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TMI Blog1968 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ly succeeded therein, but his liability to pay the amount stated was not affected by that writ proceeding. Finally, the Union of India, represented by the Commissioner of Income-tax, laid the suit. The defences of the appellant in so far as they survive for consideration in this second appeal were that the suit is barred by section 67 of the Indian Income-tax Act and that the suit is also barred by limitation. These contentions were negatived by the trial court, which granted a decree in favour of the plaintiff, the Union of India. This decision of the trial court was confirmed in appeal by the learned District Judge of Madurai. The defendant-appellant again presses in this second appeal the two contentions referred to. Section 67 of the Indian Income-tax Act, 1922, bars the jurisdiction of the civil court in so far as any relief sought in the civil court seeks to set aside or modify any assessment made under the Act. The plain language of the section does not admit of the construction placed upon it by the learned counsel, Mr. K. Srinivasan, that it bars a suit for recovery of the amount due upon an assessment. As the counsel for the department rightly points out, what the actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well. I am wholly unable to accept this argument, I am not aware of any decision which has taken this extreme view. The expression " assessment " has been used in the Act for two purposes, firstly, the assessment of the taxable income of the assessee, and, secondly, of the assessment of the sum payable by the assessee as tax under the Act. Kalawati Devi Harlalka v. Commissioner of Income-tax, which has been referred to by the learned counsel does not to my mind support the argument of counsel. Their Lordships say that the expression "assessment" can bear a comprehensive meaning and it can comprehend the whole procedure for ascertaining and imposing the liability upon the taxpayer. The ascertainment and imposition of the liability cannot possibly take in the discharge of the liability as well. In Firm Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh, the question of the ouster of the civil court's jurisdiction under the Madras General Sales Tax Act arose. Their Lordships no doubt say that there is a general presumption that there must be a remedy in the civil courts to a citizen claiming that an amount has been recovered from him illegally and that such a remedy can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The Union of India claims that, by reason of the assessment, a liability has been created and that the assessee occupies the status of a debtor vis-a-vis the Union, which is the creditor. The nature of the suit covered by article 149 is not indicated therein. Any suit by a Government is comprehended therein. After the assessment creates a liability, the notice issued under section 29 of the Income-tax Act fixes the date before which payment should be made. If no date is specified in the form of demand issued under section 29, section 45 of the Act states that such amount shall be paid on or before the first day of the second month following the date of service of the notice. It is obvious that the demand becomes enforceable against the assessee from the date of service of the notice under section 29 or at least by the date upon which the amount becomes payable as under section 45 of the Act, and article 149 provides for a period of limitation of 60 years computed from one of these two dates, whichever may apply. The argument of Mr. Srinivasan, on the other hand, is that section 46 of the Act provides for the mode and time of recovery and this being a special enactment, it is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he light of the other parts of the section. The Explanation to the section states : " A proceeding for the recovery of any sum shall be deemed to have commenced within the meaning of this section, if some action is taken to recover the whole or any part of the sum within the period hereinbefore referred to..." The word " proceeding " seems to me to indicate the variety of proceedings contemplated in the earlier sub-sections of section 46. It really refers to this procedural machinery and the resort thereto under the earlier parts of section 46. It is impossible to read into this section any reference to a suit in a civil court, though that may no doubt be a proceeding in the larger sense of the term. The further parts of the Explanation give ample support to this view, for it continues : "... and for the removal of doubts, it is hereby declared that the several modes of recovery specified in this section are neither mutually exclusive, nor affect in any way any other law for the time being in force relating to the recovery of debts due to Government... " The reference to the several modes of recovery has to be read in conjunction with the word " proceeding " and by reason o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt is a right which has been conferred for the first time by the Income-tax Act, 1961. Section 232 of this Act says that the several modes of recovery specified in the Chapter in which it occurs shall not affect in any way any other law for the time being in force relating to the recovery of debts due to Government or the right of Government to institute a suit for the recovery of arrears due from the assessee. If this section is compared with the Explanation to section 46(7) of the 1922 Act, it apparently enlarges the scope of recovery by resort to the civil court. I do not, however, think that this is a new right that has been created. To my mind, it recognises only a pre-existing common law right and the reference to a right or suit in section 232 is only a clarification of what section 46(7), Explanation, stated. The principal argument that was advanced in connection with the right of suit was, however, that even that right has to be exercised within the period of one year specified in sub-section (7) of section 46. Here again, learned counsel relies upon his argument that a proceeding contemplated in sub-section (7) would take in a suit in a civil court as well. But if this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of priority which the Crown has in payment of debts due to it and it was not necessary that a suit should have been filed by the Crown. As a corollary to this decision it would appear to follow that if the Crown was entitled merely on the basis of an undisputed debt owing to it to seek the inherent power to the court under section 151, Civil Procedure Code, to pay over the money to it in discharge of the income-tax liability of the person whose money had been brought to court by way of execution by a third party, the Crown was more or less in the position of another decree-holder seeking rateable distribution of the assets lying in court, though claiming priority over the other creditors. That would in effect mean that the Crown is not disentitled to sue the defaulting taxpayer and obtain a decree in the civil court. This decision is no doubt not a direct authority laying down that a right of suit is available to the State in respect of income-tax arrears. But inferentially that conclusion follows. This decision has been referred to in Builders Supply Corporation v. Union of India and their Lordships of the Supreme Court have not expressed any disapproval of the principle unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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