INCOME TAX OFFICER Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) THE Income-tax Officer, Ernakulam, has filed this appeal against the order of the learned single judge in company jurisdiction dismissing Application No. 239 of 1979 in B.C.P. No. 4 of 1961 (ITO v. Official Liquidator [1982] 134 ITR 136; [1982] 52 Comp Cas 156 (Ker)), filed by him.

(2.) RESPONDENT is the official liquidator, the liquidator appointed in connection with the winding up of a company. The winding-up order was passed on October 30, 1961. The liquidator invited proof of claims and settled a list of creditors and filed the same in court on July 5, 1962. Subsequently, income-tax assessment was completed in respect of the company for the years 1955-56 to 1958-59. Demand notices were served on the liquidator on February 23, 1963. Additional demand was made for the year 1955-56 by notice served on February 5, 1967. Thereafter, the Income-tax Officer filed Applications Nos. 3 of 1964 and 248 of 1968 for varying the list of creditors and that was allowed. The Department by letter dated January 29, 1971, required the liquidator to pay up the arrears of tax together with interest levied under section220(2) of the Income-tax Act. The Department sought to prove the debt before the liquidator by way of an affidavit filed in August, 1969. The liquidator by order dated July 27, 1973, recognised the tax arrears as debt but declined to recognise the interest claimed under Section 220(2) as debt.

(3.) THE dispute in the appeal relates to the claim for interest under Section 220(2) of the Income-tax Act. Section 156 of the Income-tax Act states that when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Income-tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. In regard to the original assessment, notice of demand was served in February, 1963. In regard to the additional assessment, notice of demand was served in February, 1967. Ordinarily, the assessee is liable to pay the demand within 35 days from the date of service of notice as laid down in Section 220(1), subject of course to the other provisions in that section. Sub-section (2) states that if the amount specified in any notice of demand under Section 1 56 is not paid within the period limited under Sub-section (1), the assessee shall be liable to pay simple interest at fifteen per cent, per annum from the day commencing after the end of the period mentioned in Sub-section (1). This provision also is subject to the other provisions of the section. Under Section 221 of the Income-tax Act, penalty is leviable in addition to interest. Section 222 and the succeeding Sections relate to recovery. Recovery could be made by attachment and sale of the assessee's movable property or his immovable property, by arrest of the assessee and his detention in prison or by appointing a receiver for the management of his properties. Other modes of recovery are prescribed in Section 226 of that Act. Section 229 states that any sum imposed by way of interest, fine, penalty or any other sum payable under the provisions of that Act shall be recoverable in the manner provided in the Chapter for recovery of arrears of income-tax.