TaxTMI 
TaxTMI 
1979 (3) TMI 57
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.... the Collector a certificate in accordance with s. 46(2) of the Indian I.T. Act, 1922, specifying the amount of arrears due from respondent No.2. Thereupon a certificate case was started against him (Basanta Kumar Daw) under the Bengal Public Demands Recovery Act, 1913, hereinafter called the Bengal Act, by the Certificate Officer acting as a Collector. Notice under s. 7 was served on the certificate-debtor on October 31, 1949. Basanta Kumar Daw entered appearance and filed an objection under s. 9 of the Bengal Act. This objection was rejected by the Certificate Officer by his order dated March 8, 1951. On April 2, 1951, the certificate-debtor made an application for review of the said order dated March 8, 1951, stating therein, inter alia, that the appeal preferred by him before the Income-tax Appellate Tribunal had been allowed in part and some payments also had been made since then ; the certificate case, therefore, could not proceed for the recovery of the sum of Rs. 36,874-10-0, the original amount mentioned in the certificate. The Certificate Officer declined to review his previous order and rejected the review petition. But he made certain enquiries from the ITO whether the ....
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....ertificate-debtors. Immediately thereafter, the respondent-company made an application in each of the two cases that it had purchased the property being unaware of the pendency of any certificate case against any of its vendors for realization of income-tax dues and that the Company was the owner of the property and it was not liable to be sold as that of the certificate-debtor. The Certificate Officer rejected the objection holding that the purchase, having been made after service of notice under s. 7 of the Bengal Act on the certificate-debtor, was void as against any claim enforceable in execution of the certificate and hence the company had no right to object to the sale. The company went up in appeal before the Commissioner and succeeded in both the cases. Two revisions were filed before the Board of Revenue which were allowed. The respondent-company then moved the High Court under art. 227 of the Constitution. The petition giving rise to Civil Appeal No. 1575 of 1971 was allowed and hence the Union of India has come up in appeal. The other petition giving rise to Civil Appeal No. 1965 of 1971 was dismissed by the same Bench and the company has, therefore, come up in appeal. ....
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....ion of the certificate-debtor but it was reduced on receipt of the information from the ITO. In the Bengal Act itself there is no express provision enabling a person other than the certificate-debtor claiming an interest in the property to be sold to file any objection. He, of course, under section 22 can take recourse to the said provision by filing an application to set aside the sale of immovable property on deposit of the amounts provided therein. But the rules in Sch. II under s. 38 have the effect as if enacted in the body of the Act. In Sch. II is to be found r. 39 which is very much like r. 58 of O. 21 of the Code of Civil Procedure, 1908. The company preferred a claim objecting to the sale of property on the ground that it was not liable to sale as it had purchased the property from the two certificate-debtors. It was, therefore, not quite accurate to say that the company had no locus standi to prefer the claim. It was open to it to show under r. 40 that at the date of the service of notice under s. 7 it had some interest in the property in dispute. If the notice served at the beginning of the two certificate cases under s. 7 on the two certificate-debtors was not a val....
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....uld show that it was to get over the difficulties in the collection of income-tax and other direct taxes created by the Supreme Court decision in Seghu Buchiah Setty's case [1964] 52 ITR 538 that the Validation Act was passed with retrospective effect. The interpretation of this Act falls for our consideration for the first time in this court. This is an Act " to provide for the continuation and validation of proceedings in relation to Government dues and for matters connected therewith ". In the Schedule appended to the Act are enumerated various tax statutes including the I.T. Act. " Taxing authority " has been defined in cl. (d) of s. 2 and cl. (e) defines " Tax Recovery Officer " to mean an officer to whom a certificate for the recovery of arrears of Government dues may be issued under this Act. Section 3, without the proviso, may be read as a whole : " Continuation and validation of certain proceedings.--(1) Where any notice of demand in respect of any Government dues is served upon an assessee by a Taxing Authority under any scheduled Act, and any appeal or other proceeding is filed or taken in respect of such Government dues, then,-- (a) where such Government dues a....
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.... the dues are enhanced treating it as a separate demand, or (2) to cancel the first proceedings and start a fresh one for the recovery of the entire amount including the enhanced one. In the latter case, the first proceedings started for the recovery of the original amount will lose its force and the fresh proceeding will have to proceed de novo. But in the former the first proceedings are not affected at all. In Civil Appeal No. 1965 of 1971 this is exactly the view taken by the High Court and in our opinion rightly. Mr. S. T. Desai appearing for the company submitted that where the amount was enhanced in appeal or revision there was no express provision in the I.T. Act for service of a fresh or another notice of demand for the additional amount. But if the amount was enhanced under the power of rectification under s. 35 then sub-s. (4) thereof requires : " Where any such rectification has the effect of enhancing the assessment or reducing a refund the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 29 and the provisions of this Act shall ....
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....ed could not be continued under sub-cl. (iii). In our opinion the view of the High Court is not sustainable in law. On the facts of this case, the assessee himself in his review application had clearly mentioned that the demand against him stood reduced in appeal. He also claimed that he had made certain payments. Although the TRO rejected his review petition, as, probably, he had no power of review, he took the precautionary measure of making inquiry from the taxing authority. Thereupon, the taxing authority gave him the information and the amount of the certificate debt was substantially reduced. We, therefore, hold that, on the facts of this case, the requirement of sub-cl. (ii) stood fulfilled and nothing further had to be done in the matter by the taxing authority. That being so, the proceedings initiated on the basis of the notice of demand served upon the assessee before the reduction of the amount in appeal could be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal as provided for in sub-cl. (iii). Clause (c) of s. 3(1) of the Validation Act is also important and it clearly and expressly provide....