1967 (9) TMI 2 - HC - Income Tax

Proceedings for assessment or reassessment under the IT Act are legal proceedings within the meaning of section 446 of the Companies Act. The IT authorities are not entitled to commence the assessment or reassessment proceedings contemplated against company or to continue the same without obtaining the leave of the court u/s 446(1) of the Companies Act 1956

Summary

Issues Involved:
1. Requirement of leave from the court under section 446(1) of the Companies Act, 1956, for reassessment proceedings.
2. Validity of reassessment proceedings and notices issued without such leave.
3. Jurisdiction of the Income-tax authorities in the context of the Companies Act, 1956.

Detailed Analysis:

1. Requirement of Leave from the Court under Section 446(1) of the Companies Act, 1956:
The main contention raised by the official liquidator was that reassessment proceedings against the company could only be instituted or commenced after first obtaining the leave of the court winding up the company under section 446(1) of the Companies Act, 1956. The court examined the statutory provisions, particularly section 446(1), which states: "When a winding-up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose."

2. Validity of Reassessment Proceedings and Notices Issued Without Such Leave:
The court held that the Income-tax Officer did not have the jurisdiction to issue the notices or proceed with the reassessment of the company without the leave of the court winding up the company. The reassessment proceedings were deemed "legal proceedings" within the meaning of section 446(1) of the Companies Act. The court referred to the Federal Court decision in Governor-General in Council v. Shiromani Sugar Mills, which held that the expression "other legal proceedings" should not be confined to original proceedings in a court of the first instance but should include any proceeding taken in pursuance of a legal enactment.

3. Jurisdiction of the Income-tax Authorities in the Context of the Companies Act, 1956:
The court rejected the contention that the Income-tax Officer had exclusive jurisdiction to assess the company and that the reassessment proceedings did not fall under section 446. The court emphasized that the Companies Act, being a special Act dealing with the proceedings relating to companies, would prevail over the Income-tax Act, a general provision applicable to all assessees. The court cited the Supreme Court decision in Union of India v. India Fisheries Pvt. Ltd., which held that the Income-tax Act could not be used in such a way as to defeat the provisions of the Companies Act.

Conclusion:
The court concluded that the income-tax authorities could not commence or continue the reassessment proceedings against the Colaba Land and Mills Co. Ltd. without obtaining the leave of the court under section 446(1) of the Companies Act, 1956. The court granted an injunction restraining the respondents from assessing or reassessing the company for the assessment years 1950-51 to 1955-56. The respondents were ordered to pay the applicant's costs of the summons.