802/CBDT. - Income Tax - 802/CBDT

INSTRUCTION NO. 802/CBDT Dated : November 26, 1974 In para 49(b) of the C AG's Report for 1972-73, an objection was raised regarding the writing off of a particular demand due from an assessee, who had been declared insolvent. The objection has brought to light certain shortcomings in the existing procedure relating to carry forward of arrear demand and follow-up action for recovery with particular reference to defaulters, who have been declared insolvent. 2. The Board desire that the following steps should be taken to ensure prompt and timely action in the cases of assessees who have become insolvent: (a) Claim in respect of assessees declared insolvent should be filed before the Official assignee of the competent High Court promptly and with the least possible delay. while doing so, all the relevant particulars about the various demands outstanding, the in nature, assessment year(s) to which they relate etc. should be furnished. (b) The fact of lodging the claim should be noted against each particular item of demand shown in the Demand Collection Register. (c) While carrying forward the demand to the new Register, each year, full particulars of the assessees such as Permanent Account number, assessment years to which the arrears relate etc. should invariably be recorded. (d) As long as there are arrears and recovery proceedings pending, the name of the assessee should not be deleted from the GIR even though he may have been declared insolvent. If, however, for any reason it is considered not necessary to keep the assessee's name alive on the Register, reasons for the removal of the name should be recorded and the name simultaneously entered in the register of discontinued cases. (e) Records relating to the assessee who have been declared insolvent should be promptly indexed and their safe custody and storage ensured. (f) ITO/Inspecting Assistant commissioners should maintain contact with the Official Assignees to ascertain from them from time to time the position and prospects of recovery. Periodical reviews of such cases should also be made. 3. Before the demand is written off on receipt of a report from the Official Assignee to the effect that there are no prospects of recovery, enquiries should be made of ascertain the present financial position/means of livelihood of the defaulter. Necessary investigations should also be conducted to find out whether the defaulter has any asset which has not been taken over by the Official Assignee and also the position of the defaulter vis-a-vis his other creditors. 4. The Board further desire that the provisions of the Presidency Towns insolvency Act, 1909 and Provincial Insolvency Act, 1920 should be borne in mind while processing cases of arrears outstanding against insolvents. Section 48 of the Presidency Towns Insolvency Act, 1909 read with Second Schedule of the said Act and part II of the Provincial Insolvency Act, 1920 lay down the detailed procedures to be followed in the cases of insolvency from the act of insolvency to the discharge of the insolvent. It would be advisable for ITOs, who are handing cases of insolvents, to familiarise themselves with the aforesaid two statutes and the relevant provisions thereof. 5. These instructions may be brought to the notice of all officers working in your charge.