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1968 (3) TMI 21 - HC - Income TaxCIT filed a suit in 1960 - defences of the appellant were that the suit was barred by s. 67 of the IT Act and that the suit was also barred by limitation - contentions of appellant are not acceptable - suit was not time barred
Issues Involved:
1. Bar of jurisdiction under Section 67 of the Indian Income-tax Act, 1922. 2. Limitation period for filing the suit. Issue-wise Detailed Analysis: 1. Bar of Jurisdiction Under Section 67 of the Indian Income-tax Act, 1922: Section 67 of the Indian Income-tax Act, 1922, bars the jurisdiction of the civil court in so far as any relief sought in the civil court seeks to set aside or modify any assessment made under the Act. The appellant contended that this section also barred a suit for the recovery of the amount due upon an assessment. However, the court clarified that the plain language of the section does not support this interpretation. The action before the civil court was to enforce the assessment, not to set aside or modify it. The court emphasized that the assessment procedure results only in determining the liability of the assessee, and any proceedings to set aside or modify the assessment are to be handled by the special tribunals constituted under the Act. The court referred to various provisions of the Act, including Section 3 (charging section), Section 29 (notice of demand), and Chapter VI (recovery of tax and penalties), to illustrate the scheme of the Act. It was concluded that Section 67 bars the jurisdiction of the civil court only in respect of matters for which special tribunals are constituted under the Act. The court rejected the argument that the term "assessment" includes recovery proceedings, stating that the ascertainment and imposition of liability do not encompass the discharge of liability. The court cited previous judgments, including Kalawati Devi Harlalka v. Commissioner of Income-tax and Firm Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh, to support its interpretation. 2. Limitation Period for Filing the Suit: The appellant argued that the suit was barred by limitation, contending that Section 46 of the Income-tax Act provided specific modes and timeframes for recovery, limiting the period to one year. However, the court noted that Article 149 of the First Schedule to the Indian Limitation Act, 1908, provides a 60-year limitation period for any suit by or on behalf of the Central Government. The Union of India claimed that the assessment created a liability, making the assessee a debtor vis-a-vis the Union, the creditor. The court explained that Section 46 provides various methods of recovery, including forwarding a certificate to the Collector, requiring employers to deduct tax from salaries, and demanding payment from persons indebted to the assessee. The appellant's reliance on Section 46(7) was misplaced, as this section's one-year limitation applied only to the procedural machinery outlined in earlier parts of Section 46, not to suits in civil courts. The court further clarified that the Explanation to Section 46(7) indicated that the several modes of recovery specified in the section are neither mutually exclusive nor affect any other law relating to the recovery of debts due to the Government. The court cited Builders Supply Corporation v. Union of India, which supported the view that the common law right to proceed by way of suits to recover debts represented by an assessment to tax is available to the State. The court rejected the argument that the one-year period in Section 46(2) overrides the 60-year limitation period under Article 149. The court also referred to previous decisions, including Manickam Chettiar v. Income-tax Officer, Madura, and Inderchand v. Secretary of State for India in Council, which supported the conclusion that the Crown has the right to sue for recovery of income-tax arrears and that the time-limit in Section 46(2) applies only to proceedings under that section. Conclusion: The court dismissed the second appeal, upholding the trial court's decree in favor of the Union of India. The contentions regarding the bar of jurisdiction under Section 67 and the limitation period were found to be devoid of substance. The appeal was dismissed with costs.
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