1969 (6) TMI 12 - HC - Income Tax

Notice of demand were issued to an association of persons u/s. 29 - following which, a certificate was forwarded under section 46(2)for recovery -petitioners pray to quash these notices and to forbid the Tax Recovery Officer from proceeding with the recovery

Issues Involved:
1. Validity of demand notices issued under the Income-tax Act, 1922.
2. Enforceability of certificates under section 46(2) of the Income-tax Act, 1922.
3. Applicability of section 222 of the Income-tax Act, 1961, to recovery proceedings initiated under the repealed Act.
4. Interpretation of section 297(2)(j) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Demand Notices Issued under the Income-tax Act, 1922:
The petitioners argued that individual notices of demand should have been issued to them under section 29 of the old Act. However, the Supreme Court's pronouncement in Sahu Rajeshwar Nath v. Income-tax Officer, Meerut, clarified that a notice of demand issued to an unregistered firm dispensed with the necessity to issue individual notices to the partners. This principle equally applies to members of an association of persons. Thus, the court concluded that the notices of demand issued to the unregistered firm and the association of persons were valid, making it unnecessary to issue individual notices to the partners or members.

2. Enforceability of Certificates under Section 46(2) of the Income-tax Act, 1922:
The Supreme Court had also pronounced that the recovery of the amount payable by an unregistered firm from its individual partners was authorized by the proviso to section 46(2) of the old Act. This principle was equally applicable to the members of an association of persons. Therefore, the certificates forwarded to the Collector under section 46(2) naming the unregistered firm or the association of persons dispensed with the necessity of forwarding certificates naming the individual partners or members.

3. Applicability of Section 222 of the Income-tax Act, 1961, to Recovery Proceedings Initiated under the Repealed Act:
The petitioners contended that section 222 of the new Act, which lacks a proviso similar to section 46(2) of the old Act, did not authorize the Tax Recovery Officer to recover amounts from individual partners or members. However, the court noted that section 297(2)(j) of the new Act allows for the recovery of sums payable under the old Act under the new Act's provisions. Thus, the Tax Recovery Officer could employ the same modes of recovery as provided under the new Act.

4. Interpretation of Section 297(2)(j) of the Income-tax Act, 1961:
Section 297(2)(j) states that any sum payable under the repealed Act may be recovered under the new Act. The court interpreted this to mean that the Tax Recovery Officer could use the processes and modes of recovery enumerated in section 222 and Schedule II of the new Act. This interpretation ensures that the recovery process is not impeded by technicalities and promotes the purpose of the machinery provision in the taxing statute. The court rejected the contention that a new certificate under section 222 and a notice of demand under section 156 were necessary, as this would make recovery interminable and irrational.

Conclusion:
The court dismissed the writ petitions, holding that the recovery proceedings initiated under the old Act could be continued under the new Act using the modes and processes provided therein. The validity of the demand notices and the enforceability of the certificates under section 46(2) of the old Act were upheld, and the interpretation of section 297(2)(j) of the new Act was clarified to facilitate the recovery process. The petitions were dismissed without costs.

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