Net tax recovery subject to refund enquiry before coercive certificate proceedings can proceed against the assessee firm.

Recovery of excess profits tax under the Bengal Public Demands Recovery Act, 1913 could proceed, but only on the net amount ultimately found due after completion of the refund enquiry under the Income-tax Act, 1922. Although the excess profits tax assessment had attained finality and pending refund proceedings did not suspend that finality, the correspondence showed that substantial refunds might still be payable to the assessee firm or its partners. Because no effective steps had been taken for years to complete that enquiry, fairness required that the refundable amounts be first ascertained. The Income-tax Officer was directed to complete the refund enquiry within the stipulated time, and the Certificate Officer could recover only the balance, if any.

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Issues: Whether recovery of excess profits tax under the Bengal Public Demands Recovery Act, 1913 could proceed before the Income-tax Officer completed enquiry and ascertained the amounts refundable to the assessee firm or its partners under the Income-tax Act, 1922.

Analysis: The demand had been pursued through certificate proceedings under sections 7, 9 and 51 of the Bengal Public Demands Recovery Act, 1913. The assessment to excess profits tax had attained finality, and pending refund proceedings did not affect that finality. At the same time, the relevant correspondence from the Income-tax Officer indicated that substantial refunds might be due to the firm or its partners, and no effective steps had been taken for years to complete that enquiry. In that situation, fairness required that the refundable amounts be first ascertained so that coercive recovery would be confined to the net balance, if any, remaining due.

Conclusion: The Income-tax Officer was directed to complete the refund enquiry within the stipulated time, and the Certificate Officer was to execute the demand only for the balance, if any, after such ascertainment.

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