Case: Third Income-Tax Officer, Mangalore Vs. M. Damodar Bhat

pointed out that Section 6 of the General Clauses Act will not apply in respect of those matters where Parliament had clearly expressed its intention to the contrary by making detailed provisions for similar matters mentioned in that section.For these reasons we are of opinion that the Income-tax Officer had authority to issue the notices under Section 156 and Section 226 (3) of the new Act with respect to the liability of the respondent under the old Act. The High Court was therefore in error in holding that the impugned notice was inoperative in regard to the amount of Rs. 485.55 for the assessment year 1961-62.5. As regards items 4 and 5 for the assessment years 1962-63 and 1963-64 the argument of the respondent is that the impugned notice issued on April 23, 1965 was not legally valid as notices of demand were served on the respondent for payment of these sums and time given in this notice was due to expire on May 21, 1965. The impugned notice was issued on April 23, 1965, nearly a month before that date. As the tax and penalty covered by the notice were not due till May 21, 1965 it was said that notice of attachment under Sec. 226 (3) of the new Act could not legally be issued on April 23, 1965. In our opinion, there is no warrant for this argument. As we have already observed, there is nothing in the language of Sec. 226 (3) of the new Act to suggest that the assessee must be in default before a notice under that sub-section could be issued. It is true that Section 220 of the new Act deals with the question as to when the tax is payable and when the assessee is deemed to be in default but so far as Section 226 (3) of the new Act is concerned, the question of any default of the assessee is irrelevant. It was argued by Mr. Srinivasan on behalf of the respondent that the amount of tax must be "due to be paid" by the assessee before a notice can be issued under Sec. 226 (3) of the new Act. It is not disputed in this case that the notices of demand under Section 156 of the new Act were served on the respondent before the issue of the notice under Section 226 (3) of the new Act. As pointed out by this Court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealthtax (Central), Calcutta, 1966-59 ITR 767 = (AIR 1966 SC1370), the liability to pay income-tax is a present liability though the tax becomes payable after it is quantified in accordance with ascertainable data and therefore the amount of the provision (sic) for payment of income-tax and super-tax in respect of the year of account ending March 31, 1957 in that case, was a "debt owed" within the meaning of section 2 (m) of the Wealth-tax Act and was as such deductible in computing the net wealth. It was further observed in that case that there was a perfected debt at any rate on the last date of the accounting year and not a contingent liability. In the present case, there is the additional circumstance that the assessments of tax and penalty have been made against the respondent and demand notices have also been issued under Section 156 of the new Act. It is therefore not possible to argue that the amount of tax and penalty for the assessment years 1962-63 and 1963-64 were not "due by the assessee" on April 23, 1965 when the notice under Section 226 (3) of the new Act was issued.We are accordingly of the opinion that Mr. Srinivasan is unable to make good his argument on this aspect of the case. It follows therefore that the impugned notice dated April 23, 1965 was validly issued as regards items 4 and 5, viz., Penalty for assessment year 1962-63, i. e., Rs. 1,890 and tax for the assessment year 1963-64, i. e., Rs. 64,307.90.6. We proceed to consider the next question arising in this appeal, viz., whether the High Court was right in taking the view that the Income-tax Officer did not properly exercise the statutory discretion in issuing the impugned notice with regard to the first item, viz., tax for the assessment year 1960-61 amounting to Rs. 7,056.15. It was argued on behalf of the respondent that there was an appeal pending with the Appellate Assistant Commissioner against the order of assessment and therefore it was incumbent upon the Incometax Officer to exercise the statutory discretion properly under Section 220 (6) of the new Act in treating the assessor as being in default.The finding of the High Court is that the Income-tax Officer "was not shown to have applied his mind to any of the facts relevant to the proper exercise of his discretion". In our opinion, the finding of the High Court cannot be upheld, because the respondent has not alleged in his writ petition any specific particulars in support of his case that the Income-tax officer has exercised his discretion in an arbitrary manner.In paragraph 12 (b) of the writ petition the respondent had merely said that "the order of the Income-tax Officer made under Section 220 was arbitrary and capricious". No other particulars were given by the respondent in his writ petition to show in what way the order was arbitrary or capricious. In the counter-affidavit the allegations of the respondent have been denied in this respect. We are of opinion that in the absence of specific particulars by the respondent in his writ petition it is not open to the High Court to go into the question whether the Income-tax Officer has arbitrarily exercised his discretion. In the result we hold that the respondent is unable to substantiate, his case that the impugned notice is in any way defective with regard to item No. 1, i. e. tax for the assessment year 1960-61 amounting to Rs. 7,056.15.

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

Explanation:
0[ds]In our opinion, the argument on behalf, of the appellant is well founded and must be accepted as correct. In the first place, it is necessary to notice that S. 220 (4) of the new Act mentions in what circumstances the assessee shall be deemed to be in default and S. 222 provides that when an assessee is in default or is deemed to be in default in making payment of tax, the Income-tax Officer may forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the assessee, and the Tax Recovery Officer on receipt of such certificate, shall proceed to recover from the assessee the amount specified therein by one or more of the modes mentioned in the section. Section 226, however, provides for other methods of recovery and there is no reference in S. 226 (3) to any default on the part of the assessee. Section 226 (3) merely states that the Income-tax Officer may, at any time or from time to time", by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may, subsequently hold money for or on account of the assessee, to pay to the Income-tax Officer either forthwith so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount.In a proceeding under S. 226 (3) of the new Act therefore it is not necessary that the assessee should be in default or should be deemed to be in default and no such condition or limitation is imposed by the language of that sub-section. We are accordingly of the opinion that the Income-tax Officer had authority to issue the notice dated December 11, 1963 under S. 156 of the new Act with respect to the tax liability of Rs. 485.55 incurred by the respondent under the old Act. The High Court has expressed the view that "in the case of an assessment under the old Act no notice under Section 156 of the new Act was possible", and "there was no way of taking advantage of the provisions for recovery and collection of tax contained in Sections 220 to 234 of the new Act". The High Court has based its opinion on the premise that all recoveries are possible only when the stage mentioned in Section 220 (4) was reached, namely that the assessee had become or deemed to have been an assessee in default" and the action under Section 226 could be taken only when an assessee was in default In our opinion, the reasoning adopted by the High Court and the conclusion reached by it are not correct in law. The effect of the judgment of the High Court on this point is that the provisions of Section197 (2) (j) of the new Act are nullified an declared to be of no consequence. An interpretation of Section 226 (3) of the new Act which leads to such a startling result should be avoided as it is opposed to all sound canons of interpretation. As we have already stated, there is nothing in the language of Section 226 (3) of the new Act to warrant the conclusion that the assessee should be in default or should be deemed to be in default before the issue of the notice under that sub-section. It is true that the group of sections from Section 220 to Sec.232 of the new Act are placed under the heading "Collection and recovery".But in a case falling within Section 297 (2) (j) of the new Act, for example in a proceeding for recovery of tax and penalty imposed under the old Act, it is not required that all the sections of the new Act relating to recovery and collection should be literally applied but only such of the sections will apply as are appro priate in the particular case and subject if necessary, to suitable modifications. In other words, the procedure of the new Act will apply to the cases contemplated by Section 297 (2) (j) of the new Act mutatis mutandis.As regards items 4 and 5 for the assessment years 1962-63 and 1963-64 the argument of the respondent is that the impugned notice issued on April 23, 1965 was not legally valid as notices of demand were served on the respondent for payment of these sums and time given in this notice was due to expire on May 21, 1965. The impugned notice was issued on April 23, 1965, nearly a month before that date. As the tax and penalty covered by the notice were not due till May 21, 1965 it was said that notice of attachment under Sec. 226 (3) of the new Act could not legally be issued on April 23, 1965. In our opinion, there is no warrant for this argument. As we have already observed, there is nothing in the language of Sec. 226 (3) of the new Act to suggest that the assessee must be in default before a notice under that sub-section could be issued. It is true that Section 220 of the new Act deals with the question as to when the tax is payable and when the assessee is deemed to be in default but so far as Section 226 (3) of the new Act is concerned, the question of any default of the assessee is irrelevant. It was argued by Mr. Srinivasan on behalf of the respondent that the amount of tax must be "due to be paid" by the assessee before a notice can be issued under Sec. 226 (3) of the new Act. It is not disputed in this case that the notices of demand under Section 156 of the new Act were served on the respondent before the issue of the notice under Section 226 (3) of the newthe High Court was right in taking the view that the Income-tax Officer did not properly exercise the statutory discretion in issuing the impugned notice with regard to the first item, viz., tax for the assessment year 1960-61 amounting to Rs.