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TMI Blog1975 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners of the latter firm, in certain properties belonging to Raru. Upon the death of Raru on December 24, 1971, his properties devolved on the remaining partners of the firm in their capacity as legal representatives. Raru had been assessed to income-tax in the sum of Rs. 1,38,703 for the assessment years 1957-58 to 1965-66. On the basis of a certificate issued by the Income-tax Officer under section 222 of the Income-tax Act, proceedings were initiated by the respondent for recovery of the said sum. A number of notices under rule 2 of the Second Schedule to the Act had been issued to Raru during the period March 24, 1967, to March 12, 1969. The equitable mortgage was created by Raru in favour of the petitioner's firm only on March 15, 1969. These properties were attached by the respondent under rule 48 of the Second Schedule by his order dated April 19, 1972. The petitioner's firm then filed under rule 11 of the said Schedule its objections before the respondent stating that the properties were the subject-matter of an equitable mortgage in its favour, and, therefore, the right of the revenue was subject to the superior rights of the mortgagee. The respondent disposed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer passing an order under rule, 11 of the Second Schedule is not concerned with what is stated in section 281. The officer acts by virtue of a certificate issued by the Income-tax Officer under section 222, and he enforces the certificate by means of recovery proceedings in accordance with the rules laid down in the Second Schedule and without regard to section 281. In reply to this contention, counsel for the petitioner points out that the expression "any proceeding" under section 281 cannot be construed so narrowly as to exclude recovery proceedings. Section 281 covers both assessment and recovery. Assessment proceedings come to an end only when finality is attached to such proceedings by a decision which can no longer be challenged. He relies upon the decision of the Privy Council in Commissioner of Income-tax v. Khemchand Ramdas and the decision of the Supreme Court in Garikapati Veeraya v. N. Subbiah Choudhry for the proposition that an appeal is a continuation of the earlier proceedings. He says that the recovery proceedings will, in the absence of an order of stay, progress uninterrupted by the assessment proceedings. If the interpretation of the counsel for the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fields in which section 281 and rule 16 operate. In other words, does section 281 apply to recovery proceedings also, is the sole question urged before me. I shall now read the relevant rules of the Second Schedule concerning the procedure for recovery of tax. Rule 2 says: "2. Issue of notice.--When a certificate has been received by the Tax Recovery Officer from the Income-tax Officer for the recovery of arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule." Rule 48 relates to attachment. It says: "48. Attachment--Attachment of the immovable property of the defaulter shall be made by an order prohibiting the defaulter from transferring or charging the property in any way and prohibiting all persons from taking any benefit under such transfer or charge." Rule 51 says: "51. Attachment to relate back from the date of service of notice.--Where any immovable property is attached under this Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty) at the date of the attachment, he had some interest in, or was possessed of, the property in question. (4) Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale. (5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the de au ter as his own property an not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained shall authorise the corporation to sell any land, that would not control the particular enactment, but the particular enactment would take effect notwithstanding that it was not clearly expressed and distinct .........If the court finds a positive inconsistency and repugnancy, it may be difficult to deal with it, but so far as it can, it must give effect to the whole of the Act of Parliament." (see Craies on Statute Law, 7th Edn., page 222). In Devassia v. State of Kerala this court had occasion to consider this rule of construction. Referring to J. K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of Uttar Pradesh M. S. Menon C. J. observed: "..............the rule that general provisions should yield to special provisions is not an arbitrary rule made by lawyers and judges but springs from the common understanding of men and women that when the same person gives two directions, one covering a large number of matters in general, and the other covering only some of them, his intention is that the latter should prevail as regards those matters, and that the general direction should have effect only as regards matters uncovered by the special direction." As po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral and the other particular; nor can one be regarded as subordinate and the other leading. Both are directed to the same end, the only difference being that the section specifically refers to the principle of safeguarding the interest of an innocent transferee (or transferor) while the rule does not. "All rules of procedure are intended to advance justice and not to defeat it." (Lakshmiratan Engineering Works Ltd. v. Assistant Commissioner, Sales Tax, Kanpur). In the absence of any contrary indication, the section and the rule must be harmoniously read so as to effectuate the principle stated in the section. It may be apposite to extract here a passage from what the Supreme Court has stated in C. A. Abraham v. Income-tax Officer, Kottayam: "In interpreting a fiscal statute, the court cannot proceed to make good deficiencies if there be any; the court must interpret the statute as it stands and in case of doubt in a manner favourable to the taxpayer." The object of both the section and the rule is to invalidate transfers made without bona fides during the pendency of proceedings under the Act. I fail to see how the expression "any proceeding under the Act" in section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid does not form part of the stock-in-trade of the business of the assessee." (Emphasis supplied). Two of the basic changes introduced by this new provision are: (1) it has limited the duration of the "proceeding" contemplated under section 281 to the period preceding the notice under rule 2; and (2) the cardinal rule of evidence regarding the onus of proof contained in the original section has been discarded: whereas under the original section the burden of proving that a transfer was made with intent to defraud the revenue was placed upon the department, such burden has been done away with in the new section. Counsel for the revenue contends that the new section does not limit the duration of the proceeding, as I just stated, but in fact it extends the duration to the point of service of notice under rule 2 because, according to him, the duration of the proceeding under the original section was limited to the point of time when a demand was raised by the Income-tax Officer under section 156. I do not see how such a narrow interpretation is applicable to section 281, as it stood at the relevant time, as in my opinion, the section was wide enough to take in all proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng", the earlier section was wide enough to take in all proceedings contemplated under the Act. As pointed out by the House of Lords in Warburton v. Loveland: "... No rule of construction can require that when the words of one part of a statute convey a clear meaning it shall be necessary to introduce another part of a statute for the purpose of controlling or diminishing the efficacy of the first part." (See Craies, op. cit. p. 99). If the language of section 281 is clear, it must receive full effect. If, however, two constructions are possible, the construction more favourable to the innocent transferee has to be preferred. In my opinion, the language of section 281 is sufficiently clear and explicit. It covers the entire field in which the Act operates--whether in regard to assessment or recovery. Rule 16 operates in a region already covered by section 281, and the two provisions have to be read consistently with each other. There is no clash between the two; there is no repugnancy or inconsistency. The protection mentioned under selection 281 in respect of any proceeding under the Act has to be read into rule 16 in matters of recovery as well. Viewed in this ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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