Procedure for issuance of recovery certificates. - Income Tax - 1401/CBDT

INSTRUCTION NO. 1401/CBDT Dated: June 25, 1981 Complaints have been received in the CBDT pointing out instances where recovery certificates have been issued in respect of arrears of advance tax even though in fact the advance tax demanded have also been fully paid and there were no arrears. The complaints have also pointed out that the information about the payment of advance tax demand was already available to the ITO long before the recovery certificates were issued since the details of advance tax payments and the fourth copy of challans evidencing such payments had been furnished in the return of income for the relevant year filed before the ITO. 2. The board has taken serious note of the mechanical fashion in which recovery certificates for recovery of advance tax arrears have been issued in cases where such taxes have been fully paid. This causes avoidable harassment to the honest tax-payers and sopils the public relations of the department. The board therefore has directed that there should be no cause for such complaints in future. For this purpose, the following procedure should be strictly followed before recovery certificates are issued in respect of advance tax arrears:- a)Wherever arrears of advance tax are outstanding in the register the ITO should verify whether the return of income for the relevant assessment year has been filed. If no such return has been filed, he will take all steps necessary to recover the arrears of advance tax as also to expedite submission of the return of income; b) Where a return has been filed, he will verify the advance tax payment from the challans annexed to the return. In cases where the payments claimed in the return have not been posted in the D C register relating to advance tax in accordance with the procedure laid down in Instruction No.1225 [F.No.385/5/77-IT(B), dated 15th December 1978 printed at pages 289-295 of direct taxes Bulletin Vol.XXIV part I]. In such cases, the verification should be completed well before the time-limit specified in sec.231 of the I.T.Act for issue of recovery certificates. If however, such verification could not be completed before the due date, then a recovery certificate may be issued but the fact that according to the assessee claim that the tax has been paid and the payment is awaiting verification, could be indicated on the recovery certificate itself. The TRO should also be requested not to initiate coercive steps for recovery of arrears until he confirms from the ITO that the tax is really in arrears. c) Advance demand registers should be periodically reviewed and the procedure outlines in a) and b) above should in fact be started from the month of September itself so that action to recover advance tax in arrears wherever justified is taken well in time and there is no necessity to issue such recovery certificates. This will also help in reducing the infructuous arrears of advance tax. 3. The observance of instructions in para 2 above will avoid harassment to honest tax-payers in respect of the advance tax demand payable during financial year 1980-81 and onwards only. As regards arrears of advance tax certified to the TRO in respect of financial years 1979=80 and 1978-79 the board directs that the ITOs should undertake a similar verification and either confirm the correctness of the certificates. This verification bad communication should be completed by the ITOs before 30th September 1981 or till the arrears are confirmed by the ITOs in pursuance of the recovery certificates received by them for recovery of advance tax arrears demanded in financial years 1979-80 or 1978-79 whichever is earlier. 4. The commissioners should bring these instructions to the notice of all ITOs and TROs working in their charges for strict compliance.