Recovery of arrears. - Income Tax - 1391/CBDT

INSTRUCTION NO. 1391/CBDT Dated: April 10, 1981 Reference is invited to Board's Instruction No.1240 dated 6th March where in the commissioners were instructed that pending a final decision on the subject recovery certificates should be issued u/s.222 in all such cases where period for commencing recovery proceedings get time-barred with the note that further coercive steps to recover the certified arrears may not be taken till receipt of further communication from the ITO. 2. The matter has been further examined in discussion with the settlement commission. It is understood that in the orders passed by the settlement commission u/s.245D(1) now, the commission invariably incorporates an order to the effect that the ITO/WTO may issue Tax Recovery certificate to the TRO in respect of the arrear demands if any to save limitation u/s.231 but any coercive action should be kept in abeyance till order u/s.245D(4)/22D(4) is passed by the commission. It is clarified that the coercive action referred to by the settlement commission would not cover issue of statutory notices under rule 2 of the second schedule which is the first step to be taken on receipt of any recovery certificate or attachment of properties under the second schedule with a view to safeguard the claims of revenue but would only cover sale of properties or proceedings for arrest and detention of a defaulter in a civil prison. Thus, the problem of limitation in issue of recovery certificates, it is hoped now stands so solved. 3. The matter was further discussed by the board with the settlement commission has agreed that if the commissioners were to report to the commission the undisputed amount of tax if any relating to assessment years for which assessees applications have been admitted by the settlement commission in each case, the commission would not hesitate to issue appropriate directions to the commissioners permitting them to enforce recovery of the undisputed amounts. 4. Chairman settlement commission also mentioned that sometimes the assessees offer amounts even larger than those on which they have already been assessed. He stated that in such cases the commission would consider directing the assessees to pay the tax on the amounts offered by them. 5. In this context chairman, settlement commission mentioned that often the commissioners delayed sending their reports on the statement of facts called for from them and therefore desired that the commissioners should exercise greater control in the matter and ensure that the reports called for by the commission are sent tot them without any delay. 6. In view of the above the following instructions are issued regarding collection/recovery of arrears in cases where settlement applications are pending:- (a) cases where arrears are outstanding in respect of assessment years other than those for which applications have been admitted by the settlement commission have to be pursued in the normal course. b) Where an application has been made to the commission u/s.245C in respect of any assessment year but final order u/s.245D(1) has not been passed admitting the case, recovery proceedings have to be pursued in the normal course until an order u/s.245D(1) is passed admitting the settlement petition. c) At the time of submission of the report to the settlement commission or as soon thereafter as is possible, the CsIT should ensure that the cases before the settlement commission are examined in the light of the observations made by the chairman of the commission reproduced in paras 3 to 5 above so that suitable directions could be sought from the commission in regard to payment of taxes in respect of cases which have been admitted by them. d) It may be noted in this connection that even after a settlement petition is admitted payment of taxes in respect of the assessment year covered by the petition is permissible as the act does not prohibit that. If assessees themselves are willing to pay the taxes during the pendency of admitted applications with the settlement commission, they should not only be permitted to pay such taxes but even be encouraged to do so. 7. The general impression is that the Income-tax authorities do not pursue recovery proceedings in cases where settlement applications are moved by any assessee for any year. This tendency should be curbed. On the contrary action should be taken in accordance with the guidelines given in paragraphs 2 to 6 above to collect/recover the taxes as expeditiously as possible even in such cases. 8. The contents of this instructions may be brought to the notice of all officers working under you including the TROs.