High Court rules TRO jurisdiction limited to certificate issued by ITO. Partner not in certificate exempt from recovery.

The High Court of Karnataka upheld the decision that the Tax Recovery Officer (TRO) lacked authority to recover tax from a partner of a dissolved firm not specified in the tax recovery certificate. The court emphasized that the TRO's jurisdiction is limited to the certificate issued by the Income Tax Officer (ITO) and cannot exceed its scope. The appeal was dismissed, affirming that recovery can only be enforced against the assessee named in the certificate, resulting in costs being awarded to the respondent.

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Issues:
1. Interpretation of tax recovery certificate under section 222 of the Income-tax Act, 1961.
2. Authority of Tax Recovery Officer (TRO) to recover tax from a partner of a dissolved firm.
3. Definition of "defaulter" under Rule 32 of the Second Schedule to the Act.

Analysis:
The High Court of Karnataka heard an appeal by the TRO of the Income Tax department challenging an order in a writ petition where a mandamus was issued to the TRO to refrain from recovering tax from a partner of a dissolved firm based on a tax recovery certificate. The respondent was a partner in two different firms, and a tax demand was issued in the name of the dissolved firm. The TRO attempted to recover the tax from the respondent's new firm, which was contested as unauthorized by the respondent.

The key contention was whether a partner of a firm could be considered a "defaulter" under the tax recovery certificate. The court examined the definition of "defaulter" under Rule 32 of the Second Schedule to the Act, which referred to the "assessee mentioned in the certificate." The court emphasized that the person named in the certificate as the assessee in default is the one against whom the recovery can be enforced. The TRO's jurisdiction is limited to the certificate issued by the ITO, and he cannot exceed the scope of the certificate to recover from a person not mentioned in it.

The court upheld the decision of the learned single judge, emphasizing that the TRO's actions were unauthorized as the recovery certificate was issued in the name of the dissolved firm, and the notice of demand was also in the firm's name. The court cited a Division Bench decision of the Andhra Pradesh High Court to support the interpretation that recovery can only be made against the assessee mentioned in the certificate. The court dismissed the appeal, affirming the view that the TRO lacked authority to recover tax from a person not specified in the recovery certificate.

In conclusion, the High Court of Karnataka affirmed that the TRO's actions were unauthorized as the recovery certificate specified a different entity as the assessee in default. The court clarified that the TRO's jurisdiction is limited to the certificate issued by the ITO, and recovery cannot be enforced against a person not named in the certificate. The appeal was dismissed, and costs were awarded to the respondent.

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