Union of India (UOI) vs Jnanada Prasanna Chakrabarti

P.N. Mookerjee, J.—This Rule raises a short question.

The opposite party became liable to payment of income tax under, the Indian income tax Act, 1922. For recovery of the same, proceedings were started under the Public Demands Recovery Act as authorised by law. In the said proceedings, the opposite party was permitted to make payment of the dues under the certificate by installments. These payments were being made from time to time and they were being accepted by the Certificate Officer and, through them, by the income tax department. This state of things continued upto August 14, 1967. Thereafter it appears, the proceedings for recovery were taken over by the Tax Recovery Officer under the income tax Act, 1961. Before him, also a further instalment was paid, namely of Rs. 500, on or about October b, 19b7, and, thereafter, on or about November 9, 1967, the balance due under the above existing certificate, namely Rs. 7,042-33 P., appears to have been paid and the same was accepted by the Tax Recovery Officer who, however, recorded an order on that date in the following terms:

9th November, 1967: Challan passed for Rs. 7,042-33 P. for payment. Await official challan. To date fixed for payment of balance. The next order on the order-sheet appears to be of May 18, 1968, which is recorded as follows:

18th May, 1968: Seen credited challan for the marginal noted payment. Ask C D.R. to pay balance including interest and costs. This further payment was apparently demanded u/s 16(a) of the Public Demands Recovery Act, and to the same the opposite party objected on the ground, inter alia, that the Tax Recovery Officer had no jurisdiction to make such demand under the aforesaid Act. This objection, however, was rejected by the learned Tax Recovery Officer upon the view that Section 297(2)(j) of the income tax Act, 1961, authorised such recovery.

Against this order, the opposite party filed an appeal to the Commissioner under Rule 86, Sch. II, of the income tax Act. 1961. That appeal was allowed by the learned Commissioner upon the view that recovery of interest and cost, sought for by the department, was not permissible under the law, and against the said order of the learned Commissioner the present Rule was obtained by the Union of India-

Before us, in support of the Rule, Mr. Pal has relied on Section 16(a) Of the Public Demands Recovery Act, read with Section 297(2)(j) of the income tax Act, 1961, and his contention is that this demand for interest and cost is sufficiently warranted and authorised by the above provision of the Public Demands Recovery Act in the present proceeding which was saved u/s 297(2)(j) of the income tax Act, 1961.

In our view, the order for recovery of the above interest and cost was passed by the Tax Recovery Officer under a misconception and, although the learned Commissioner may not have correctly expressed the position in law in his order, which is challenged in this Rule, his decision, so far as his ultimate conclusion is concerned, that the same cannot be recovered by the Tax Recovery Officer is correct.

Section 297(2)(j) of the income tax Act, 1961, saves recovery any sum payable by way of income tax, super-tax, interest, penalty or otherwise under the repealed Act. and also saves any action already taken, for the recovery of such sum under the repealed Act. It is clear, however, from the words underlined above that the saving applies to sums recoverable under the repealed Act or the Indian income tax Act, 1922, which would not include the disputed interest. Moreover, the Tax Recovery Officer is a creature of the new statute, the income tax Act, 1961, and his power of recovery and procedure for the same are governed by Sch. II of the said Act which does not contain any provision similar to Section 16(a) of the Public Demands Recovery Act. As the Tax Recovery Officer, therefore, he has no power to charge or levy or recover any interest u/s 16(a) of the Public Demands Recovery Act. It is not also disputed before us that the instant demand for interest and cost would only be supportable u/s 16(a) of the Public Demands Recovery Act. In the circumstances, the Tax Recovery Officer had no jurisdiction to recover or to institute or carry on recovery proceedings for the same.

Mr. Pal points out that the Tax Recovery Officer may be the Certificate Officer himself [vide Section 2(44) of the income tax Act, 1961] and, as Certificate Officer, he will have power to make recovery under the Public Demands Recovery Act. It is not clear, however, from the record whether, in the instant case, the Tax Recovery Officer in question was also the Certificate Officer. Further, the relative or relevant recovery proceedings in the instant case from the moment they were taken over by the Tax Recovery Officer appear to be proceedings under the income tax Act, 1961 (vide Sch. II of the Act), and not under the Public Demands Recovery Act and, as a matter of fact, the appeal before the Commissioner was filed under the said Schedule, and so Section 16(a) of this latter Act (Public Demand Recovery Act) would not apply.

In the above view, we would uphold the ultimate decision of the learned Commissioner and accept the opposite party's objection to the recovery of the disputed amounts by the Tax Recovery Officer and this Rule must be discharged accordingly.

We would, however, make it clear that this order will be without prejudice to the Union's right, if any, under the law to recover the disputed amounts by appropriate proceedings in accordance with law.

There will be no order as to costs in this Rule.

Amiya K. Mookerji, J.

I agree.