Tax recovery by debtor notice does not discharge arrears when the promissory note is repudiated and no payment certificate exists.

Section 46(5A) of the Indian Income-tax Act, 1922 was an enabling recovery provision: it allowed the Income-tax Officer to require a debtor of the assessee to pay the debt towards tax arrears, but it did not make the officer the assessee's collecting agent or itself discharge the liability. If the debtor repudiated liability on the promissory note, recovery through that machinery could not continue. A clearance certificate stating only that the assessee was attempting to pay promptly and regularly did not amount to a certificate that the arrears had been paid. On that reasoning, the tax arrears were not treated as discharged.

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Issues: Whether the petitioner's tax arrears stood discharged by delivery of a promissory note for recovery under the income-tax recovery machinery and by the subsequent clearance certificate issued by the Income-tax Officer.

Analysis: Section 46(5A) of the Indian Income-tax Act, 1922 was only an enabling recovery provision. It authorised the Income-tax Officer to call upon the assessee's debtor to pay the debt towards tax arrears, but it did not make the Income-tax Officer the assessee's agent for collection of the debt. The provision also permitted the officer to stop the recovery attempt where the debtor repudiated liability, and in that event no further recovery could be made through that mode. Since the debtor denied liability on the promissory note, the income-tax department could not recover the amount under that machinery. The clearance certificate merely stated that the petitioner was trying to pay the demand promptly and regularly and did not state that the arrears had been paid.

Conclusion: The petitioner was not discharged from liability to pay the tax arrears; the writ petition failed.

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