Civil suit for income-tax arrears not barred by assessment challenge rule or special recovery limitation

A civil suit by the Government to recover assessed income-tax arrears was held not to be barred by section 67 of the Indian Income-tax Act, 1922, because that provision only prevents suits that seek to set aside or modify an assessment, not suits enforcing an existing tax liability. The suit was also held to be within limitation: Article 149 of the First Schedule to the Indian Limitation Act, 1908 applied to suits by the Central Government and allowed a sixty-year period, while section 46(7) governed only the Act's recovery machinery and did not shorten limitation for a civil suit. The Government's recovery remedy was therefore upheld.

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Issues: (i) Whether section 67 of the Indian Income-tax Act, 1922 barred a civil suit by the Government for recovery of income-tax arrears; (ii) Whether the suit was barred by limitation, including the effect of section 46(7) of the Income-tax Act and section 29(2) of the Indian Limitation Act, 1908.

Issue (i): Whether section 67 of the Indian Income-tax Act, 1922 barred a civil suit by the Government for recovery of income-tax arrears.

Analysis: Section 67 was construed according to its plain language, which bars suits seeking to set aside or modify an assessment made under the Act. A suit by the Government to recover the amount due on an assessment does not seek to annul or alter the assessment, but to enforce the liability already determined. The recovery provisions in the Act were treated as distinct from proceedings that challenge the assessment itself.

Conclusion: The suit was not barred by section 67; this issue was decided against the assessee.

Issue (ii): Whether the suit was barred by limitation, including the effect of section 46(7) of the Income-tax Act and section 29(2) of the Indian Limitation Act, 1908.

Analysis: Article 149 of the First Schedule to the Indian Limitation Act, 1908 was held applicable to a suit by the Central Government and provided a sixty-year period. Section 46(7) was held to govern only the recovery machinery under section 46 and not a civil suit. The Explanation to section 46(7) preserved other laws relating to recovery of government debts, and section 29(2) did not shorten the limitation for a civil suit because the one-year period in section 46(7) was not a limitation period for suits, appeals, or applications in court.

Conclusion: The suit was within limitation; this issue was decided against the assessee.

Final Conclusion: The Government's civil remedy to recover assessed income-tax arrears was upheld, and both jurisdictional and limitation objections failed.

Ratio Decidendi: A civil suit by the Government to recover income-tax arrears is not a suit to set aside or modify the assessment, and the special recovery period in the tax statute does not displace the general limitation applicable to suits by the Central Government.

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