K SHRIMAL Vs. RECOVERY OFFICER

JUDGEMENT

(1.) This Petition for a Writ of Prohibition is filed by the petitioner who seeks to prohibit the Respondents viz., The Tax Recovery Officer, the Joint Collector, Hyderabad and the Income-Tax Officer, from giving effect to the order of the 1st Respondent dtd. 10/8/1965, as confirmed by the Joint Collector. Hyderabad, by his order dtd. 3/9/1965, to arrest and detain him in a civil prison as a defaulter, under Rule 73 of the Income-Tax Rules (hereinafter called the Rules) in Schedule II to the Income-Tax Act (43 of 1961) (hereinafter called the Act).

(2.) It is necessary to state the averments and allegations contained in the affidavits of the parties in so far as they are relevant for the determination of contentions urged before me.

(3.) The Petitioner was originally assessed for the year 193556 to a tax of Rs.2,95,540.0019 and for the year 195657 to Rs.10,70,643.0013. A Certificate was also issued to the Collector for recovery of the tax, and the Collector, pursuant to the said Certificates attached all the immovable properties of the assessee in July, 1959. The Income-Tax Officer had also issued a notice under Sec. 46(5A) of the Act, restraining the tenants of the property from paying rents of nearly Rs.1200.00 p.m. to the petitioner and since July, 1959 onwards the Income-Tax Officer himself was collecting the rents from the tenants. Against the assessment orders, an appeal was preferred to the Appellate Assistant Commissioner, and the assessment for 195556 was set aside and remanded, the assessmant for 195657 was reduced to Rs.1,72,159.00. There was no appeal by the Department against this order for 195657. After remand, the assessment for 195556 was completed by the Income-Tax Officer, who levied a tax of Rs.77,738.0022, against which an appeal was preferred to the Appellate Assistant Commissioner on 10/5/1963, and it is pending. For the year 195758, 195859 and 195960. the Income-Tax Officer levied tax demands of Rs.3,25,912.0092, Rs.3,15,489.00 and Rs.2,62,307.0066 respectively. Appeals were also preferred agains these assessments on 6/4/1962, 11/4/1963, 3/4/1964 respectively. Though these appeals were heard by successsive Appellate Assistant Commissioners, they have not been disposed of and are still pending at the first appellate stage. It is stated in the petition that the Income-Tax Officer and the Special Deputy Collector have also initiated other coercive measures, by issuing notices to the various debtors restraining them from making repayments of the debts due, by freezing all the bank accounts, by issuing notices to various companies prohibiting them from transferring the shares held by him in the Companies and by issuing notices to Banks prohibiting them from delivering the shares and securities lying with them against overdrafts granted, to him, the totality of which measures according to the petitioner, immobilized all the means which he had. Furher the Income-Tax Officer, accompanied by the Special Deputy Collector, raided the business premises and the residential house in December, 1959 and seized all the shares and securities lying in his possession, of the value of more than Rs.2,00,000.00 which according to him represent the stock-in-trade, and was disabled from dealing with any of his moveable as well as immoveable properties. Immediately after these shares and securities were seized, the petitioner states that hi made representations to the Income-Tax Department to sell the shares and securities lying in their possession and realise the proceeds thereof and adjust the same against the due from him that he had even offered to the concerned officials that he would co-operate in the matter of bringing buyers to purchase the shares and securities at the prevailing market rates, which might be verified by referring to the Stock Exchange But the Department did not pay any heed, nor did they act according to his request. As result of this omission by the Department, he suffered loss, as the shares have now fallen very much in the market. According to the petitioner although the admitted tax payable by him is only Rs.4,00,000.00, as against which the properties attached were of far considerable value, the Income-Tax Officer and the Special Deputy Collector insisted on his paying the entire tax arrears on the alleged ground that they were not concerned with the non-disposal of the appeals by the Appellate Assistant Commissioner. Thereupon, he requested the Income-Tax Officer and the Special Deputy Collector to bring to sale the immoveable property under attachment and to realise the tax arrears on the sale thereof but these properties also have not been sold and no action is taken against them on account of some claims put in by third parties. Though the claims were rejected by the Special Deputy Collector, after due enquiry, and it is possible to sell those properties under law and realise the tax arrears the properties have not been notified for sale. Ultimately, the Special Deputy Collector issued a notice under Rule 73 of the Rules, calling upon him to show cause why the certificate issued by the Income-Tax Officer dtd. 16/6/1959 should not be executed by arresting and committing him to prison. The petitioner accordingly showing cause, challenged the validity of the certificate on the ground inter alia, that the conditions precedent for the issue of such an order against him under Rule 73 were not satisfied. The Income-Tax Officer in his counter dtd. 28/7/1965 contended that the assessee had sold certain shares without the prior approval of the Special Deputy Collector and also failed to deposit the proceeds realised on the shares with the Special Deputy Collector, that he had realised certain debts but failed to pay the same against his tax arrears and that he had nelected to pay the tax arrears, having substantial means to pay the same. The Special Deputy Collector again issued another notice dtd. 27/7/1965. calling upon him to show cause why he should not be arrested and committed to prison in execution of the certificate issued by the Income-Tax Officer for the assessment years 195556, 195758 and 195960. The Petitioner filed a reply dtd. 5/8/1965 to the counter of the Income-Tax Officer, but the Tax Recovery Officer rejected all his contentions and passed an order on 10/8/1965 that he was liable to be arrested and detained in a civil prison under rule 73. He gave the petitioner time to pay the amounts mentioned in the certificate till 25-8- 1965, failing which it was ordered that a warrant of arrest would be issued and he would be committed to civil prison. He immediately appealed the Joint Collector, under rule 86. The Joint Collector who heard the appeal, dismissed it by his order dtd. 3/9/1965. upholding the order of the Special Deputy Collector.