1996 (3) TMI 109 - HC - Income Tax

Summary

Issues Involved:
1. Legality of detention u/s 222 of the Income-tax Act, 1961.
2. Compliance with procedural requirements for arrest and detention.
3. Validity of the notice issued under rule 2 of the Second Schedule.
4. Jurisdiction and authority of the Tax Recovery Officer.
5. Availability of alternative remedies and the scope of judicial review.

Summary:

1. Legality of Detention u/s 222 of the Income-tax Act, 1961:
The petitioner sought a writ of habeas corpus for the release of the detenu, detained by respondent No. 2 u/s 222 of the Income-tax Act, 1961. The detenu was arrested for failing to pay income-tax dues amounting to Rs. 75 lakhs. The court acknowledged that the Tax Recovery Officer has the jurisdiction to issue a certificate for recovery of tax dues, including arrest and detention.

2. Compliance with Procedural Requirements for Arrest and Detention:
The court examined whether the mandatory procedures under the Second Schedule were followed. Rule 73(1) mandates issuing and serving a notice to the defaulter to show cause why they should not be committed to civil prison. The court found procedural lapses, including improper service of notice and lack of compliance with Order V, rule 19 of the Civil Procedure Code.

3. Validity of the Notice Issued Under Rule 2 of the Second Schedule:
The notice served on the detenu did not specify the place for depositing the amount, and the status of the defaulter was unclear. The court held that these deficiencies rendered the notice invalid. The court emphasized that recovery proceedings must strictly conform to legal requirements and any deviation vitiates the detention order.

4. Jurisdiction and Authority of the Tax Recovery Officer:
The court scrutinized the Tax Recovery Officer's satisfaction regarding the detenu's ability to pay the arrears. The order dated February 23, 1996, lacked reasons for concluding that the detenu had the means to pay. The court stated that assigning reasons is a statutory requirement and part of natural justice.

5. Availability of Alternative Remedies and the Scope of Judicial Review:
The court addressed the argument that an alternative remedy by way of appeal existed. It concluded that procedural impropriety and jurisdictional errors warranted judicial review. The court cited precedents supporting the issuance of a writ of habeas corpus when detention is without jurisdiction or involves procedural errors.

Conclusion:
The court allowed the petition, directing the release of the detenu. It permitted the Tax Recovery Officer to serve a fresh notice and proceed according to law. The detenu was instructed to disclose all assets and comply with the Tax Recovery Officer's directives. The court emphasized the importance of procedural fairness and adherence to statutory requirements in tax recovery proceedings.