RAJESWARAMMA P Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) : These writ petitions raise the same question and involve the construction of sub-s. (5A) of S. 46 of the IT Act. The assessee is P. Changa Reddy & Co. Ltd., Gudur. A notice dt. 28th Feb., 1952, issued by the ITO, Nellore, under the sub-section mentioned, was served on the petitioners in W.P. No. 981 of 1958 on 7th March, 1952. In that notice it was stated that tax amounting to the sum of Rs. 72,819-9-0 was due from the assessee to the Department and a demand was made that the petitioners, who owed money to the assessee, should pay the Officer the amount due from them or held by them for or on account of the assessee, up to the amount of arrears stated. A similar notice was served on the petitioner in W.P. No. 980 of 1958 also at about the same time.

(2.) THE petitioners in WP No. 981 of 1958 assert that soon after receiving the notice, they sent the officer a written objection to it on the ground that no sum was due from them to, or held by them on account of, the assessee, but for the purposes of these petitions, I am assuming that that fact has not been established. It is not denied, however, by the Department that on 9th July, 1958, the petitioners objected to the notices issued to them. In spite of the objection so made, the ITO by his letter dt. 5th August, 1958, repeated his demand and threatened to take coercive steps against the petitioners. THE petitioners have approached this Court for the issue of a writ of mandamus directing the respondent (ITO) to forbear from taking any action against them under the provisions of the Act.

(3.) MR. Kondaiah, for the Department, argues that the whole object and purpose of enacting sub-s. (5A) would be nullified if it is to be held that a mere objection by the person upon whom a notice is served entitled him to plead immunity from coercive proceedings which the ITO is expressly authorised to enforce by the clause preceding the clause now under discussion. I am not disposed to agree. The provision, it seems to me, is intended to apply only to an admitted liability. Where a person admits by word or conduct that any money is due to the assessee or is held by him for or on account of the assessee, he becomes liable to pay it and may well be exposed to the penal provision which enables the ITO to take further proceedings before the Collector on the footing that the notice issued has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub-s. (2) of this section. If, for instance, after taking the notice, a person makes a payment to the assessee, and that can only be on the footing that he owed money to the assessee, then, to the extent of the sum so paid (up to the amount due from the assessee), the person would become liable personally to the Department and the penal provisions of the Act can be invoked and enforced against him for its recovery. Where, however, the person to whom the notice is sent denies that any money is due from him, then the ITO cannot take any further proceedings under this sub-section even though the denial may not be true. MR. Kondaiah's contention is that the last clause applies only to cases where the person to whom the notice is sent is raising a bona fide objection, an objection which is true and not false to his knowledge. In such a case, he contends, it is open to the authorities to ascertain and find whether, as a matter of fact any money is or is not due to the assessee and resort to the, coercive processes if it be found that there is a debt due to the assessee. I am not prepared to accede to this contention. If the position taken up by MR. Kondaiah were right, then the authorities acting under the Act would be armed with what seems to me a very extraordinary power : they would be able to decide questions of liability of third persons to the assessee. There is nothing in the language of the sub-section which points to such a result. It seems to me that the interpretation I am inclined to put is also in consonance with principle because the legislature could hardly have meant to entrust the officers of the Department with the jurisdiction to decide questions relating to the existence and quantum of such liability--matters which are normally within the purview of civil Courts. I may add that this interpretation seems also to accord with the language of sub-s. (5), of which it is clear that this provision is an extension. That sub-section is as follows :