UNION OF INDIA Vs. B C NAWN

JUDGEMENT

(1.) This application by the Union of India under Article 227 of the Constitution of India is directed against an order of the Revenue Divisional Commissioner reversing the order of the Tax Recovery Officer in his Certificate Case No. 659-I.T.(A)/68-69. The opposite party, B.C. Nawn & Bros. (P.) Ltd., was assessed to income-tax under Section 144 of the Income-tax Act, 1961 (to be hereafter mentioned as "the Act"). The Income-tax Officer, who assessed the tax, served a notice of demand under Section 156 of the Act upon the opposite-party-assessee. The assessee did not pay the assessed tax within the period specified in Section 220(1). He preferred an appeal against the order of assessment before the Appellate Assistant Commissioner under Section 246 and later before the Income-tax Appellate Tribunal under Section 253. On the prayer of the assessee, the Income-tax Officer allowed him, under Section 220(3), to make an initial payment towards the assessed tax and to pay the balance in a number of instalments There was default by him in the matter of compliance, with that order. The Income-tax Officer then took steps for attachment and sale of the assessee's immovable properties. Thereupon, the assessee filed a petition of objection under Rule 9 of Schedule II of the Act before the Tax Recovery Officer praying for postponement of further proceeding in the certificate case till the disposal of his appeal before the Income-tax Appellate Tribunal and alternatively for withdrawal of the notice issued by him for settling the proclamation of sale of his immovable properties. This petition was opposed by the Union of India and was rejected by the Tax Recovery Officer by his order dated July 11, 1969. Against that order, the assessee filed an appeal before the Revenue Divisional Commissioner under rule 86 of Schedule II of the Act. The Revenue Divisional Commissioner allowed the appeal by his order dated October 14, 1969, holding that the tax was not recoverable by summary certificate procedure during the pendency of the appeal by the assessee before the Income-tax Appellate Tribunal. It is this order which is challenged in this application as being made in excess of his jurisdiction.

(2.) When income-tax is assessed, as in the case under Section 144, the sum determined becomes payable by the assessee. After a tax is so determined, the Income-tax Officer serves on the assessee a notice of demand under Section 156. That obliges the assessee to pay the said sum within a specified period. If the assessee does not make payment within the period in Sub-section (1) or (3) of Section 220, he becomes a defaulter. When the assessee becomes a defaulter, the Income-tax Officer may forward to the Tax Recovery Officer a certificate specifying the amount for recovery by him under Section 222. The Tax Recovery Officer, upon receipt of such certificate, proceeds to recover the sum. These provisions show that a tax, once assessed and determined as payable, becomes recoverable if the assessee be a defaulter. The recovery of tax by the Tax Recovery Officer can only be halted either by stay of the certificate proceeding under-orders of the proper authorities or by cancellation or withdrawal of it. "Tax" can be said to be irrecoverable only when there is no assessment or when the assessee is not a defaulter. In the instant case, the tax has been assessed and determined as payable under Section 144 and the assessee is a defaulter, not having paid the sum within the specified time after receipt of notice of demand under Section 156. It was contended before the Tax Recovery Officer by the assessee in his petition under rule 9 of Schedule II of the Income-tax Act, that the assessment, which is the subject-matter of the certificate, having been disputed by filing an appeal, had lost its finality and had become irrecoverable. The Tax Recovery Officer rejected the contention. There is no provision in the Act in support of the contention that an assessment becomes provisional or non-existent or vanishes with the filing of an appeal against it or during the pendency of such an appeal. The provisions in the Act go to show that the assessment remains final even during the pendency of appeal against it. Sub-section (6) of Section 220 empowers the Income-tax Officer to treat the assessee as not being in default, if the assessee files an appeal before the Appellate Assistant Commissioner under Section 246. If the assessment is taken as nonexistent with the filing of the appeal, as contended, the above provision becomes meaningless. It has been decided by the Supreme Court in Income-tax Officer, Cannanore v. M. K. Mohammed Kunhi, [1969] 71 I.T.R. 815, [1969] 2 S.C.R. 85 (S.C) that the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal have power to stay proceedings before the Certificate Officer. Sub-section (4) of Section 225 provides for amendment of the certificate or withdrawal of it in accordance with the order in the appeal against the assessment. Provision has also been made in Section 240 for " refund " as may be due to the assessee on the result of any order passed in appeals under this Act. The assessee himself applied for stay more than once before the Tax Recovery Officer and even in his petition of objection under Rule 9 of Schedule II. It is clear from the various provisions referred to above that the assessment remains final even during the pendency of the appeal. This is to be noted that there is no provision in the Act for " revival" of the assessment after the disposal of the appeals. Section 231 of the Act lays down periods for commencement of the proceeding for recovery of assessed amount. The assessment does not cease to exist or to be final with the filing of the appeals. The contention that the assessed amount cannot be recovered during the pendency of the appeals is unsound.

(3.) Section 224 is that it shall not be open to the assessee to dispute before the Tax Recovery Officer the correctness of the assessment or for the Tax Recovery Officer to entertain any objection to the certificate on any ground. This bars an objection by the assessee as to the recoverability of the assessed tax before the Tax Recovery Officer. The learned advocate, appearing for the opposite party, contended that Rule 9, Schedule II, clearly provides that all questions between the defaulter and the Tax Recovery Officer relating to execution, discharge and satisfaction of the certificate are to be decided by the Tax Recovery Officer and not by suit. He contended that the assessee was entitled under this rule to raise an objection that the amount of the certificate was irrecoverable on account of pendency of the appeal. That Rule 9 has application to cases which are not "expressly provided by the Act" and which relate to certificates "duly filed ". Express provision has been made in Section 224 to the contrary to the effect that no objection to the certificate on any ground shall be entertained by the Tax Recovery Officer. This case, coming under Section 224, cannot be entertained under Rule 9. A certificate is "duly filed" when there is an assessment and the assessee is in default. In the petition of objection, the opposite party contended that the assessment had lost its finality or existence. His question was not, therefore, about a certificate " duly filed ". Rule 1(b) and (c) of Schedule II defines " defaulter " as the assessee and " execution " as recovery of arrears in pursuance of a certificate. The person, who disputes that he is an assessee, cannot come under Rule 9. It was next contended by the learned advocate, appearing for the opposite party, that the second part of Section 224(1) speaks only of objection as to the correctness of the assessment and not to the assessment itself. The first part relates to disputes as to correctness and the second part clearly refers to objection " on any ground " to the " certificate ". The Tax Recovery Officer and the Income-tax Appellate Tribunal both went wrong in entertaining the petition of objection and in making orders thereon in disregard of Section 224.