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TMI Blog1972 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... 19-5-1972 - Judge(s) : K. N. SETH., SATISH CHANDRA. JUDGMENT SATISH CHANDRA J.-The State of U. P. instituted a suit for the recovery of Rs. 3,02,982.62 as arrears of agricultural income-tax for the assessment year 1952-53 with pendente lite and future interest at twelve per cent. per annum. The learned civil judge, Faizabad, decreed the suit for recovery of Rs. 1,89,364.62 with interest at 41/2 per cent. per annum. Aggrieved Raja Jagdambika Pratap Narain Singh, the defendant, has come up in appeal. The plaint case was that the defendant, Raja, had agricultural income liable to tax under the Agricultural Income-tax Act, 1948, for the assessment year 1952-53. The Deputy Commissioner, Faizabad, on 27th November, 1952, passed an order assessing the defendant's income to a tax of Rs. 3,40,090, The defendant preferred an appeal (No. 65 of 1953) before the Agricultural Income-tax Commissioner. The appeal was decided on 25th November, 1953. The quantum of tax was reduced to Rs. 1,89,364.62. The assessee did not prefer a revision and the appellate order became final. During the pendency of the appeal the defendant had obtained an order of stay from the appellate court staying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the principal amount of the arrears of tax. This valuation did not include the amount which was granted by way of interest at 41/2 per cent. During the course of the hearing the appellant made an application for the amendment of the valuation of the appeal. Finding that the prayer in the appeal was that the suit be dismissed and that there was a specific ground taken in the memorandum that the award of interest was illegal, we permitted the appellant to amend the valuation and pay the requisite court fee. Thereafter, the plea that the award of interest was illegal became a live issue in this appeal. One of the pleas taken in the written statement was that the plaint was liable to be rejected under Order 7, rule 11, Civil Procedure Code. On 22nd February, 1964, during the course of arguments before the trial court, the defendant made an application for amendment of the written statement (87-A). In this he gave the details of the facts upon, which the plea was supposed to rest. This application was rejected by the trial court on the ground that it was highly belated. The appellant reiterated his application for amendment during the hearing of the appeal. After hearing the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Commissioner. The order sheet then states : " The appeal is allowed in part and the amount of tax is reduced to Rs. 1,89,364-10-0 from Rs. 3,40 090 which must be paid as directed in the order. Send copies of the order to the LRC and LC along with the ment file and then consign the case to the records." The order sheet of 25th November, 1953, therefore, shows that the counsel were heard in the appeal and the order was also pronounced the same day. On behalf of the appellant, Sri Braj Sunder Lal Mehrotra appeared as a witness. He stated that he was the manager of the defendant and was looking after the litigation of his estate. He as well as his counsel left the court of the Commissioner after the hearing of the appeal was over. He did not know the result of the appeal that day and that the Commissioner did not say anything about the pronouncement of the judgment. After the hearing of the appeal was over, another case was taken up. He also stated that no copy of the appellate judgment was received by him from the office of the Agricultural Income-tax Commissioner. He admitted in cross-examination that he had filed Writ Petition No. 1072 of 1958 in the High Court on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rasod Singh v. State, it was urged that the appellate order cannot in law be deemed to have been communicated to the assessee unless a copy thereof was served upon him. In Harish Chandra v. Deputy Land Acquition Officer the, Supreme Court held that if the date of pronouncement of the award is communicated to the party and it is accordingly pronounced on the date previously announced, the award is said to be communicated to the said party even if the said party is not actually present on the date of its pronouncement. In the present case the assessee knew of the date of hearing. It was understood that on that day the judgment of the appeal can as well be pronounced. Under the circumstances the pronouncement of the appellate order on that day was an effective communication thereof to the assessee even though the assessee's lawyer or manager had left the court and may not have been actually present at the time of the pronouncement of the order. In State of Punjab v. Atmar Singh Harika it was held that communication, of an order was necessary before it can be an operative and binding order. In that case the order of dismissal was passed on 3rd June, 1949. Being ignorant of this order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon the appellant on December 27, 1952 (exhibit 9). As seen above, section 23 requires the communication of the appellate order. There is no other provision in the Act requiring the service of a fresh notice of demand after the passing of an appellate order. Rule 24 of the rules framed under the Act provides for a fresh notice of demand in case the demand is subsequently enhanced on appeal or revision. Obviously, if the demand is reduced in appeal, there is no requirement to serve a fresh copy of the notice of demand. Mere communication of the appellate order is enough. Mr. Gupta then urged that in view of the specific language of the appellate order, the liability to pay the reduced amount of the tax did not in law arise till the service of a notice of demand in accordance with it. No such notice of demand having been served, the State had no cause of action to institute the suit. The operative part of the appellate order runs as follows : " The appeal is, therefore, partly allowed and the amount of tax is reduced to Rs. 1,89,364-10-0 only which must be paid in four equal instalments to be fixed in the fresh notice of demand after making, necessary adjustments for the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th November, 1953, and it was open to the State Government to have filed the writ petition soon thereafter. The State has furnished an explanation for the delay. It has been urged that the defendant did not even in the written statement take the plea that the suit was barred because of non-compliance with the appellate order in not serving a fresh notice of demand. This point was urged for the first time at the hearing of the appeal. The, appellant, State, was also not advised that the appellate order would in any way be a bar to the present suit. The mistake of law as to the implications of the appellate order came to light for the first time when the question was argued during the hearing of the appeal. It was for lack of knowledge of this aspect of, the matter that no proceedings were initiated by the State for the setting aside of the impugned clause of the operative part of the order. A perusal of the written statement shows that such a plea was not specifically taken. The judgment of the court below leads to the same conclusion. The memorandum of appeal also shows that no such plea was included in any of the grounds of appeal. Ground No. 2 stated that there being no valid n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a civil court was not within the purview of this provision. We are in respectful agreement with this view. Section 38 of the Act bars suits in civil courts. It provides that no suit shall be brought in any civil court to set aside or modify : any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer or the State Government for anything in good faith done or intended to be done under this Act. Thus, the legislature barred suits of the kind mentioned in section 38. In this context section 32 should not be construed as laying down a bar to the institution of a suit not covered by section 38. The right to recover money due and payable to the plaintiff is a civil right which inheres in every creditor. The provisions of the Agricultural Income-tax Act show that at least when the assessee is in default the State has, the right to recover the amount. That could only be as if the assessee had become a debtor to the State Government. The State Government, having become a creditor, has all the remedies available to a creditor. The institution of a suit for recovery of a debt is provided for by section 9, Civil Procedure Code. That secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d had been reduced in appeal, the Act does not require the service of a fresh notice of demand. We fail to see how the decision in that writ petition would operate as res judicata. In passing, the learned judge observed that under section 46 of the Income-tax Act "it has been held that recovery proceedings under that section are not exhaustive. The Government have a right to institute other proceedings, outside that section, to recover the amount due. It is for the legal advisers of the Government to advise it, whether or not a suit can be filed, for the recovery of the amount in this case". These observations do not suggest that a suit will not be maintainable. In fact, barring the making of the above observations, no decision was recorded by the learned judge on this aspect. Learned counsel then submitted that section 9, Civil Procedure Code, 'violated article 14 of the Constitution. In many statutes the State has been conferred a right to recover its dues by an expeditious remedy provided therein. That remedy was alleged to be more stringent than the normal way of recovering money by a suit, because the special procedure was quick and provided for recovery as an arrear of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the respondent, State, it was urged that interest could be awarded under section 73, Indian Contract Act, or, in the alternative, under the Interest Act. Illustration (n) to section 73, Contract Act, was by the Supreme Court in Union of India v. A. L. Rallia Ram held inapplicable to the right of a creditor to recover interest from his debtor on a loan advanced to the latter. It was held that the illustration does not confer upon a creditor the right to recover interest from a debtor when he is not entitled to such interest under any provisions of the law. The proviso to section 1 of the Interest Act (1 of 1839) provides that interest shall be payable in all cases in whic h it is not payable by law. The term "law" occurring in this proviso has been construed repeatedly as applying to cases in which either the provisions of the substantive law or the common law provide for interest and also to cases in which the court of equity exercises jurisdiction to allow interest. In Bengal Nagpur Railway Co. Ltd. v. Ruttlanji Ramji it was observed that in order to invoke a rule of equity it is necessary in the first instance to establish the existence of a set of circumstances wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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