TMI Blog1979 (3) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside and it is directed that the certificate case shall proceed to disposal in accordance with law as expeditiously as possible. - - - - - Dated:- 16-3-1979 - Judge(s) : N. L. UNTWALIA., R. S. PATHAK JUDGMENT The judgment of the court was delivered by UNTWALIA J.--These two appeals, one by the Union of India and the other by M/s. Jardine Henderson Ltd., are by certificate granted by the Calcutta High Court. Since the facts in both the cases are very much similar involving the interpretation of the various clauses of s. 3(1) of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, hereinafter referred to as the " Validation Act ", the two appeals have been heard together and are being disposed of by this judgment. There were two brothers named Basanta Kumar Daw, respondent No. 2 in Civil Appeal No. 1575 of 1971 and Haridhan Daw, respondent No. 2 in Civil Appeal No. 1965 of 1971. The facts of Civil Appeal No. 1575 of 1971 are these : For realization of arrears of income-tax dues the Certificate Officer (sic) of 24 Parganas forwarded to the Collector a certificate in accordance with s. 46(2) of the Indian I.T. Act, 1922, specifying the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n January 27, 1954. On March 2, 1954, the ITO informed the Certificate Officer that the original demand of Rs. 59,541-15-0 had been enhanced to Rs. 59,604-7-0 under s. 35 of the I.T. Act and requested him to realize the enhanced amount. The order under s. 35 was passed on March 2, 1953. The Certificate Officer thereupon informed the ITO that the Bengal Act did not provide for enhancing the demand of the existing certificate and asked him to file a separate certificate for the additional amount. He, however, continued the certificate proceedings for the recovery of the original amount. M/s. Jardine Henderson Ltd., respondent in Civil Appeal No. 1575 of 1971, and appellant in Civil Appeal No. 1965 of 1971, purchased the whole of the premises in question on September 20, 1954, for a total sum of Rs. 3,00,100 purchasing one-half of the undivided share from each of the two brothers. In both the cases, the company received a notice on August 6, 1956, fixing a date for settling the terms of the sale proclamations in respect of the respective one-half share of each of the two certificate-debtors. Immediately thereafter, the respondent-company made an application in each of the two case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate transfer or delivery of any of his immovable property situated in the district in which the certificate is filed, or of any interest in any such property, shall be void against any claim enforceable in execution of the certificate. " Under s. 9 the certificate-debtor may file a petition of objection denying his liability in whole or in part. Under s. 10 it is provided : " The Certificate Officer in whose office the original certificate is filed shall hear the petition, take evidence (if necessary), and determine whether the certificate-debtor is liable for the whole or any part of the amount for which the certificate was signed ; and may set aside, modify or vary the certificate accordingly. " On reading the provisions aforesaid it is clear that if the certificate is modified or varied by the Certificate Officer under s. 10 while disposing of the petition of objection filed by the certificate-debtor under s. 9, then the certificate case proceeds further without a fresh notice under s. 7. But in the instant case, the amount was not reduced on the objection of the certificate-debtor but it was reduced on receipt of the information from the ITO. In the Bengal Act itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee was substantially reduced in appeal. The ITO informed the assessee of the reduced tax liability and called upon him to pay the reduced amount. No fresh notice of demand was issued under s. 29. Pending further appeals to the Appellate Tribunal the assessee wanted the certificate proceedings to be stayed. and on his request being rejected be moved the High Court under art. 226 of the Constitution. The High Court held that the department was not entitled to treat the respondent as a defaulter in the absence of a fresh notice of demand and quashed the recovery proceedings. On appeal to this court the majority view expressed was that the amount of tax assessed being reduced as a result of the orders of the AAC, a fresh demand notice had to be served on the respondent before he could be treated as a defaulter. The recovery proceedings initiated against him on the basis of the original demand notice were, therefore, rightly quashed by the High Court. The Statement of Objects and Reasons which led to the introduction and passing of the Validation Act would show that it was to get over the difficulties in the collection of income-tax and other direct taxes created by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est) shall be invalid by reason only that no fresh notice of demand was served upon the assessee after the disposal of such appeal or proceeding or that such Government dues have been enhanced or reduced in such appeal or proceeding. " The Act was made retrospective by an express provision in section 5. Clause (a) deals with the case of an enhancement of Government dues and provides that the proceedings initiated may be continued from the stage at which such proceedings stood immediately before the disposal of the appeal or proceedings in which the enhancement was made. Another notice of demand is required to be served in respect of the amount by which the dues are enhanced. On a plain reading of cl. (a) of s. 3 it is clear that the intention of the legislature is not to allow the nullification of the proceedings which were initiated for recovery of the original demand. On the basis of another notice of demand for the enhanced amount, two courses are open to the department : (1) to initiate another proceeding for the recovery of the amount by which the dues are enhanced treating it as a separate demand, or (2) to cancel the first proceedings and start a fresh one for the recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Validation Act it would be seen that sub-cl. (i) clearly provides that it is not necessary for the taxing authority to serve upon the assessee a fresh notice of demand. The only thing which he is required to do is that he has to give intimation of the fact of such deduction to the assessee and to the TRO. The purpose of giving intimation to the assessee is to bring it to his pointed knowledge that the demand against him has been reduced, although by other methods also such as by service of a copy of the appellate order or the revisional order being served on him he may be made aware of that. The intimation to the TRO is essential, as without that intimation from the taxing authority he cannot reduce the amount of the certificate debt in the proceedings already commenced. The High Court has taken the view that the provision contained in sub-cl. (ii) of cl. (b) of s. 3(1) of the Validation Act is mandatory and, in the absence of a formal intimation to the assessee and to the TRO as required by the said provision, the proceedings initially started could not be continued under sub-cl. (iii). In our opinion the view of the High Court is not sustainable in law. On the facts of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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