RAJA JAGDISH PRATAP SAHi

STATE OF UTTAR PRADESH

February 13, 1973

[K. S. HEGDE, P. )AGANMOHAN REDDY AND H. R. KHANNA, JJ.]

U.P. Agricultural Income-tax Act (3 of 1948), s. 32-Suit for recovery of tax assessed-Maintainability.

The appellant was assessed to Agricultural income-tax under the U.P.

Agricultural Income-tax Act, 1948, and was directed to pay it in four instalments. The appellant defaulted and, when summary proceedi:ogs to recover the amounts as arrears of land revenue were taken under s. 32 of the Act, it was found that two of the instalments had become time barred under s. 32(2). In a suit by the respondent State for recovery of those amounts, the appellant contended that the only remedy open to the respondent was under s. 32 and that the suit was not maintainable. The trial court dismissed the suit, but the High Court in appeal decreed the suit.

Dismissing the appeal to this Court,

HELD : Where a taxing statute provides for a summary mode of recovery and is not exhaustive, it will be open to the State to have recourse to any other mode open to it under the general law. [5320]

Once a notice of den1and is served on the assessee for payment of tax due under the Act, and the assessee makes a default _after the date for payment specified therein has expired, a debt is created in favour of the State; and the State has the right to recover it by any of the modes open to it under the general law, unless, as a matter of policy only a specific mode to the exclusion of any other is prescribed by the law.

No such prohibition is enacted in s. 32 of the Act. [531C-EJ

Manlckam Chetiar v. Income-tax Officer. Madurai, [1938] VI l.T.R. 180, lnder Chand v. Secretary of State, A.LR. [1942] Patna 81 and Cha ganti Raghava Reddy v. State of Andhra Pradesh, A.l.R. [1959] A.P. 631 applied.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1192 of 1970.

Appeal by Certifica1e from the Judgment and order dated May 20, 1966 of the Allahabad High Court in First Appeal No. 161 Of 1960.

Yogeshwar Prasad, Hajii Iqbal Ahmed, S. K. Bagga a.nd S.

Bagga, for the appellant.

S. C. Manchanda and 0. P. Rana, for the respondent.

The Judgment of the Court was delivered by

JAGANMOHAN REDDY, J.

The State of Uttar Pradesh filed a suit against the appellant for the recovery of a sum of Rs. 26,548-62 being two instalments of the Agricultural Income-tax due from him

J. P. SAHi v. U.P. STATE (Jaganmohan Reddy, J.) 529

under the U.P. Agricultural Income-tax Act (III of 1948) hereinafter referred to as 'the Act'). The appellant was assessed to Agricultural Income-tax for the year 1359 Fasli, in a sum of Rs. 53,097-25 and was directed to pay the same in four instalments of Rs. 13,274-31 each payable on December 9, 1952, Februry 9, 1953, April 9, 1953 and June 9, 1953, and accordingly the first instalment was recovered from him with penalty. Notice to pay the second and third instalments by April 21,1953 was served on him but this amount was not paid. Instead, the appellant filed a Writ Petition in the Allahabad High Court and obtained a stay order which was subsequently vacated. Thereafter the State sought to recover the amout but the appellant filed a revision challenging the proceedings for recovery on the ground that they had become time-barred under s. 32(2) of the Act. The Board accepted the contention and held that no proceedings could be commenced for the recovery of third and fourth instalments which fell due on April 9, 1953 and June 9, 1953, but in respect cif the proceedings for the recovery of the second instalment it was held that those proceedings could be continued. An application to the Board for reference to the High Court was dismissed. The appellant then paid the second instalment.

In view of the decision of the Board, the State of Uttar Pradesh filed a suit for the recovery of the amounts aforesaid in which the

appellant pleaded that the only remedy open to the State was that permitted under s. 32(2) of the Act, and that no regular suit was maintainable. This plea was sustained, and the suit was dismissed as not maintainable. The High Court, however, in an appeal reversed the judgment of the Trial Court and decreed the suit.

Against that judgment, this appeal is by certificate.

It is contended before us that the only mode of recovery of arrears of tax or penalty due under the Act is under s. 32, and the State cannot recover any such amount by any other mode such as by s. suit. Section 32 is as follows :

"32. Recovery of penalties--(!) The Collector may, on the motion of assessing authority, recover any sum imposed by way of penalty under the provisions of section 17 or section 31, or, where an assessee is in default, the amount assessed as agricultural income-tax as if it were an arrear of land revenue. '

(2) No proceedings for the recovery of any sum

pyale under this Act shall be commenced after the expuauon of one year from the date on which the last instal!llet fixect under section 30 falls due or after the exp1rat10n f one year from the date on which. any appeal relatmg to such sum has been disposed of,"

Before we deal' with the n1ain contention, it may be stated that once a notice of demand is served on the assessee for payment of tax duel under the Act, and the assessee makes a default after the date for payment specified therein has expired, a debt is createa in favour of the State. This debt the State can recover by any of the modes open to it under the general Jaw. This is also the position under the Indian Income-tax Act, but it is contended that the analogous provisions of sub-s. (7) of s. 46 of the Indian Income-tax Act, 1922, or the corresponding provisions of s. 232 of the Incometax Act of 1961 cannot be relied upon for interpreting s. 32 of the Act inasmuch as there are special provisions in these Acts which enab'Ie the Revenue to file a suit for the recovery of arrears of tax due from the assessee. It is true thats. 232 of the Income-tax Act '05 1961 provides that the modes of recovery under that Act are not exhaustive, but this clarification, which it is, does not imply tliat it is only bv virtue of a soecific provision that the legislature has.conferred this right uoon the Revenue where it did not earlier possess. nder s. 46(2) of the Act of 1922, the Income-tax Officer may forward to the Collector a certificate under his signature soecifying the amount of arrears due from an assessee. and the Callee-·

tor. on receipt of such certificate, shall oroceed to recover from such assessee the amount soecified therein as if it were an arrear of land revenue. Sub-section (7) of the said section orescri6~ a period of limitation of one year from the last day of the Financial year in which anv demand is. made under the Act, and thereafter no proceedings for the recovery can be taken. This section was amended bv s. 21 of the Indian Income-tax (Amendment) Act, 1953, by which the following exolanation was added : . . . "Explanation.-A proceeding for the recovery of any sum shall be deemed to have commenced within the meaning of this section, if some action is taken to recover the whole or any part of the sum within the period hereinbefore referred to, and for the removal of doubts it is hereby declared that the several modes of recovery specified in this section are neither mutually exclusive, nor affect in' any way any other law for the time being in force relating to the recovery of debts due to Govern- . ment. and it shall be lawful for the Income-tax Officer. if

for any special reasons to be recorded he so thinks fit, to nave recourse to .'.!ny such mode of recovery notwith-· standing that the tax due is being recovered from an assessee by any other mode."

It is manifest that this eXplanation does not in any way confer a right on the Revenue to recover arrears of tax by any.mode ()!her 11 than those provided under that Act. That right which the State or thd Revenue has for reeovering arrears of tait which i~ a del; it due

'.,..

J. P. SAHi v. U.P. STATE (Jaganmoha11 Reddy, J.) 5:Jl

to it is a general right conferred on it under the law either by a suu 'or Dy some oma memod open to 1t.

Section 32, thougn H ctoes not nave an Expianauon analogous to s. 4o nonetneless uoes

not preclude either spec1ticatly or by necessary impllcauon a nghr to recover the arrears o! tax Clue by a suit. The melhoct prescnbecJ m tn1s section is one o! the modes of recovery which 1s a summary

rem~Jy. 1t is, however, open to the State to adopt any method availaDle to it for the recovery of tax in the same way as it would be open to it to .recover ordinary debt due to it. It can institute a suit and obtain a decree with costs against the assessee or other persons liable to pay. It could also probably, without obtammg a decree or attachment, apply to a Court for ll1e payment of dues 1f there are funds lying to' •me credit of the assessee in the Court,

ur it may perhaJ?.s demand payment in the hands of the receiver appointed in respect of any property pf the assessee, if due nonce to all the parties interested in the funds is given. On these aspects, however, we do not propose to express any views. As already observed, after an assessment is made upon the assessee quantifying the tax due from him and a demand for the payment thereof is issued within the period specified therein, it creates a debt payable by the assessee in favour of the State. It is well established that once a debt is creati; d, the State has the right to recover it by any of the modes open to it under the general law, unless as a matter of policy only specific mode to the exclusion of any other is presc.tiQed by the Jaw.

No such prohibition is enacted in s. 32 of the Act.

Even prior to the amendment of sub-s. ( 7) of s. 46 of the 1922 Act, several High Courts in this country had taken this view. In Manickam Chettier v. Income-tax Officer, Madurai('), a Full Bench of the Madras High Court was dealing with the right of the Crown to obtain payment of arrears of tax due from the assessees properties sold in execution of a. decree where the question were, firstly, whether the Government was entitled to claim a priority, and secondly, whether, as. a matter of procedure, the petition by the Income-tax Officer to the Civil Court for payment to him from the amounts to the credit of the assessee, was sustainable. It was contended before the .Full Bench, as it is contended before us, on the analogous provisions of section 32 of the Income-tax Act of 1922, that inasmuch as section 46 of that Act nrovides modes for the recovery of income-tax, the Crown is not entitled to adopt any different method. This cnntention was repelled.

Leach. C.J., observed at p. 185 :

"This section, h. •.vever, does not profess to be exhaustive and it cannot without express wordo, to that effect take away from tile Crown the right of enforcing 11av- _._n1ent_by any_cithe~_method open to it. Therefore, I do

(1) (1938) VJ l.T.R. 180.

not regard section 46 as imposing a bar to an application or the nature of the one we are now concerned with."

Varadachariar, J., had expressed a doubt as to the procedure for recovery,. but he had howevr no doubt that the Crown had a priority tor the recovery of debts due to it, and consequently agreed in favour of the view expressed by Leach, C.J. Mockett, J., also agreed with this view. This case was COl!Sidered by Harris; C.J., and Chatterjee, J., of the Patn:i High Court in lnder Chand v.

Secretary of State('). In this case the Patna High Court was confilering whether the Crown as a Creditor has th11 ordinary right of suit against the assessee. Following the Full Bel\ch judgment of the Madras High Court, it was held that a suit was maintainable.

The contention of Mr. P.R. Das, learned counsel for the appellant, that the only method by which income-tax may be recovered is that laid down in s. 46, was repelled by Chatterjee, J. In Chaganti Raghava Reddy v.

Stat_e of Andhra Pradesh('), the Andhra Pradesh High Court also took a similar view. On principle.as well as on the consistent view of the High Courts, it is beyond doubt that where a taxing statute provides for a summary mode of recovery and is not exhaustive, it will be open to the State to have recourse to any other mode open to it under the general law.

In this view, the judgment of the High Court is affirmed, and the appeal is dismissed with costs.

V.P.S.

A ppeat dismissed.

(I) A.l.R. 1942 Patna 87 .

(2) A.LR. 1959 A.P. 631.

LV96Sup, C.l./73-2500-30-8 74-GIPF.