Appeal No 1650 of 1970
Anneal from the Judgment and order dated January 31 1970 of the Bombay High Court in April No 94 of 1967
section T Desai P C Bhartari
Ajit Mehta
Kirit Mehta J B Dadaichanji O C Mathur and Ravinder Narain for the appellant
14 L736SuPCT72 966 B Sen section K Aiyar and R N sachthey for the respondents
The Judgment of the Court was delivered by Dua J
The Colaba Land and Mills Co Ltd in liquida tion was ordered by the Bombay High Court on October 7 1959 to be wound up under the provisions of the Companies Act 1 of 1956 and the Official Liquidator was appointed its liquidator
Earlier on May 1 1959 the Official Liquidator had been appointed by the High Court its provisional liquidator
On August 23 1966 the Income tax Officer Companies Circle concerned issued six different notices under section 148 of the Income tax Act 1961 proposing to reopen the assessment of the Company and to re assess it in respect of the assessment years 1950 51 to 1955 56
On December 31 1966 the Income tax Officer served further notices under section 1421 of the Income tax Act upon the Official Liquidator calling upon him to produce accounts and documents speci fied at the back of the notices and to furnish any information called for by the said officer
At the foot of the said notices it was stated that failure on the part of the Official Liquidator to comply with the terms of those notices would not only result in exparte assessment against the Company but might also entail penalty under section 271 of the Income tax AcL Certain negotiations followed between the Official Liquidator and the Inspecting Assistant Commissioner of Income tax but they were infructuous
On an application made by the Official Liquidator in the High Court questioning the jurisdiction of the Income tax Officer to issue the said notices or to proceed with the reassessment of the Company without the leave of the High Court winding up the Company Vimadlal J on 28th September 1967 held that the income tax authorities were not entitled to commence the assessment or reassessment proceedings contemplated against the Colaba Land and Mills Co Ltd or to continue the same without obtaining leave of the Court under section 4461 of the Act No 1 of 1956 hereinafter called the Act
The learned Judge on this view granted an injunction restraining the Incometax Officer from assessing or re assessing the said Company for the assessment years 1950 51 to 1955 56
On appeal by the Income tax Officer and the Union of India before the appellate bench of the High Court against the order of injunction the Division Bench Modi and Desai JJ reversed the order of the learned single Judge and set aside the injunction issued by him
Before the appellate bench two contentions were raised on behalf of the Income tax Officer 1 that notices for reassessment issued under section 148 were not legal proceedings within the meaning of that phrase as used in section 4461 of the Act and 2 that assuming the re assessment proceedings started under the 967 said notices to be legal proceedings leave of the Company Court under section 4461 of the Act was not necessary because the Incometax Officer had exclusive jurisdiction to make re assessment and to determine the tax liability
The proceedings by way of assessment before the Income tax Officer according to the contention were outside the pale of jurisdiction of all civil courts including the Company Court
The appellate bench did not consider it necessary to decide the first contention because on the authority of Damji Valji Shah vs Life Insurance Corporation of India1 the second contention deserved to be accepted and that was considered sufficient to conclude the appeal
The Official Liquidator after securing a certificate of fitness from the High Court under article 1331c of the Constitution has appealed to this Court and the only question which requires consideration here is if it is necessary for the Income tax Officer to obtain leave of the liquidation court when he wants to re assess the company for escaped income in respect of past years
Section 446 of the Act reads  1 When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator no suit or other legal proceeding shall be commenced or if pending at the date of the winding up order shall be proceeded with against the company except by leave of the Court and subject to such terms as the Court may impose
2 The Court which is winding up the company shall notwithstanding anything contained in any other law for the time being in force have jurisdiction to entertain or dispose of a any suit or proceeding by or against the company b any claim made by or against the company including claims by or against any of its branches in India c any question of priorities or any other question whatsoever whether of law or fact which may relate to or arise in course of the winding up of the company whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arises or such application has been made or is made before or 1  968 after the order for the winding up of the company or before or after the commencement of the Companies Amendment Act 1960
3 Any suit or proceeding by Or against the company which is pending in any Court Other than that in which the winding up of the company is proceeding may notwithstanding anything contained in any other law for the time being in force be transferred to and disposed of by that Court
4 Nothing in sub section 1 or sub section 3 shall apply to any proceeding pending in appeal before the Supreme Court or High Court To appreciate and understand the precise scope of this section so far as it concerns us in the present controversy we consider it pro per to turn to the scheme of the Act on this aspect
Chapter II of Part VII of the Act beginning with section 433 deals with winding up by the Court
Section 439 provides for applications for winding up and section 441 tells us when the winding up of a company is to be deemed to commence
Section 442 which confers power on courts to stay or restrain proceedings against the company reads 442
At any time after the presentation of a winding up petition and before a winding up order has been made the company or any creditor or contributory may a where any suit or proceeding against the company is pending in the Supreme Court or in any High Court apply to the Court in which the suit or proceeding is pending for a stay of proceedings therein and b where any suit or proceeding is vending against the company in any other Court apply to the Court having jurisdiction to wind up the company to restrain further proceedings in the suit or proceeding and the Court to which application is so made may stay or restrain the proceedings accordingly on such terms as it thinks fit
 Section 444 enjoins the Court making an order for the winding up of a company to cause intimation thereof to be sent forthwith to the Official Liquidator and the Registrar appointed under the 
Official Liquidators attached to the High Courts are appointed by the Central Government under section 448 and the Registrars by the Central Government under section 609 of the Act
969 It is the duty of the petitioner in the winding up proceedings and also of the company to file under section 445 a certified copy of the order of winding up with the Registrar who has to notify in the Official Gazette that such an order has been made
Such order is to be deemed to be a notice of discharge of the officers and employees of the company except when the business of the company is continued vide section 445 3
Then comes section 446 which has already been set out
The present sub section
2 of this section was substituted for the old one in 1960 by Act 65 of 1960 and sub  4 was also added by that Act
Sub section 2 is on the lines of section 7 of the Presidency Towns Insolvency Act 1909 section 4 of the and section 45B of the Banking 
The object of this sub section appears to be to empower the court as in exercise of insolvency jurisdiction to decide all claims made by or against any company and other questions whatsoever so that winding up proceedings might be expedited
Subsections 2 and 3 both seem to have been inserted to give effect to the recommendation of the Company Law Committee Report contained in para 207c namely that all suits by or against a company in winding up should notwithstanding any provisions in any law for the time being in force be instituted in the court in which the winding up proceedings are pending
This was considered to be to quote the exact words on balance an advantage to all concerned including the parties which have a claim against the companies to institute suits relating to its affairs in the Court where the winding up proceedings are pending
In the Indian Companies Act 1913 section 171 provided for preventing litigation against a company in the process of being wound up and it read as   171
When a winding up order has been made or a provisional liquidator has been appointed no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court may impose
 The words underlined were inserted by the Companies Amend ment Act 1936 which followed the English Act
It is hardly necessary to point out that company legislation in India has ever since the first enactment of 1850 Registration of Joint stock Companies Act No XLIII of 1850 broadly been following the lines of development of the company law in England
The object of section 171 was designed to achieve was to prevent all litigation against the company in the process of being wound up except with the consent of the court
We have reproduced this section because the decisions to which reference has been made by Shri Desai in the very beginning of his arguments relate to the cons 970 truction of this section by the Federal Court of India and by this Court
The Federal Court in The Governor General in Council vs
Shiromani Sugar Mills Ltd1 while construing this section held that the words other legal proceedings in this section comprise any proceedings by the revenue authorities under section 462 of the Indian Income tax Act and accordingly before forwarding the requisite certificate under section 462 to the Collector which would put the machinery for the collection of the arrears of land revenue into motion the Income tax Officer should have applied under section 171 of the Indian Companies Act for leave of the winding up Court
The passage on which Shri Desai specifically relied is where disagreeing with the observations of a Full Bench of the Lahore High Court in Shakuntla vs The People s Bank of Northern India Ltd In Liquidation2 Spens CJ observed that the expression or other legal proceedings in section 171 need not and therefore should not be confined to original proceedings in a court of first instance analogous to a suit initiated by means of a petition similar to a plaint
The learned Chief Justice there went on to observe  Section 171 must in our judgment be construed with reference to other sections of the Act and the general scheme of administration of the assets of a company in liquidation laid down by the Act
In particular we would refer to section 232
Section 232 appears to us to be supplementary to section 171 by providing that any creditor other than Government who goes ahead notwithstanding a winding up order or in ignorance of it with any attachment distress execution or sale without the previous leave of the Court will find that such steps are void
The reference to distress  indicates that leave of the Court is required for more than the initiation of original proceedings in the nature of a suit in an ordinary Court of law
Moreover the scheme of the application of the company s property in the pari passu satisfaction of its liabilities envisaged in section 211 and other sections of the Act cannot be made to work in coordination unless all creditors except such secured creditors as are  outside the winding up in the sense indicated by Lord Wrenbury in his speech in Food Controller vs Cork3 are subjected as to their actions against the property of the company to the control of the Court
Accordingly in our judgment no narrow construction should be placed upon the words or other legal proceeding  in section 171
In our judgment the words can and should be held 1 2 Lah
3 971 to cover distress and execution proceedings in the ordinary Courts
In our view such proceedings are other legal proceedings against the company as contrasted with ordinary suits against the company
 In that case a company was ordered to be wound up in April 1942 and an order of assessment to income tax of the profits made by the company in the year ending May 31 1940 was made in 1943 and the Income tax Officer without obtaining leave of the winding up court commenced proceedings for recovery of tax as If it were an arrear of land revenue
It was on these facts that it was observed that the words or other legal proceedings can and should be held to cover distress and execution proceedings
This expression was not held to cover assessment proceedings to which apparently no objection was raised by the parties though they were represented by eminent counsel
The decision of this Court to which Shri Desai has next referred is M K Ranganathan vs Government of Madras 
The head note which gives a clear idea of the ratio of this decision is in these words The secured creditor is outside the winding up and can realise his security without the leave of the winding up Court though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under section 171 of the Indian Companies Act to obtain the leave of the winding up Court before he can do so although such leave would almost automatically be granted
It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them
It is also a well recognized rule of construction that the legislature does not intend to make a substantial alteration in the law beyond what it explicitly declares either in express words or by clear implication and that the general words of the Act are not to be so construed as to alter the previous policy of the law unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched
Held therefore that having regard to the context in which the words any sale held without leave of the Court of any of the properties  added in section 2321 by the amending Act XXII of 1936 have been used in aposition with any attachment distress or execution put into force without leave of the Court against the estate or effects it would be a legitimate construction to 1  972 be put upon them that they refer only to sales held through the intervention of the Court and not to sales effected by the secured creditor outside the winding up and without the intervention of the Court and that the amendment was not intended to bring within the sweep of the general words sales effected by the secured creditor outside the winding up
Held accordingly that in the present case the sale effected by respondent No 2 as the receiver of the trustees of the debenture holders in July 1954 was valid and binding on all parties concerned and could not be chal lenged as it was sought to be done by the Official Receiver
 In this case the observations already reproduced from the judgment of the Federal Court in Shakuntla s case supra were approved
It may also be pointed out that in this decision this Court observed that the winding up court assures pro rata distribution of the assets of the company in the same way in which the court under the Presidency Towns Insolvency Act or the ensures such distribution of assets
Section 2321 of the Act of 1913 which was held supplemental to section 171 was also stated to have reference to legal proceedings in the same way as such proceedings were envisaged by section 171
These two decisions in our opinion do not lay down that assessment proceedings under the Income tax Act should be held to be within the contemplation of section 171 of the Indian Companies Act 1913
The next decision to which reference has been made by Shri Desai is Union of India vs India Fisheries P Ltd 1
In that case the respondents Fisheries P Ltd had been directed to be wound up by the winding up court and an Official Liquidator had been appointed by an order of the High Court in October 1950
The head note in that case gives a clear idea of the facts and the decision
It reads  The respondent company was directed to be wound up and an official liquidator appointed by an order of the High Court in October 1950
In December 1950 the respondent was assessed to tax amounting to Rs 8737 for the year 1948 49
A claim made for this tax on the official liquidator was adjudged and allowed as an ordinary claim and certified as such in April 1952
The Liquidator declared a dividend of 9 12 annas in the Rupee in August 1954 and paid a sum of Rs 5188 to the Department leaving a balance of Rs 3549
1 973 In June 1954 the Department made a demand from the respondent and was paid Rs 2565 as advance tax for the year 1955 56
On a regular assessment being made for that year only Rs 1126 was assessed as payable so that a sum of Rs 1460 inclusive of interest be came refundable to the respondent
However the Income Tax Officer purporting to exercise the power available to him under section 49E of the Income Tax Act 1922 set off this amount against the balance of Rs 3549 due for the year 1948 49
A revision petition filed by respondent in respect of this set off was rejected by the Commissioner of Income tax
Thereafter petition under article 226 filed by the respondent to set aside the orders of the Income Tax Officer and Commissioner was allowed by the High Court on the ground that the demand for Rs 8737 in respect of 1948 49 being adjudged and certified came to have all the incidents and character of an unsecured debt payable by the liquidator to the Department it was therefore governed by the provisions of Company Law and no other remedy or method to obtain satisfaction of the claim was available to the creditor
In the appeal to this Court it was contended on behalf of the appellant that section 49E gave statutory power to Income Tax Officer to set off a refundable amount against any tax remaining payable and that this power was not subject to any provision of any other law
Held the Income Tax Officer was in error in applying section 49E and setting off the refund due to the respondent
The effect of sections 228 and 229 of the Companies Act 1913 is inter alia that an unsecured creditor must prove his debts and all unsecured debts are to be paid pari passu
Once the claim of the Department has to be proved and is proved in liquidation proceedings it cannot by exercising the right under section 49E get priority over other unsecured creditors and thus defeat the very object of sections 228 and 229 of the Companies Act
Furthermore if there is an apparent conflict between two independent provisions of law the special provision must prevail
Section 49E is a general provision applicable to all assessees in all circumstances sections 228 and 229 deal with proof of debts and their payment in liqui 97 4 dation
Section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolvency rules do not apply
 In our opinion this decision is of no greater assistance to the appellant on the narrow point which requires determination by us
On the contrary to some extent it goes against Shri Desai because the assessment made in December 1950 after the appointment of the Official Liquidator was assumed to be in order
It may be recalled that in Shiromani Sugar Mills case supra the assessment made after the winding up order was not challenged though on the argument addressed by Shri Desai before us it could have been challenged
The ratio decidendi or the principle accepted and applied in none of the decisions cited supports the appellant s contention on the precise point of assessment of tax
Shri Desai has next referred us to a more recent decision of this Court in Balwant Singh vs L C Bharumal Income tax Officer New Delhi1 In this case the Income tax Officer was held to be a court for the purpose of section 195 1 b Cr P C though it was added that the Income tax Officer could not be treated as a re venue court and therefore neither section 476 nor section 479 A Cr P C would be applicable
This decision has been cited for the purpose of contending that if the expression other legal proceeding in section 446 is to be construed to mean a proceeding in a court then the Income tax Officer must be considered to be a court when holding assessment or re assessment proceedings
This contention may be disposed of with the observation that merely because the Income tax Officer is considered to be a court for the purpose of section 195 1 b Cr P C it does not necessarily follow that the said officer must be considered to be a court for the purposes of section 446 of the Act
There is no justification for extending the scope of this decision beyond its own facts
The decisions which apparently seem to lend more direct support to the appellants contention are Union of India vs Seth Spinning Mills Ltd In Liquidation 2 and Mysore Spun Silk Mills Ltd In Liquidation In re Official Liquidator vs Commissioner of Income tax Bangalore
Both of them are decisions by single Judges the former by the Punjab High Court and the latter by the Mysore High Court
In Seth Spinning Mills case supra it was observed that section 171 of the Indian Companies Act 1913 provides that when a winding up order has been made no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose
The language of this section is wide enough to include proceedings under the Income tax Act
1 196870 ITR89SC 2 3 975 No leave of the court has been obtained
In view of this the claim of the petitioner for Rs 4000 on account of the penalty order passed on 14th April 1956 cannot be entertained
in this case the Union of India through the Commissioner of Income tax had applied to the learned single Judge who was apparently functioning as a company Judge praying that the department s claim amounting to Rs 16500 should have been admitted by the Official Liquidator and that his refusal to do so was not justified in law
This amount it appears consisted of the penalty imposed by the Income tax Department
Part of the penalty was imposed by means of an order passed prior to the company s going into liquidation but a sum of Rs 4000 related to the penalty imposed after the date of winding up
The learned single Judge while dealing with that petition observed  Section 171 of the Indian Companies Act 1913 provides that when a winding up order has been made no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose
The language of this section is wide enough to include proceedings under the Income tax Act
No leave of the court has been obtained
In view of this the claim of the petitioner for Rs 4000 on account of the penalty order passed on 14th April 1956 cannot be entertained
 In the Mysore case it appears that in the course of winding up of the mills in liquidation large sums of money came into the hands of the liquidator which could not be immediately applied for distribution of dividends to the creditors
Those moneys were invested pursuant to the relevant provisions of the Companies Court Rules
The question arose whether in respect of the receipts of income the liquidator was liable to pay income tax on those receipts
The learned single Judge after discussing the scheme of the Companies Act observed  The liquidator is only an officer of the court
Unlike a receiver in the case of insolvency properties of the insolvent do not vest in him but come within the control of the court
All his actions are subject to the control of the court for which purpose the court issues to him appropriate directions from time to time in the course of winding up
No court or other authority subject to the exception contained in sub section 4 of section 446 of the Companies Act can take any proceedings or attach or otherwise reach any of the matters the winding up court treats the liquidator as its special 97 6 officer specially charged with the duty of representing the company and protecting its interests in winding up
In the light of the above principles it is the duty of the court to see that all liabilities of a company are properly met in accordance with the provisions of the law and the special provisions in that behalf contained in the Companies Act
Liability to income tax is also one of the liabilities which the court is expected to provide for in the course of winding up
Such being the position the question is whether because the liquidator does not answer the description of the principal officer as defined in the Income tax Act the liability if any of the company for payment of income tax itself comes to an end and therefore the winding up court may ignore that liability
 The Court thereafter observed that the corporate existence of the company continues even after the winding up order but after the winding up order the question of payment of income tax has to be dealt with or answered on a joint application of the terms or provisions of the Income tax Act and the Companies Act
After so observing the court proceeded  that even after a winding up order is passed the company continues to be a person within the meaning of section 4 of the Income tax Act that therefore any receipt in the course of winding up which would attract liability to income tax under appropriate provisions of the Income tax Act would be liable to income tax or for payment of tax under Income tax Act but that before any action can be taken by the appropriate Incometax Officer under the Income tax Act for the purpose of quantification or collection of the income tax he should obtain the leave of the winding up court under section 446 of the Companies Act and further that the collection of the tax can only be by securing the orders of the winding up court for payment of tax in the light of the appropriate provisions of the Companies Act
 In this case so far as collection of the tax assessed is concerned there can scarcely be any difficulty in agreeing with the view taken there
But it is only when the court said that for the purpose of quantification of the income tax also leave under section 446 of the Act ha  to be obtained that we have to consider if this view 977 is correct
It is on this observation that Shri Desai has principally relied
The decisions of the Federal Court and of this Court already cited by Shri Desai it may be recalled do not support this view
Reference by Shri Desai has also been made to Abdul Aziz Ansari vs The State of Bombay1 in which assessment proceedings under the Bombay Sales Tax Act 1946 were considered to be legal proceedings for the purpose of continuance of those proceedings after repeal of the Bombay Sales Tax Act 1946 by section 482 of the Bombay Sales Tax Act 3 of 1953
We do not think this decision is of any assistance for considering the question whether assessment or re assessment proceedings can be considered to be legal proceedings as contemplated by section 446 of the Act
The learned counsel for the appellant has also drawn our attention to Shiromani Sugar Mills vs Governor General in Council2 where after referring to section 171 of the Companies Act 1913 it was held by the Allahabad High Court that initiation by the Income tax Officer of steps to recover the amount of assessment under section 46 of the Income tax Act of 1922 and the prosecution by the Collector of those steps amounted to commencement or proceeding with a suit or other legal proceeding
 Needless to point out that this is the view which the Federal Court on appeal upheld in the decision already referred to
The further submission pressed by Shri Desai that section 446 of the Act is a special provision and section 148 of the Income tax Act a general provision of law was sought to be supported by reference to India Fisheries case3
It may here be pointed out that in that case it was while dealing with section 49E of the Income tax Act that this Court observed that the revenue could not by exercising the right under that section get priority over other unsecured creditors and it was in this context that it was said that there being apparent conflict between two independent provisions of law the special provision must prevail
In order to understand and appreciate the binding force of a decision it is always necessary to see what were the facts of the case in which the decision was given and what was the point which had to be decided
Thus considered India Fisheries case3 lends no assistance to Shri Desai and we are unable to construe the observations in that decision to support Shri Desai s contention that section 446 of the Act is a special provision as against section 148 of the Income tax Act under which Income tax Officers hold proceedings for assessment or re assessment of income tax and that therefore the former should prevail over the latter
1 AIR 1958 Bom
2 ILR 1945 Allahabad 352
3 978 Turning now to the Income tax Act it is noteworthy that section 148 occurs in Chapter XIV which beginning with section 139 pres cribes the procedure for assessment and section 147 provides for assessment or re assessment of income escaping assessment
This section empowers the Income tax Officer concerned subject to the provisions of sections 148 to 153 to assess or re assess escaped income
While holding these assessment proceedings the Income tax Officer does not in our view perform the functions of a court as contemplated by section 4462 of the Act
Looking at the legislative history and the scheme of the Indian Companies Act particularly the language of section 446 read as a whole it appears to us that the expression other legal proceeding in sub section
1 and the expression legal proceeding in sub section
2 convey the same sense and the proceedings in both the sub sections must be such as can appropriately be dealt with by the winding up court
The Income tax Act is in our opinion a complete code and it is particularly so with respect to the assessment and re assessment of income tax with which alone we are concerned in the present case
The fact that after the amount of tax payable by an assessee has been determined or quantified its realisation from a company in liquidation is governed by the Act because the income tax payable also being a debt has to rank pari passu with other debts due from the company does not mean that the assessment proceedings for computing the amount of tax must be held to be such other legal proceedings as can only be started or continued with the leave of the liquidation court under section 446 of the Act
The liquidation court in our opinion cannot perform the functions of Income tax Officers while assessing the amount of tax payable by the assessees even if the assessee be the company which is being wound up by the court
The orders made by the Income tax Officer in the course of assessment or re assessment proceedings are subject to appeal to the higher hierarchy under the Income tax Act
There are also provisions for reference to the High Court and for appeals from the decisions of the High Court to the Supreme Court and then there are provisions for revision by the Commissioner of Income tax
It would lead to anomalous consequences if the winding up court were to be held empowered to transfer the assessment proceedings to itself and assess the company to income tax
The argument on behalf of the appellant by Shri Desai is that the winding up court is empowered in its discretion to decline to transfer the assessment proceedings in a given case but the power on the plain language of section 446 of the Act must be held to vest in that court to be exercised only if considered expedient
We are not impressed by this argument
The language of section 446 must be so construed as to eliminate such startling consequences as investing the winding up court with the powers of an Income tax Officer conferred on him by the Income 979 tax Act because in our view the legislature could not have intended such a result
The argument that the proceedings for assessment or re assessment of a company which is being wound up can only be started or continued with the leave of the liquidation court is also on the scheme both of the Act and of the Income tax Act unacceptable
We have not been shown any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining the amount of tax payable by the company which is being wound up
The liquidation court would have full power to scrutinise the claim of the  revenue after income tax has been determined and its payment demanded from the liquidator
It would be open to the liquidation court then to decide how far under the law the amount of Income tax determined by the department should be accepted as a lawful liability on the funds of the company in liquidation
At that stage the winding up court can fully safeguard the interests of the company and its creditors under the Act
Incidentally it may be pointed out that at the bar no English decision was brought to our notice under which the assessment proceedings were held to be controlled by the winding up court
On the view that we have taken the decisions in the case of Seth Spinning Mills Ltd in Liquidation 1 and the Mysore Spun Silk Mills Ltd In Liquidation 2 do not seem to lay down the correct rule of law that the Income tax Officers must obtain leave of the winding up court for commencing or continuing assessment or reassessment proceedings
For the foregoing reasons we have no hesitation in dismissing the appeal with costs
SC Appeal dismissed


Summary:
A company in liquidation was ordered by the High Court to be wound up and the official liquidator was appointed its liquidator
Thereafter the ITO issued notices under section 148 of IT Act proposing to reopen the assessment of the Company in respect of the assessment years 1950 51 to 1955 56
The ITO further notified the official liquidator to produce accounts and documents specified at the back of the notice
The official liquidator made an application before the High Court questioning the jurisdiction of the ITO to issue the said notices without the leave of the High Court as required under section 4461 of the companies Act
The learned single Judge of the High Court issued an injunction restraining the ITO to reassess the said Company
On appeal the appellate bench of the High Court reversed the order and set aside the injunction
On appeal to this Court only one question arose for determination as to whether it was necessary for the ITO to obtain leave of the liquidation court when he wants to reassess the company for escaped income in respect of the past years
Dismissing the appeal HELD  The Income Tax Officer need not obtain leave of the winding up court for commencing or continuing assessment or reassessment proceedings Me Income tax Act is a complete Code and section 147 empowers the Income Tax Officer to assess or reassess escaped income
Further while holding these assessment proceedings the Income Tax Officer does not perform the functions of a Court as contemplated by section 4462 of the Act
The liquidation court cannot perform the functions of Income Tax Officers while assessing the amount of tax payable by the assessees even if the assessee be the Company which is being wound up by the Court
It would lead to anomalous consequencs if the winding up Court were to be held empowered to transfer the assessment proceedings to itself and assess the Company to Income tax
978 B D Grovernor General in Council vs Shiromani Sugar Mills Ltd  Shakuntala vs The Peoples  Bank of Northern India Ltd in liquidation
Lab 760 and M K Ranganathan vs State of Madras
  referred to and discussed