constituted under the corresponding provision of the Income-tax Act, 1961, to recover arrears Of tax under that Act, would be the authority competent to proceed to recover the arrears of tax due under the Travancore Income-tax Act. Section 8(1) of the General Clauses Act reads : " Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals and re-eracts, with or without modification, any provision of a former enactment, then references in any other enactment or in any instrument to the provision so repealed shall, unless a different intention appears, be construed as references to the provision so re-enacted. " That would indicate that the reference in the proviso to section 13(1) of the Indian Finance Act, 1950, to the authority constituted under the provisions of the Income-tax Act, 1922, must now be read as a reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Travancore Income-tax (Investigation Commission) Act XIV of 1124. Section 3 provides : " If immediately before the commencement of this Act there is in force in any Part B State other than Jammu and Kashmir any law (hereinafter in this section referred to a the State law ) corresponding to the Taxation on Income (Investigation Commission) Act, 1947 (XXX of 1947), that law shall continue to remain in force with the following modifications, namely :-- . . . . (d) the report of the Central Commission shall be submitted to the Central Government, and the Central Government may, by order in writing, direct that such proceedings as it thinks fit under the law in force in the State relating to income-tax, super-tax or excess profits tax or any other law, shall be taken against the person to whose case the report relates in respect of his income other than agricultural income, and upon such a direction being given, all such proceedings may be taken and completed under the appropriate law applicable in the State, as if the direction had been given and the proceedings had been instituted thereunder .. . " Exhibit D-1 directed the Income-tax Officer concerned to take " all proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly in accordance with law, the choice of alternative laws substantially similar in character can well be left to the authority effecting the recovery. We think that the arrears of income-tax due for these two years could have been recovered under the Income-tax Act, 1922, and can now be recovered under the provisions of the Income-tax Act, 1961. We are not satisfied that by reason of exhibit D-2 settlement, the revenue is precluded from recovering the arrears of income-tax due for the period covered by the settlement under the provisions of the Income-tax Act, 1961. As the terms of the settlement binding on the assessee have been broken by him, the revenue cannot be held to be bound by the terms of the settlement binding on them. The next question for consideration is whether the 11 out of the 22 certificates, namely, certificates Nos. 12 to 22 (both inclusive), annexed to exhibit P-1 were validly issued. It was contended on behalf of the appellants that, since these certificates were issued after the death of Thangal Kunju Musaliar, they were void. Reliance was placed upon section 66(3) of the Travancore Income-tax Act for this purpose. Section 66(3) provides that the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is higher than what is really due from the assesses the sale would be invalid and the Collector could be restrained by an order from confirming the sale. In Collector of North Arcot v. V. K. Kannan the certificate for recovery was for a sum, which was substantially in excess of what was actually due, and it was held that the error would go to the root of the jurisdiction of the Collector to recover the arrears, and the proceedings taken by the Collector for recovery of the arrears would be invalid. For this proposition the learned judges relied on the decision in Santosha Nadar v. First Additional Income-tax Officer, Tuticorin, where Rajagopalan, Offg. C.J. and Srinivasan J., laid down that where a certificate is issued under section 46(2) of the Income-tax Act, 1922, for a sum which is substantially in excess of the sum that was actually due, that error would go to the root of the jurisdiction of the Collector to recover the amount. In V. K, Kannan v. Collector of North Arcot, it was held that a certificate showing an amount in excess of what was actually due from the assessee would be invalid and that the proceedings taken under that certificate would also be invalid. These ruli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. Nor is an attachment before judgment rendered invalid merely because the amount for which the decree is passed is less than the amount shown in the plaint as due. Counsel also relied upon the ruling of a Division Bench of this court in Annamma Kunjacko v. Tax Recovery Officer. That was a case where a defaulter was arrested for arrears of income-tax due from him both under the Travancore Income-tax Act, 1121, as well as under the Income-tax Act, 1922. There was no provision for arrest of a defaulter in the Travancore Income-tax Act, although there was a provision for it in the Income-tax Act, 1922. So, the contention was raised that because the arrest was made for arrears of tax due both under the Travancore Act and the Indian Act, the arrest was illegal. The contention was upheld. In doing so the learned judges relied upon article 21 of the Constitution, which says that no person can be deprived of his life or personal liberty except according to the procedure established by law. Their Lordships said that the arrest was illegal as the arrest was also for an amount for which the defaulter could not be arrested. Their Lordships also said that the defaulter would have had an opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deeds during his life that the title to the properties included in the gift deeds passed to the donees, and that the revenue should not have proceeded to attach the properties as if they belonged to Thangal Kunju Musaliar at the time of his death. It is contended that the revenue should have filed a suit and obtained an adjudication that the gift deeds were either sham or intended to defeat or delay his creditors before proceeding to attach the properties. Reliance was placed in this connection upon the ruling of this court in Abdulla v. State of Kerala, where Vaidialingam J. held that when a dealer assessed to sales tax transferred his property, the amount assessed cannot be recovered from the property transferred, unless there is an adjudication by a civil court that the transfer was either intended to defeat or delay the creditors or that it was sham. We are not satisfied that it was necessary for the revenue to have filed a suit for declaration that the gift deeds executed by Thangal Kunju Musaliar were either sham or intended to defeat or delay the creditors before proceeding to attach the properties, on the basis that they belong ed to him on the date of his death. We think ..... X X X X Extracts X X X X X X X X Extracts X X X X
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