809/CBDT. - Income Tax - 809/CBDT

INSTRUCTION NO. 809/CBDT Dated : December 5, 1974 Section(s) Referred: 220 Statute: Income - Tax Act, 1961 In para 4.14 of their report, the Wanchoo Committee observed that on a study of a few major arrears cases carried out at their instance, it came to notice that undisputed taxes amounting to several lakhs of rupees had remained unpaid by a group of assessees in spite of the fact that the group owned a number of immovable properties of substantial value far exceeding the amount of tax arrears. They also felt perturbed on finding that the defaulters were able to postpone the payment for several years and in some cases for seven years or more by making frequent representations to the authorities and making promises, which were not kept and were probably never meant to be kept. They further observed that even though instalments were granted at the instance of the assessee, the undertaking was not honoured. They felt that where promises were not kept and instalments granted at the instance of the assessee were not honoured, the Department should take a stiff attitude in the matter of realisation of arrears. 2. It hardly needs reiteration that in the cases of the type commented upon by the Committee, no leniency should be shown. On the contrary, stiff attitude should be adopted to realise the arrears. Since this recommendation has been accepted in principle, the Board desire that in cases where instalments are not honoured and the commitments made by the assessee with regard to the payment of arrears due from them are not kept, coercive measures should be adopted to realise the arrears. According to the provisions of sub-section (5) of section 220, in cases where payment by instalments is allowed under sub-section (3), the assessee commits default in paying any one of the instalments within the time fixed under that sub-sect, the assessee shall be deemed to be in default as to the whole of amount then outstanding and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default. It, therefore, follows that in case of a default in respect of any single instalment, the entire demand then outstanding against the assessee becomes payable in lump-sum. Further, the assessee also becomes liable to penalty under section 221. The penal provisions should, invariably, be invoked in such cases to levy suitable penalties in keeping with the circumstances of each case and the gravity of the default. Apart from this, coercive measures should also be taken to realise the arrears in such cases as quickly as possible.