1955 (5) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Collector to recover arrears.
2. Constitutionality of the proviso to section 46(2) of the Income Tax Act.
3. Validity of the assessment under the Income Tax Act.
4. Limitation period for recovery proceedings under section 46(7) of the Income Tax Act.
5. Impact of pending appeals on the recovery process.
6. Liability of a non-karta member of a Hindu undivided family for the arrears.

Detailed Analysis:

1. Jurisdiction of the Collector to Recover Arrears:
The petitioners contended that the Collector lacked jurisdiction to recover the alleged arrears using the procedure of a civil court. The court held that the Collector's jurisdiction to recover arrears in this manner is based on section 46(2) of the Income Tax Act, which allows the Collector to use the powers of a civil court for recovery purposes. The court concluded that the Collector has jurisdiction to proceed with the recovery.

2. Constitutionality of the Proviso to Section 46(2) of the Income Tax Act:
The petitioners argued that the proviso to section 46(2) is ultra vires the Constitution as it allows the Collector discretion to choose between two procedures, potentially denying equal protection of laws. The court rejected this argument, stating that the law provided in section 46(2) is the same for all assessees and does not discriminate between them. The court cited the Supreme Court's decision in Kedar Nath Bajoria's case, which upheld the validity of laws providing alternative procedures, and held that the proviso does not violate Article 14 of the Constitution.

3. Validity of the Assessment under the Income Tax Act:
The petitioners contended that the assessment was invalid as the Finance Acts enacting the rates for assessment were extended to the excluded area after the period of assessment had begun. The court rejected this argument, stating that the liability to Income Tax is under section 3 of the Income Tax Act, and the Finance Acts legislate about the rate of tax. The court cited the Federal Court's decision in Chatturam v. Commissioner of Income Tax, which supported the view that the assessment would be valid even if the Finance Acts were extended to the excluded area after the period of assessment had begun.

4. Limitation Period for Recovery Proceedings under Section 46(7) of the Income Tax Act:
The petitioners argued that the proceedings were barred by the limitation provision in section 46(7) of the Income Tax Act. The court held that the forwarding of the certificate by the Income Tax Officer is "some action" taken to recover the dues within the meaning of the explanation in section 46(7), and consequently, the proceedings for recovery commenced as soon as the certificate was forwarded. The court concluded that the proceedings were within the limitation period.

5. Impact of Pending Appeals on the Recovery Process:
The petitioners contended that since appeals were pending against the assessments, the amounts should not be treated as in default. The court held that under section 45 of the Income Tax Act, the Income Tax Officer has the discretion to treat the assessee as not being in default while an appeal is pending. However, in this case, the Income Tax Officer had not exercised this discretion, and the amounts were therefore in default. The court concluded that the Collector had jurisdiction to proceed with the recovery despite the pending appeals.

6. Liability of a Non-Karta Member of a Hindu Undivided Family for the Arrears:
The court held that while a non-karta member of a Hindu undivided family is liable for the debt and the joint family property in his hands is liable for the debt, his personal property is not. Since Kashiram Agarwalla was not in charge of any portion of the joint family property, the court concluded that the Collector had no jurisdiction to recover the arrears by his arrest and detention. The court made the rule obtained by Kashiram Agarwalla absolute and quashed the proceedings against him.

Conclusion:
The court upheld the jurisdiction of the Collector to proceed with the recovery of arrears from Nandaram Agarwalla but quashed the proceedings against Kashiram Agarwalla. The court found that the proviso to section 46(2) of the Income Tax Act is constitutional, the assessments were valid, the proceedings were within the limitation period, and the pending appeals did not affect the Collector's jurisdiction to recover the arrears.