Recovery proceedings and limitation under income-tax law: additional recovery mode failed for want of recorded special reasons.

Initiation of recovery under section 46(2) of the Income-tax Act, 1922 was treated as commencing recovery proceedings for limitation purposes, and the court-ordered stay extended the limitation period under section 46(7). Notices issued under section 46(5A) were therefore not time-barred and remained valid as recovery steps, even though earlier proceedings had not produced actual recovery. However, where one mode of recovery was already pending, resort to an additional mode under section 46(5A) required special reasons to be recorded; as none were recorded, that recovery action was vitiated and the writ petitions succeeded on that narrow ground.

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Issues: (i) Whether the issue of a certificate under section 46(2) commenced recovery proceedings within the period of limitation under section 46(7) of the Income-tax Act, 1922; (ii) Whether notices issued under section 46(5A) to debtors of the assessee, including the Bank of India, were within limitation and valid despite the earlier proceedings and the stay order; (iii) Whether resort to an additional mode of recovery under section 46(5A) while proceedings under section 46(2) were already on foot required special reasons to be recorded, and whether absence of such reasons vitiated the action.

Issue (i): Whether the issue of a certificate under section 46(2) commenced recovery proceedings within the period of limitation under section 46(7) of the Income-tax Act, 1922.

Analysis: The relevant scheme treated recovery as commenced when the Income-tax Officer initiated action capable of setting the recovery machinery in motion. The forwarding of the certificate to the Collector under section 46(2) was the initiating step, even if the Collector thereafter took no effective action. The stay order was also held to extend the limitation period under the proviso to section 46(7).

Conclusion: The certificate under section 46(2) amounted to commencement of recovery proceedings within limitation.

Issue (ii): Whether notices issued under section 46(5A) to debtors of the assessee, including the Bank of India, were within limitation and valid despite the earlier proceedings and the stay order.

Analysis: The period of limitation stood extended by the court-ordered stay, and notices issued in December 1954 were within that extended period. The later notice to the Bank of India was treated as part of the same recovery mode already initiated under section 46(5A). The fact that some notices did not yield actual recovery did not affect their legal validity as recovery steps.

Conclusion: The notices under section 46(5A) were not barred by limitation on that basis and were valid in point of timing.

Issue (iii): Whether resort to an additional mode of recovery under section 46(5A) while proceedings under section 46(2) were already on foot required special reasons to be recorded, and whether absence of such reasons vitiated the action.

Analysis: The explanation to section 46(7) made the several modes of recovery non-mutually exclusive, but permitted recourse to another mode while one mode was already being pursued only for special reasons to be recorded. No such reasons had been recorded before issuing the section 46(5A) notices while proceedings under section 46(2) were pending.

Conclusion: The proceedings under section 46(5A) were vitiated for want of recorded special reasons.

Final Conclusion: The recovery action under section 46(5A) failed on the narrow ground that the statutory precondition for adopting an additional mode of recovery was not satisfied, and the writ petitions were allowed.

Ratio Decidendi: Under section 46 of the Income-tax Act, 1922, initiation of recovery by the Income-tax Officer commences proceedings for limitation purposes, and an additional statutory mode of recovery cannot be pursued while another mode is already in progress unless special reasons are recorded.

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