III INCOME TAX OFFICER MANGALORE Vs. DAMODAR BHAT

JUDGEMENT

(1.) THE following Judgment of the court was delivered by

(2.) THIS appeal is brought by certificate on behalf of the II1 Income Tax Officer, Mangalore from the judgment of the Mysore High court dated 1/02/1967 in Writ Petition No. 846 of 1965 holding that the notice under s. 226(3) of the Income Tax Act, 1961, hereinafter called the 'new Act', bearing No. 770-d/60-61, 61-62, 62,-63 and 63-64 issued by the III Income Tax Officer to M/s. Rajarajeswari Motor Service, Mangalore, produced as Ex. VIII with the writ petition was invalid and inoperative in respect of the following items of tax and penalty included therein :-- <FRM>JUDGEMENT_408_AIR(SC)_1969Html1.htm</FRM> and quashing the notice to that extent.

(3.) AS regards the second item in the impugned notice, viz., tax in respect of assessment year 1961-62 to the extent of Rs. 485.55 the material facts are as follows: The assessment proceedings were taken and concluded under the old Act and tax of Rs. 2,947.56 was imposed and demanded. Thereafter, the respondent preferred an appeal to the Appellate ASsistant Commissioner. In appeal the tax liability was reduced to Rs. 485.55. Thereupon the Income Tax Officer issued a notice to the respondent dated 11/12/1963 purporting to be under s. 156 of the new Act. The limit of 35 days for payment of the amount expired on 22/01/1964. The impugned notice under s. 226(3) was issued nearly two years thereafter on 23/04/1965. The argument on behalf of the respondent was that both the assessment order as well as the appellate order having been made under the old Act, the provisions of s. 226 of the new Act were not applicable. The High court has. accepted this contention of the respondent and has held that the notice was invalid to the extent it included the tax of Rs. 485.55 for the assessment year 1961-62. The contention of the appellant is that the High court was in error in holding that action under s. 226 of the new Act was possible only in the case of an assessee who was `in default` and that in the case of an assessment under the old Act, no notice under s. 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 ss. 220 to 234 of the new Act. Inour 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 W issue the notice dated 11/12/1963 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 s. 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 ss. 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 s. 220(4) was reached, namely, that the assessee had become or deemed to have been an assessee in default` and the action under s. 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 is not correct in law. The effect of the judgment of the High court on this point is that the provisions of s. 297(2)(j) of the new Act are nullified and declared to be of no consequence. An interpretation of s. 226(3) of the new Act which leads to such a starting 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 s. 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 S. from s. 220 to s. 232 of the new Act are placed under the heading `Collection and recovery`. But in a case falling within s. 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 S. of the new Act relating to recovery and collection should be literally applied but only such of the S. will apply as are appropriate 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 s. 297(2)(j) of the new Act mutatis mutandis. In this connection it is relevant to refer to the decision of this court in Kalawati Devi Harlalka v.Commissioner of Income Tax, West Bengal(1), in which it was pointed out that s. 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 s. 156 and s. 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.