1961 (2) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Necessity of a fresh notice of demand under Section 29 of the Income-tax Act after the appellate reduction of tax.
2. Applicability of the Rajasthan Public Demands Recovery Act for the recovery of income-tax dues.
3. Compliance with procedural requirements under the Public Demands Recovery Act.

Detailed Analysis:

Issue 1: Necessity of a Fresh Notice of Demand under Section 29 of the Income-tax Act
The petitioners contended that after the tax amount was reduced by the Appellate Assistant Commissioner, a fresh notice of demand under Section 29 of the Income-tax Act was necessary. They argued that without such a notice, the proceedings for recovery initiated by the Collector and the Tehsildar were invalid.

The court referred to the Mysore High Court decision in Seghu Buchiah Setty v. Income-tax Officer, which held that a fresh notice of demand was necessary after an appellate reduction. However, the court also considered the Calcutta High Court's decision in Ladhuram Taparia v. D.K. Ghosh, which clarified that if the tax amount is reduced (not enhanced), a fresh notice of demand is not required. The court agreed with this latter view, stating that the intimation of the reduced amount to the certificate officer and the assessee suffices. Therefore, the absence of a fresh notice under Section 29 does not bar the continuation of proceedings for the reduced amount. The contention on this point was dismissed.

Issue 2: Applicability of the Rajasthan Public Demands Recovery Act
The petitioners argued that the income-tax dues should be recovered following the procedure laid down in the Rajasthan Public Demands Recovery Act, not just the Rajasthan Land Revenue Act. The court examined the relevant provisions of both Acts and the Income-tax Act.

Section 46 of the Income-tax Act allows the Collector to recover tax dues as if they were arrears of land revenue. The court noted that while the Land Revenue Act provides the procedure for recovering land revenue, it does not cover the recovery of income-tax dues comprehensively. The Public Demands Recovery Act supplements the Land Revenue Act in this context. The court concluded that income-tax dues, being public demands, should be recovered following the Public Demands Recovery Act, which includes provisions for objections and other procedural safeguards.

Issue 3: Compliance with Procedural Requirements under the Public Demands Recovery Act
The petitioners claimed that the Collector and Tehsildar did not follow the necessary procedures under the Public Demands Recovery Act, particularly the issuance of a notice under Section 6. The court acknowledged the importance of compliance with procedural requirements but also considered whether the non-compliance caused any prejudice to the petitioners.

The court referred to the essentials for proceedings under the Public Demands Recovery Act, as laid down in Rijhumal v. State of Rajasthan. These include the demand being covered by the Schedule of the Act, a requisition under Section 3, a certificate under Section 4, and a notice under Section 6. While the requisition by the Income-tax Officer under Section 46(2) of the Income-tax Act amounts to a certificate, the failure to issue a notice under Section 6 was noted.

However, the court found that the petitioners did not demonstrate any prejudice resulting from this omission. The court emphasized that the provisions of the Public Demands Recovery Act are not in derogation of the Income-tax Act. Given that the petitioners could not deny their liability or claim that the demand was barred by limitation, the court decided not to interfere due to the procedural lapse.

Conclusion
The application was dismissed without costs. The court held that a fresh notice of demand under Section 29 of the Income-tax Act was not necessary after the appellate reduction of tax. The recovery of income-tax dues should follow the Rajasthan Public Demands Recovery Act, supplemented by the Rajasthan Land Revenue Act. Despite procedural non-compliance, no prejudice was caused to the petitioners, and thus, no interference was warranted.