Case: Champa Kumari Singhi &amp; Ors Vs. The Member Board Of Revenue, West Bengaland Others

from 1952 to 31st March 1957. It was however, provided as follows:".......provided however that in the event of due and punctual payment of all instalments Government will give up the sum of Rs. 11,49,019/5/- with interest thereon, from the last instalment and accept the sum of Rs. 55,99,822/6/- with interest thereon in full settlement of the balance due provided further that in the event of any default in payment of any sum on due date therefrom or in the event of it being found that the guarantee hereby given or any part thereof is not enforceable for any reason whatsoever there will be no abatement and the parties of the first and second part will pay the full sum of Rs. 67,48,841/11/-.The monies payable on 31st March, 1953, 31st March, 1954, 31st March, 1955, 31st March, 1956 and 31st March, 1957 shall be applied pro rata towards the tax liability of the party of the first part and the parties of the second part mentioned in Schedule "Y" hereto.The said parties shall however be at liberty to make any part payment at any time towards the said instalments not less that Rs. 10,000 (Rupees ten thousand) at a time.4. In the event of any instalment not being paid within the time mentioned above (such time being deemed to be of the essence of the arrangement) or in the event of it being found that the guarantee hereby given or any part thereof is not enforceable for any reason whatsoever the whole of the balance of the said sum of Rs. 67,48,841/11/- will at once become due and payable with interest at the rate aforesaid and Government will (in addition to all rights for enforcement of this document) be entitled to take all steps to enforce payment including issue of certificate under Section 46 (2) of the Income Tax Act and proceedings under the West Bengal Public Demands Recovery Act and Revenue Recovery Act."16. The contention of the appellants is that the letters of the 22nd September, 1952 (one of which has been reproduced above as a sample) were accompanied by the notices of demand and on the breach of the payment of the instalment of Rs. 9,50,000/- on 31st March, 1953, the appellants became defaulters within the meaning of the Act in respect of the whole amount of tax. Therefore recovery proceedings could only commence within the end of a financial year commencing from 31st March, 1953 since the payment of the instalment was co-terminus with the end of the financial year. This, according to them, was provided in the agreement itself in the extract just reproduced from the agreements above. The other side contends that Clause (iv) of the proviso to Section 46, sub-sec. (7) takes no account of the exigibility of the whole amount under a scheme of payment by instalments. Whenever instalments are granted the period of limitation counts from the last instalment and here it would be one year from March 31, 1957. The default could be taken note of earlier also because the whole amount remained exigible the moment the first default was made. In the present case the certificate was issued on March 14, 1956 and, therefore, it was well within the period of limitation.17. The learned single Judge in the case (Sinha, J.) very rightly pointed out that under the agreements two things were done. Firstly, the total liability of the parties was calculated and each party became jointly and severally liable for the whole sum. Then instalments were fixed and on the breach of a single instalment the whole of the amount became exigible. The assessment order reproduced the agreement as part of it and the agreement therefore became the assessment order. Under the assessment order a notice of demand was sent to pay the money of the first instalments of Rs. 9,50,000 by March 31, 1953. On breach of it the whole amount was said to be exigible and the demand in respect of that was also made. The appellants, therefore, rightly concluded the Judge, became defaulters on the failure to pay the first instalment. Since instalments were granted Clause (iv) of the proviso to sub-section (7) of Section 46 applied to the case. This conclusion is correct. That clause does not mention about the exigibility of the whole amount or exigibility of any particular instalment. It only says that if instalments are granted time of one year ending with the end of a financial year is to be calculated from the date on which the last instalment is payable. The language of Clause (iv) of the proviso was unfortunate in expressing this intent and has now been corrected in the new Act but the intention was always obvious. Even in the second agreement which replaced the first agreement the same condition obtained. There was a concession shown in the matter of penalty and smaller instalments were fixed. But the Central Board of Revenue had stipulated even then that the concession mentioned above would only be available if the revised scheme of payment was strictly followed. In other words, payment was to be made by instalments and this concession therefore attracted the provisions of Cl. (iv). The Government could always accept any instalment even if paid late without having to worry about the period of limitation of one year from the date of demand, since Clause (iv) of the first proviso gave them an option to wait till the last instalment was payable.The scheme of the instalments took the matter out of the main part of sub-section (7) and brought it within the provision to Cl. (iv). We are, therefore, satisfied that the High Court was right in holding that the certificates were issued within the period of limitation prescribed by law and were not barred by time. The first four appeals therefore fail and are dismissed with costs. The other appeals need not be considered since special leave was granted against the main order and those appeals themselves have failed.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]15. To begin with there is an error in the fourth clause of the first proviso inasmuch as the words "be reckoned" have been inadvertently left out in that clause. The intention to use those words is obvious from the way in which the first three clauses are worded. Supplying those words, because they were inadvertently omitted, it is clear that one of two limitations is applicable to the present case, according to the circumstances of the case. If it is to be considered under the main clause of(7), then we have to find out whether the whole of the amount was payable by a particular date on which the assessee can be said to have become a defaulter. If, however, the fourth clause of the proviso applies then we have to see whether by reason of the grant of instalments, limitation would only commence to run from the date on which the last of the instalments was payable. In this connection reference has been made by the High Court and the Board of Revenue to the agreements and the letters written sending the assessment orders and the notices of demand. The agreements set out a scheme of payments by instalments and the entire sum payable was RupeesThis was payable in different instalments, from 1952 to 31st March 1957. It was however, provided ashowever that in the event of due and punctual payment of all instalments Government will give up the sum of Rs. 11,49,019/5/with interest thereon, from the last instalment and accept the sum of Rs. 55,99,822/6/with interest thereon in full settlement of the balance due provided further that in the event of any default in payment of any sum on due date therefrom or in the event of it being found that the guarantee hereby given or any part thereof is not enforceable for any reason whatsoever there will be no abatement and the parties of the first and second part will pay the full sum of Rs.monies payable on 31st March, 1953, 31st March, 1954, 31st March, 1955, 31st March, 1956 and 31st March, 1957 shall be applied pro rata towards the tax liability of the party of the first part and the parties of the second part mentioned in Schedule "Y" hereto.The said parties shall however be at liberty to make any part payment at any time towards the said instalments not less that Rs. 10,000 (Rupees ten thousand) at a time.4. In the event of any instalment not being paid within the time mentioned above (such time being deemed to be of the essence of the arrangement) or in the event of it being found that the guarantee hereby given or any part thereof is not enforceable for any reason whatsoever the whole of the balance of the said sum of Rs. 67,48,841/11/will at once become due and payable with interest at the rate aforesaid and Government will (in addition to all rights for enforcement of this document) be entitled to take all steps to enforce payment including issue of certificate under Section 46 (2) of the Income Tax Act and proceedings under the West Bengal Public Demands Recovery Act and Revenue Recoveryrecovery proceedings could only commence within the end of a financial year commencing from 31st March, 1953 since the payment of the instalment waswith the end of the financial year. This, according to them, was provided in the agreement itself in the extract just reproduced from the agreementsare, therefore, satisfied that the High Court was right in holding that the certificates were issued within the period of limitation prescribed by law and were not barred by time. The first four appeals therefore fail and are dismissed with costs. The other appeals need not be considered since special leave was granted against the main order and those appeals themselves havethe assessee is a defaulter, no action can be taken against him under Section 46.of the terms of the agreement does not amount to a default under Sectione the first thing we have to see is when the assessees became defaulters. For deciding that question reference to the agreement is irrelevant. Admittedly demand notices under Section 29 had been issued to the assessees on September 22, 1952 in respect of the entire tax due from them. Therefore they became defaulters as soon as they failed to comply with those demands.