JOGENDER SINGH Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) BY means of the present writ petition, the petitioner seeks a writ of certiorari quashing the order dated April 29, 1987, passed by the Income-tax Officer, Circle-I(6), Kanpur, respondent No. 1 (filed as annexure H to the writ petition), as also the notice dated July 27, 1987, issued by the Tax Recovery Officer (A), Kanpur, respondent No. 2 (filed as annexure-I to the writ petition). The petitioner further seeks a writ, order or direction prohibiting respondent No. 2 from proceeding with the recovery of the demand mentioned in the notice dated July 22, 1987. The petitioner further seeks a direction to the Commissioner of Income-tax, Kanpur, respondent No. 3, to release the title deed of the property No. 18/183-A, Kurswan, Kanpur, to the petitioner.

(2.) THE facts of the case are that the petitioner along with two other persons stood surety and executed a surety bond dated May 7, 1974, for the value of stocks worth Rs. 1,00,559 belonging to one Guru Nanak Metal Stores, 67/40, Bhusa Toli, Daulatganj, Kanpur, which was seized by the Income-tax Department in pursuance of the search conducted on April 27, 1974, at the business premises of the aforesaid Guru Nanak Metal Stores. In order to get it released in terms of the surety bond, the petitioner deposited the title deed of his immovable property bearing house No. 18/ 183-A, Kurswan, Kanpur, with the Commissioner of Income-tax, Kanpur, respondent No. 4, by way of equitable mortgage. THE petitioner further undertook that if the said amount of Rs. 1,00,559 or as may be determined as income-tax, wealth-tax and/or gift-tax liability of the firm and its partners to the extent of Rs. 1,00,559 or less as confirmed or varied by the appellate authorities or as settled by the Commissioner of Income-tax, Kanpur, and the said tax liability as may be determined up to the extent of Rs. 1,00,559 only shall be realised from him by sale of his property mentioned in the schedule of the surety bond. He further undertook that he shall not mortgage or charge or in any way encumber the said property till the security mentioned above is released.

(3.) IN the counter affidavit filed by Sri Arun Kumar Bhatia, INspector, attached in the office of the Tax Recovery Officer (A), Kanpur, respondent No. 2, the execution of the surety bond dated May 7, 1974, has not been denied. However, it has been stated that, according to the terms of the surety bond, the petitioner stood surety for the firm and its partners to the extent of Rs. 1,00,559 jointly and severally and the petitioner was aware that if the said amount of Rs. 1,00,559 or as maybe determined as tax liability under the Direct Tax Act on the firm and its partners shall be realised from the petitioner by sale of his property. The refund of Rs. 24,330 to the firm on February 12, 1985, as stated by the petitioner in paragraph 15 of the writ petition, has been admitted in the counter affidavit filed by the said Sri Arun Kumar Bhatia. However, it has been stated that the penalty imposed under Section 271(1)(c) of the Act, on the firm is a tax liability under the Direct Taxes Act, and on the non-payment by the firm, Guru Nanak Metal Stores, the recovery can be made against the petitioner, who stood surety to the firm and its partners for a liability to the extent of Rs. 1,00,559. The fact of the applying and obtaining of income-tax clearance certificate under Section 230A of the Act, by the partners of the said firm, according to the respondents, is not relevant, and therefore, the recovery proceeding's for the realisation of the outstanding amount of penalty imposed against the firm, Guru Nanak Metal Stores, from the petitioner is perfectly justified in law.