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TMI Blog1972 (5) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... February 18, 1969, by means of I.A. No. 353 of 1969, that there were huge arrears of income-tax against the judgment debtor in respect of which action had been taken for recovery of income-tax dues and recovery certificates had been issued by various Income-tax Officers to the Tax Recovery Officer, Delhi, for attachment of this very property. The prayers made, in the alternative, were : (1) that the proclamation, of sale dated December 17, 1968, be modified by converting th e proclamation of sale by discharging the Government dues (there was a statement that apart from the mortgage to the decree-holder there was no other lien on the property) ; (2) that in the event, however, of the sale taking place, after payment of secured debt whatever balance that renmained after payment of income-tax arrears may alone be paid to the decree-holder. The execution sale was postponed and notice of the application (I. A. No. 353 of 1969) was ordered to the decree-holder who contested the claim of the income-tax department. On October 7, 1969, the Income-tax Officer issued notices under section 226(2) of the Income-tax Act to some of the tenants occupying the mortgaged property. None of the tena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices. In the order dismissing the review application the learned single judge reiterated his observations about the absence of even an averment concerning attornment by the tenants to the decree-holder. Even in I.A. No. 1050 of 1969, filed after the dismissal of I.A. No. 787 of 1969, all that had been urged was that there was an implied attornment by reason of the payment of rents by tenants to the appellant-bank. In this view he denied to the appellant-bank the opportunity, which was sought for, to let in evidence to show that the rents were being paid by the tenants to the decree-holder bank, but not to the judgment-debtor. The contention that the income-tax department, which had already submitted to the jurisdiction of the court by moving I.A. No. 353 of 1969, had no power to issue notice under section 226 of the Income-tax Act thereafter, without the directions of the court was repelled. It was further observed that the mere creation of the lien in favour of the decree-holder by means of the award would not amount (in the absence of the tenants actually, attorning to the decree-holder) to rents not becoming due or payable to the judgment-debtor (landlord). The learned sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's immovable property (c) arrest of the assessee and his detention in prison ; (d) appointing a receiver for the management of the assessee's movable and immovable properties. Sub-section (2) of section 222 provides that the Income-tax Officer may issue a certificate under sub-section (1), as aforesaid, notwithstanding that proceedings for recovery of the arrears by any other mode have been taken. The other modes of recovery are described in section 226. Notwithstanding the issue of a certificate to the Tax Recovery Officer under section 222, the Income-tax Officer may recover the tax by any one or more of the modes provided in the section. The following provisions, made in sub-section (3), are material : " (3) (i) The Income-tax Officer may, at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee, to pay to the Income-tax Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a debt by the Tax Recovery Officer in exercise of his powers under section 222 ......" Section 232 is also important : " 232. The several modes of recovery specified in this Chapter shall not affect in any way-- (a) any other law for the time being in force relating to the recovery of debts due to Government ; or (b) the right of the Government to institute a suit for the recovery of the arrears due from the assessee ; and it shall be lawful for the Income-tax Officer or the Government, as the case may be, to have recourse to any such law or suit, notwithstanding that the tax due is being recovered from the assessee by any mode specified in this Chapter." The Second Schedule of the Act lays down the procedure for recovery of tax. Paragraph 1(b) defines a "defaulter" as the assessee mentioned in the certificate. According to paragraph 2 when a certificate has been received by the Tax Recovery Officer from the Income-tax Officer for the recovery of arrears under this Schedule, a notice shall be served upon the defaulter asking him to pay the amount specified in the Schedule within 15 days from the date of service on pain of steps being taken to realise the amount und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le III, Delhi, to the extent of the liability discharged ; or to the extent of the liability of the taxpayer for tax/penalty/interest/fine referred to in the preceding para., whichever is less. Further if you fail to make payment in pursuance of this notice to me as Income-tax Officer, you shall be deemed to be an assessee in default in respect of the amount specified on the notice and further proceedings may be taken against you for the realisation of the amount as if it were an arrear of tax due from you in the manner provided in sections 222 to 225 of the Income-tax Act, 1961, and this notice shall have the same effect as an attachment of a debt by the Tax Recovery Officer in exercise of his powers under section 222 of the said Act. The necessary chalans for depositing the money to the credit of Central Government may be obtained from me. A copy of this notice is being sent to Messrs. B. Dharam Singh Co. (Private) Ltd, Asaf Ali Road, New Delhi (Taxpayer). (Sd.) 17-4-69 Income-tax Officer, Central Circle III, New Delhi. C. C. to Messrs. B. Dharam Singh Co. (P.) Ltd. (Sd.) I. T. O., C. C. III,, Delhi." (Emphasis added.) No reply having been received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The several modes of recovery specified in that Chapter shall not affect in any way any other law for the time being in force relating to the recovery of arrears as debts due to the Government or even the right of the Government to institute a suit for the recovery of the arrears due from the assessee. By reason of the notices issued by the Income-tax Officer the tenants became assessees in default in respect of the amount specified in the notices which was the amount due by the landlord (the judgment-debtor of the decree-holder bank). Any question arising between such defaulters or their representatives on the one hand and the Income-tax Officer on the other relating to the execution, discharge or satisfaction of such certificate is, according to paragraph 9 of the Second Schedule, to be determined by the order of the Tax Recovery Officer before whom such question arises and not by way of a suit. If the tenants and the judgment-debtors-landlords themselves were precluded from raising any question pertaining to the above before a forum other than the Tax Recovery Officer concerned, the appellant-bank also could not raise any question with respect to it. The expression "their repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the matter in execution, if section 47, Civil Prooedure Code, applied, and even if it did whether the matter arising under section 47, Civil Procedure Code, would itself, on account of the complexity involved, have to be converted into a suit. Shri Ved Vyas sought to derive support from the two decisions of the Bombay High Court, Lalchand Radhakisan v. Ramdayal Ramnarayan and Ningappa Neelappa Katti v. Adiveppa Shivappa Tuppad. In the former case Beaumont C.J. observed, but without any discussion, that even though the question arose in that case under section 73, Civil Procedure Code, and no appeal normally lay against an order passed under section 73, an appeal would lie if the rateable distribution affected not only the creditors inter se but the surety to a considerable extent and the judgment-debtor to a lesser extent. Not only section 47, Civil Procedure Code, but section 145, Civil Procedure Code, was also invoked. Beaumont C.J. stated that even if an appeal did not lie the appeal could have been treated as a revision under section 115, Civil Procedure Code. This decision was followed in the latter case by Lokur J. The facts in that case were that the judgment-debtor h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of these applications was any reference made to the appellant-bank being a representative of the judgment-debtor or the latter being affected by what was done by the income-tax department. We are, therefore, unable to find any support for the contention put forward on behalf of the appellant-bank that the dispute arises under section 47, Civil Procedure Code, and hence appealable. If for any purpose, even for stating that the matter comes under section 47, Civil Procedure Code, the appellant-bank claims to be a representative of the judgment-debtor then its remedy to agitate the matter in a civil court would be barred by reason of paragraph 9 of the Second Schedule read with sections 222 and 226(3)(x) of the income-tax Act. If, in order to get over the above-said bar, the appellant-bank contends that it is not the representative of the judgment-debtor then it would be a question purely between two rival decree-holders--especially when it has not even alleged that the judgment-debtor is affected and none of the judgment-debtors were made parties to these proceedings--there could be no appeal under section 47, Civil Procedure Code. In either view this appeal would not be maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears on the merits of the appeal into which we are not entering. It is, however, helpful, for a fuller understanding, to recall the nature of the proceedings leading to the present appeal. The appellant-bank did not seek the assistance of the executing court for recovering rents from the suit property ; the only prayer made in execution was for sale of the mortgaged property. The appellant-bank is no doubt seeking, in effect, to get rid of the obstacle placed in the way of its collecting the rents from the tenants by reason of the notices issued to the tenants under the Income-tax Act and the proceedings taken by the Tax Recovery Officer. It is pertinent to note that the application which the appellant-bank made in I.A. No. 1551 of 1969 for appointing the receiver to collect the rents was dismissed. There has been no appeal against the said order. The question of priorities between the appellant-bank and the income-tax department in the matter of the rents claimed to accrue from the hypotheca to the judgment-debtor company in liquidation is at any rate not one which can be gone into by the court executing a decree for sale of the hypotheca. In these circumstances we do not feel the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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