TaxTMI 
TaxTMI 
TaxTMI 
1967 (9) TMI 2
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....olaba Land and Mills Co. Ltd. had been sold on 21st May, 1958, and all the records (except the financial books) of the undertaking maintained by the company had been handed over to the purchasers for the purposes of running and working the said undertaking. On 23rd August, 1966, the Income-tax Officer served on the official liquidator, who is the applicant before me, notices under section 148 of the Income-tax Act, 1961, proposing to re-open the assessment of the company and to reassess the company in respect of the assessment years 1950-51 to 1955-56. Copies of those notices have been annexed to the affidavit in support of the present judge's summons and collectively marked "C". On 31st December, 1966, the Income-tax Officer served further notices under section 142(1) of the Income-tax Act, 1961, upon the official liquidator, calling upon him to produce the accounts and documents specified on the reverse of the said notice and to furnish certain information called for by him. At the foot of the said notices it was stated that failure on the part of the official liquidator to comply with the terms of the said notices would not only result in an ex parte assessment against the compa....
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....6 of the Companies Act, 1956, with the interpretation of which I am directly concerned on the present summons, provides, in sub-section (1) thereof, as follows : "When a winding-up order his been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose." Sub-section (2) of that section then proceeds to enact that the court which is winding up the company is to have jurisdiction to entertain and dispose of any suit or proceeding by or against the company and certain other matters laid down therein "notwithstanding anything contained in any other law for the time being in force". Sub-section (3) of section 446 provides that any suit or proceeding by or against the company which is pending in any other court may also be transferred to and disposed of by the court which is winding up the company. The main contention of the official liquidator on the present summons is that the Income-tax Officer has no jurisdiction to issue the notices ....
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....nd for the recovery of the said amount as arrears of land revenue. On these facts, the official liquidator made an application to the High Court, inter alia, under section 171 of the old Indian Companies Act, 1913, which is identical in terms with section 446(1) of the present Companies Act of 1956, against the Governor-General for an order that the respondents be directed to put in a formal claim to the official liquidator, and for an injunction restraining the Collector from effecting recovery of the said sum as arrears of land revenue, pending disposal of the application. A Division Bench of the Allahabad High Court, before whom the application came up for hearing held, inter alia, that the respondent should be restrained from proceeding, without the leave of the court, with the subsisting proceeding before the Collector of Allahabad for recovery of the sum claimed by the income-tax authorities as arrears of land revenue in accordance with the provisions of section 46 of the Income-tax Act, 1922. On a certificate granted under section 205 of the Government of India Act, 1935, the matter was taken up to the Federal Court, and one of the main contentions of the Government, which w....
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....aves open the question whether action under section 46 of the Indian Income-tax Act is covered by the phrase 'other legal proceeding'. Clearly it is not a proceeding in an ordinary court of law. But we see no reason why in British India no 'legal proceeding' can be taken otherwise than in an ordinary court of law, or why a proceeding taken elsewhere than in in ordinary court of law, provided it be taken in the manner prescribed by law ind in pursuance of law or legal enactment, cannot properly be described as a 'legal proceeding'. If it be considered that the effect of the income-tax authorities putting the machinery of section 46 of the Income-tax Act in motion for the collection of arrears of income-tax is to bring into operation all the appropriate legal enactments relating to the collection of land revenue in the Province concerned, it is, in our judgment, very difficult to say that they are not taking a 'legal proceeding'." The Federal Court, therefore, agreed with the Allahabad High Court in holding that the words "other legal proceeding" in section 171 of the Companies Act, 1913, covers any proceeding by the revenue authorities under section 46(2) of the Income-tax Act, 192....
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....rovisions of section 49E were not available to the income-tax department, and directing the Income-tax Officer to dispose of the respondent's claim for refund and pass appropriate orders in respect of the same under section 48 of the Income-tax Act, 1922. That decision was confirmed on appeal to the Supreme Court. After quoting section 49E of the Income-tax Act, 1922, the Supreme Court observed as follows : "On the face of this provision, there is no doubt that this section is not subject to any other provision of law. But it will be surprising if this power can be exercised in such a way as to defeat the provisions of the Indian Companies Act." It may be mentioned that it was not denied by the Additional Solicitor-General before the Supreme Court that the State had no priority in respect of its claim for income-tax dues. The Supreme Court in its judgment then referred to sections 228 and 229 of the Companies Act, 1913, which dealt with proof of debts in winding up, and held that, in view of those statutory provisions, once the claim of the income-tax department has to be prove and was proved in the liquidation proceedings, the said department could not, by exercising the right un....
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....ssued by the Income-tax Officer are not "legal proceedings" at all within the terms of section 446(1). Mr. Joshi has contended that it is only after the reassessment proceedings are completed and steps are taken to recover the additional tax, if any, that may be found due, that they become "legal proceedings" within the terms of that section. Mr. Joshi has based this contention of his on a decision of the Allahabad High Court in the case of Tika Ram and Sons Ltd. v. Commissioner of Income-tax to which I will presently refer. (2) That, assuming the reassessment proceedings started by the notices in question are "legal proceedings", they do not fall under section 446 because the Income-tax Officer alone has exclusive jurisdiction to make the reassessment and to determine the tax liability, if any. In support of this contention, Mr. Joshi has relied on the observations of the Supreme Court in the case of Damji Valji v. Life Insurance Corporation of India to which also I will presently refer. (3) That, in any event, the present application, as framed is misconceived, in so far as the court cannot, on an application like this, be asked to quash the proceedings. Mr. Joshi has contended t....
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....estion also, I do not think I am concerned at all with the same in the present application, and I do not, therefore, propose to deal with the judgment of the learned judge on that point. The learned judge then proceeded to deal with the second question that arose before him. After quoting section 446(1) of the Companies Act, 1956, Manchanda J. proceeded to deal with the case-law on the point including the decision of the Federal Court in Shiromani's case already discussed by me above, and observed that the judgment of the Federal Court made it clear that the expression "other legal proceedings", so far as it relates to income-tax proceedings was confined to execution or distress proceedings, that is, action under section 46, which is a stage arising after the assessment has been completed. Manchanda J. then stated as follows at page 158 : "The ratio of the decision is that because other Acts---U. P. Land Revenue Act and the Civil Procedure Code---in proceedings under section 46 of the Income-tax Act come to the assistance of the Collector, those proceedings can be termed as legal proceedings. It was, however, nowhere held that even assessment proceedings which fall under a specia....
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....anchanda J. in Tika Ram's case or with the construction placed by him upon the expression "other legal proceeding" in section 446(1) of the Companies Act. It is true that the question which arose before the Federal Court in Shiromani's case related to recovery proceedings under section 446 of the Companies Act, but the Federal Court has in unambiguous terms construed the expression "other legal proceeding" as including any proceeding taken in pursuance of a legal enactment which need not be in a court of law. I do not see how the distinction which Manchanda J. has sought to draw in Tika Ram's case can be drawn at all on a plain reading of the language of section 446(1) itself. In my opinion, recovery proceedings are proceedings which are as much under a legal enactment as assessment proceedings, and, in fact, both the proceedings would be proceedings under the same Act, though they relate to different stages. Manchanda J. has sought to distinguish the decision of the Federal Court in Shiromani's case but I am afraid I am unable to see what is the distinction in principle which he seeks to make. I am bound by the decision of the Federal Court in Shiromani's case and I also respectfu....
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....he provisions of section 41 of the Life Insurance Corporation Act, which provided that no civil court was to have jurisdiction to entertain or adjudicate upon any matter which the Tribunal constituted under that Act was empowered to decide, being a provision of a special Act, would override the provisions of section 446 of the Companies Act, which is an Act relating to companies in general. In so far as the decision is based upon that ground, I am afraid, it is inapplicable in considering the question as to which is the special Act and which the general statute as between the Companies Act and the Income-tax Act. The Supreme Court itself has in effect held in the case of Union of India v. India Fisheries Limited, that the Income-tax Act must be considered to be a general provision applicable to all assessees, whereas the Companies Act must be held to be a special Act dealing with the proceedings relating to companies. Mr. Joshi has also relied upon the following observations of the Supreme Court in Damji Valji's case : "It is in view of exclusive jurisdiction which sub-section (2) of section 446 of the Companies Act confers on the company court to entertain or dispose of any suit ....