TMI Blog1976 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... 56, and March 5, 1956, respectively, for those two years. On March 15, 1956, the I.T.O. also issued to the Collector, Kanpur recovery certificate under sub-section (2) of section 46 of the Act for recovering Rs. 85,667-7-0 and Rs. 79,925-8-0 in respect of the assessment years 1954-55 and 1955-56 respectively. The petitioner filed an appeal against the levy of penalty of Rs. 7,500. The Appellate Assistant Commissoner set aside the levy of penalty observing that the provisional assessment under section 23B of the Act was had inasmuch as it was made before the petitioner had filed his return realising his mistake the I.T.O. passed on May, 14, 1958, two orders which read as follows : " 1954-55 14-5-58. Earlier 23B asstt. as on 1-7-55 is cancelled under section 35 in the light of AAC's observations and CIT 's direction. Complete fresh 23B asstt. issue N/D Ch. 1955-56 14-5-58. Earlier 23B asstt. as on 1-7-55 is cancelled under section 35, vide 54-55. Complete 23B asstt. afresh issue N/D Ch." After the aforesaid two orders were made, neither fresh demand notices under section 29 nor a fresh recovery certificate under section 46(2) of the Act were issued by the I.T.O. Subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assessments made on July 1, 1955. Hence, the demand notices issued in pursuance of those void orders of provisional assessment and the recovery certificates issued on the basis of those demand notices also became void. When the I.T.O. made fresh provisional assessments on May 14, 1958, he neither issued any fresh demand notices nor any recovery certificate under section 46(2) of the Act on the basis of those demand notices. Even after final assessments for 1954-55 and 1955-56 were made on February 18, 1959, the I.T.O. merely issued demand notices in pursuance of those assessment orders, but did not follow them by issue of a fresh recovery certificate under section 46(2) of the Act. Hence there was no recovery certificate in force when the Tax Recovery Officer proceeded to attach the properties of the petitioner in the year 1972. In the absence of a recovery certificate under section 46(2) of the Act issued within one year from the last day of the financial year in which the demand notices were issued, no proceedings for recovery of tax could be taken by the tax recovery authorities. Hence, the attachment of the petitioners properties by the Tax Recovery Officer was illegal. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery certificate under section 46(2) of the Act. He further submitted that after the final assessments for those two years were made on February 18, 1959, the I.T.O. had issued fresh demand notices for those years and had intimated the tax recovery authorities what the amount of arrears of tax was as a result of such final assessments. The learned standing counsel maintained that no fresh recovery certificate was necessary either after the rectification made on May 14, 1958, under section 35 of the Act of the provisional assessments nor after the final assessments made on February 18, 1959, and that the tax recovery authorities could proceed to recover the arrears of tax on the basis of the original recovery certificate issued on March 15, 1956. The learned standing counsel submitted that in order to overcome the effect of the decision of the Supreme Court in Income-tax Officer v. Seghu Buchiah Setty [1964] 52 ITR 538, the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (hereinafter called "the Validation of Recovery Proceedings Act "), was enacted and that under section 3 of that Act the tax recovery authorities can take recovery proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t." Sub-section (3) of section 3 states that the provisions of this section shall have effect notwithstanding any judgment, decree or order of any court, Tribunal or other authority. Section 5 of the Validation of Recovery Proceedings Act gives retrospective effect to the provisions of that Act and states that those provisions shall apply and shall be deemed always to have applied in relation to every notice of demand served upon an assessee by any taxing authority under any Scheduled Act whether such notice was or is served before or after the commencement of that Act. The learned standing counsel contended that the words " other proceeding " occurring in sub-section (1) of section 3 of the Validation of Recovery Proceedings Act are wide enough to include a rectification proceeding under section 35 of the Act. He maintained that since the original provisional assessments made by the I.T.O. for the years 1954-55 and 1955-56, before the petitioner had filed his returns for those years, had been rectified by the I.T.O. under section 35 of the Act by his orders dated May 14, 1958, there was no need to issue fresh tax recovery certificate after such rectification and that likewis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r demand notice or the earlier recovery certificate was void ab initio or stood cancelled. As there was no valid recovery certificate under section 46(2) of the Act issued prior to the final assessment orders for the years 1954-55 and 1955-56, the authorities could not proceed to recover the tax in pursuance of the recovery certificate issued on March 15, 1956, which was void ab initio and also stood cancelled. Section 3(1) of the Validation of Recovery Proceedings Act could not be of any aid to the authorities even after the final assessments were made and fresh demand notices were issued for those two years. However, the learned standing counsel contended that in the circumstances of this case we should not exercise our discretionary jurisdiction under article 226 of the Constitution to quash the impunged recovery proceedings. Elaborating this contention he submitted that the final assessments for the years 1954-55 and 1955-56, made on the petitioner had been affirmed in appeals and had become final, that a large sum of tax was undoubtedly due from the petitioner, that even if there was any irregularity in the recovery proceedings, no injustice could be said to have resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and served a notice on the bank in which the assessee has money in deposit, not to pay him any monies to the extent of such arrears of tax. In pursuance of such notice the bank deposited with the Government a sum of Rs. 18,119.48. The assessee challenged the action of the Income- tax Officer by filing a writ petition in this court. The petition was dismissed by a learned single judge who took the view that there was no manifest injustice in the impugned action of the Income-tax Officer. In the appeal filed by the assessee, the Division Bench reversed the order of the learned single judge holding that the provisions of section 46 of the Indian Income-tax Act, 1922, had not been incorporated in the Excess Profits Tax Act, that, therefore, that sub-section could not apply to proceedings for realisation of excess profits tax and that the proceedings taken by the Income-tax Officer were without jurisdiction. Repelling the contention of the revenue that the equities of the case were against the assessee and that the court should not grant its discretionary relief to the assessee because he had not paid any amount towards the excess profits tax assessed on him as early as in 1959, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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