Transferee liability barred where the transferor is traceable and service is defective; recovery against transferee stayed pending compliance.

Transferee liability under the proviso to section 23 was held inapplicable because the statutory precondition - inability to find the transferor or inability to recover tax from the transferor - was not satisfied when recovery proceedings commenced. Procedural defects in service and the transferor's admitted but unresolved opportunity to contest the assessment made recovery from the transferee inappropriate. Consequently, notices of recovery, attachment and sale against the transferee are quashed and the assessing authority is directed to supply the assessment order to the transferor, entertain any representation or revision, and refrain from further recovery steps against the transferee pending compliance with the proviso.

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Issues: Whether recovery proceedings and notices issued to the transferee under the proviso to section 23 of the Agricultural Income-tax Act can be sustained where the transferor has not been shown to be untraceable and further relief in relation to service and opportunity to contest the assessment.

Analysis: Section 23 of the Agricultural Income-tax Act makes both transferor and transferee liable in respect of agricultural income, but the proviso renders the transferee liable for arrears only where the transferor cannot be found or the tax assessed on the transferor cannot be recovered from him. The statutory scheme requires that the condition in the proviso be satisfied before recovery is effected from the transferee. The assessment for the relevant year was completed under the procedural provision but the assessment order had not effectively reached the transferor; the transferor has admitted potential liability and sought an opportunity to contest the assessment. Given these facts, the statutory precondition for invoking transferee liability under the proviso was not shown to be satisfied at the time recovery proceedings were initiated against the transferee. The procedural defects in service and the transferor's unresolved opportunity to seek revision under the applicable provision render continued recovery from the transferee inappropriate pending compliance with the proviso and allowing the transferor an opportunity to contest the assessment.

Conclusion: Recovery notices and consequent attachment and sale notices against the transferee are quashed; the assessing authority is directed to furnish the assessment order to the transferor by registered post and to entertain any representation or revision filed by the transferor within the prescribed time, and no further recovery steps shall be taken against the transferee in respect of the subject property for the year in question.

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