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    Comparative Analysis of Tax Recovery and Default Provisions : Clause 411 of the Income Tax Bill, 202...
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    Tax default and recovery: rules on payment timelines, interest adjustment, waiver procedures, and deferment during appeals.
    Clause 411 sets the conditions for payment of tax on a notice of demand, the deemed default trigger for coercive recovery, and AO powers to shorten payment periods, extend time or allow instalments. It prescribes interest on unpaid demands with adjustment where liabilities change, prevents overlapping interest charges, allows time bound waiver or reduction of interest for hardship with a hearing requirement, permits deferment of default treatment during appeals on conditions, and protects remittance restricted foreign income from being treated as default.
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    Advance tax credit ensures payments are applied to the relevant tax year and credited in regular assessment.
    Sums paid or recovered as advance tax, excluding penalty and interest, shall be treated as payment of tax for the income of the tax year in which payable, and credit for such advance tax must be given to the assessee in the regular assessment; the clause covers voluntary payments and recoveries and ties credit to the relevant tax year, while procedural mechanisms, definition of tax year, and treatment on reassessment are left to subordinate rules.
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    Advance tax default: three independent triggers establish deemed default and activate statutory consequences for noncompliance.
    Clause 409 deems a taxpayer in default for advance tax where the taxpayer fails to: pay an instalment specified by an Assessing Officer by the due date; send an intimation of revised liability to the Assessing Officer by the date an unpaid instalment becomes due; or pay advance tax based on the taxpayer's own estimate of current income. The clause frames these three independent triggers as grounds for deeming default, thereby activating statutory consequences such as interest, penalties, and recovery measures.
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    Advance tax instalment schedule: staged payments and a single-instalment rule for presumptive taxpayers streamline compliance and revenue flow.
    Clause 408 requires assessees to pay advance tax in staged instalments during the tax year, with progressive minimum thresholds and specified due dates, and treats amounts paid on or before the last day of the tax year as advance tax. It provides a single-instalment exception for presumptive taxpayers and cross-references the statutory computation provision for determining current income, while updating terminology and certain cross-references that will require harmonisation with other provisions.
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    Advance tax orders: AO may require payment based on the higher of assessed or returned income, with taxpayer estimation rights.
    Clause 407 authorises the Assessing Officer to order advance tax from persons already assessed, specifying a specified sum-the higher of the latest assessed income or subsequently returned income-and an instalment schedule, with such orders and any amendments requiring accompanying notices of demand and adherence to prescribed timing and procedural safeguards.
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    Advance tax self assessment: Bill emphasizes taxpayer initiated instalments and mid year revision, shifting reliance onto voluntary compliance.
    Clause 406 requires every person liable to pay advance tax to self assess and remit instalments based on the specified sum, defined as the assessee's estimate of current income, calculated by the cross referenced methodology and paid by statutory due dates; taxpayers may increase or reduce subsequent instalments to accord with revised estimates, while the clause itself does not set out administrative order powers.
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    Advance tax computation: formula-based method clarifies net tax after TDS/TCS credits and tightens credit conditions.
    Clause 405 adopts a formulaic computation of advance tax: A = B - C, where B is tax on the "specified sum" and C is TDS/TCS deductible only if the income is included in the specified sum and the deductor/collector has actually credited/paid or received/debited the income post deduction/collection. Net agricultural income is included by reference to assessing officer orders or the assessee's estimate as applicable. The clause modernises drafting and omits the prior HUF specific provision, raising potential gaps.
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    Advance tax liability retained; payable during the tax year when computed tax meets the statutory threshold, preserving continuity.
    Clause 404 requires payment of advance tax during the tax year when the amount of tax "as computed under this Part" for that year reaches the statutory threshold, linking liability to the year of income accrual, incorporating deductions, exemptions and set offs in computation, and using the threshold to exclude small liabilities from procedural advance payments.
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    Advance tax liability clarified: pay tax on current income during the tax year, with a narrow senior citizen exemption.
    Clause 403 requires payment of advance tax during the tax year on an assessee's current income, defined as the total income chargeable to tax for that tax year, and exempts resident individuals aged sixty or above who have no income under "Profits and gains of business or profession." The provision replaces earlier temporal terms with "tax year" and references mechanisms within "this Part," indicating structural reorganization and necessitating clear definitions and transitional guidance.
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    PAN non compliance increases withholding and collection rates and invalidates declarations, expanding PAN obligations to both TDS and TCS.
    Clause 397(2) mandates furnishing and quoting of PAN by deductees and collectees, invalidates certain declarations and applications where PAN is absent, and requires deductors/collectors to apply prescribed higher rates of TDS and TCS in the absence of PAN. The clause covers both TDS and TCS, provides exemptions for specified non resident scenarios and specified payments, caps TDS on certain rent payments at the last month's rent, and emphasizes comprehensive documentation and reporting obligations to enhance traceability and enforcement.
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    Centralized processing of withholding statements enables automated determination and intimation of amounts payable or refundable.
    Centralized processing creates an automated, unified mechanism for TDS and TCS statements, including correction statements, requiring rectification of arithmetical errors and apparent incorrect claims, computation of interest and fees on adjusted amounts, adjustment against prior payments, issuance of an intimation within one year from the end of the tax year, and grant of refunds; the Board may establish a centralized processing scheme and must address interpretive gaps such as the undefined scope of "incorrect claim apparent" and the tax year/financial year distinction.
    Act RulesBills
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    Tax Deduction and Collection Account Number mandated for deductors and collectors to enhance tracking and reporting under the new bill
    Clause 397(1) requires every person responsible for deducting or collecting tax to apply for and, when allotted, quote a Tax Deduction and Collection Account Number (TDCAN) in all prescribed TDS/TCS documents; it prevents duplication, allows prescribed timelines and forms, and provides targeted exemptions including notified persons and categories cross referenced to other provisions.
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    Deemed assessee in default: consolidated TDS/TCS consequences including interest, asset charge, and conditional relief.
    Clause 398 deems persons required to deduct or collect tax who fail to deduct, collect, or remit to be assessee in default, subject to interest, recovery and a statutory charge on assets. A conditional exception applies where the payee has reported and paid the income tax and an accountant's certificate in the prescribed form is furnished; interest is bifurcated between pre-collection and post-collection periods and must be paid before filing the relevant statement. The clause sets a limitation period for default orders and requires satisfaction of good and sufficient reasons before penalties are imposed.
    Act RulesBills
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    TDS/TCS reporting modernization: unified mandates for remittance, verified statements, non-resident reporting and six-year corrections.
    Clause 397(3) mandates that every person responsible for deduction or collection, including employers and designated government officers, remit deducted or collected tax to the Central Government within prescribed timelines and furnish verified statements in prescribed forms; it requires the prescribed authority to issue statements to buyers/licensors/lessees, mandates reporting of payments to non-residents irrespective of taxability, recognises a six-year correction window for statement amendments, compels specified financial institutions to file statements for certain payments, and preserves liability where tax collection fails.
    Act RulesBills
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    Lower TCS certificates permit reduced collection when taxpayer income justifies it, with mandatory certified issuance and electronic processes.
    Clause 395(3) permits buyers, licensees or lessees to apply to the Assessing Officer for collection of tax at a lower rate where the AO is satisfied that the applicant's total income justifies lower collection; the AO issues a certificate specifying the reduced rate and validity, subject to rules and to cancellation after hearing. Clause 395(4) requires every person deducting or collecting tax to issue a certificate to the deductee or collectee specifying the amount, rate and other prescribed particulars within prescribed timelines, with electronic issuance anticipated.
    Act RulesBills
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    Tax collection at source: consolidated TCS framework aligns rates, preserves declaration exemptions and prevents double collection.
    Clause 394 consolidates TCS rules into a table specifying liable collectors, receipt categories, tiered rates and timing (earlier of debit or payment), retains a declaration based exemption for residents using goods for manufacturing/processing/production or power generation with prescribed duplicate filings and reporting, incorporates anti overlap safeguards preventing double collection on remittance and tour package transactions, and adopts existing definitions for forest produce while omitting certain granular definitions and the lower/nil TCS certificate mechanism pending further rulemaking.
    Act RulesBills
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    PAN furnishing requirement: higher withholding rates apply where PAN is not provided, with specified carve-outs for non-residents.
    Clause 397(2) requires recipients and payers of amounts subject to TDS/TCS to furnish and quote a valid PAN; failure to do so triggers withholding or collection at enhanced statutory rates, invalidates declarations or applications for lower or nil deduction absent PAN, and mandates PAN disclosure in all transactional documents, while providing specified exemptions for certain non-residents and a cap on TDS for rent in defined cases.
    Act RulesBills
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    TDS/TCS reporting obligations expanded: mandatory electronic payment, verified statements, correction window and liability for non-collection.
    Clause 397(3) requires prompt payment of tax deducted or collected to the Central Government and the furnishing of verified statements in prescribed forms and manner. It expands reporting to include payments to non-residents, special procedures for government remittances without challans, and interest payments below thresholds by specified entities. The clause permits correction statements within six years and imposes liability to pay where tax is not collected, while delegating operational details to prescribed authorities and mandating electronic filing and verification.
    Act RulesBills
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    Bar against direct demand protects assessees from paying tax already deducted at source, placing recovery obligations on the deductor.
    A statutory bar prevents authorities from calling an assessee to pay tax to the extent tax has been deducted at source: Clause 401 of the 2025 Bill mirrors Section 205 of the 1961 Act by protecting the assessee where tax was actually deducted, limiting liability "to the extent" of deduction and leaving recovery, penalties, and prosecution against the deductor for any non deposit.
    Act RulesBills
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    Person responsible for paying: allocation of TDS/TCS duties to payers, principal officers, authorised remitters and government payors.
    Clause 402(27) designates the person responsible for paying for TDS/TCS according to payment type and payer status: employers (and company principal officers) for salaries; payers (and company principal officers) for interest and other chargeable sums; authorised persons for remittances to NRIs; payers for reporting payments to non-residents irrespective of chargeability; and drawing and disbursing officers (or the actual payor) for government payments, with cross-references to FEMA and updated agent definitions.

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      Amendments to the Code of Civil Procedure, 1908 by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002 upheld by the Supreme Court.

      9 June, 2022

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      2002 (10) TMI 796 - Supreme Court

      Amendments  to the Code of Civil Procedure, 1908 by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002 upheld by the Supreme Court.

      Certain writ petitions have been filed seeking to challenge Amendments made to the Code of Civil Procedure, by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002.

      Writ Petition (civil) 496 of 2002 was filed by Salem Advocate Bar Association and after notice was issued the petitioner sought leave of this Court to withdraw the writ petition. The court declined the request to withdraw the writ petition. The petition had been filed in public interest.


      The amendments sought to be made by the above amendment acts (Amendment Act 46 of 1999 and Amendment Act 22 of 2002) have been challenged but the hon'ble apex court refused to strike down the aforesaid amendments on the ground that there was no infirmity in the same.

      Summons to the Defendant within 30 days.

      A clarification was sought on an amendment made to Section 27 dealing with summons to the defendant. It has to be done within 30 days from the date of the institution of the suit. The hon'ble court clarified that object of this section is to avoid long delay in issue of summons for want of steps by the plaintiff. If all that is required to be done by a party is duly performed then compliance has been done by the party and no fault can be attributed to the party. The objective being, if a party concerned has taken steps to file the process fee along with completing the other formalities which are required to enable the court to issue the summons then such a party is not at fault.

      Arbitration, Conciliation, Judicial Settlement and Mediation.

      Section 89 introduced in the Code of civil procedure, 1908:

      It speaks of settlement of disputes outside the court through arbitration,conciliation, judicial settlement including settlement through Lok Adalat and mediation. Held that it being imperative that resort should be had to Alternative Dispute Resolution Mechanism with a view to bring to an end litigation between the parties at an early date. The parties shall follow the procedures as provided by the mechanism and accordingly appropriate rules be framed with regard to mediation.

      The ADR mechanism is successful in most of the countries but if a matter is not settled through conciliation or mediation or judicial settlement despite efforts being made, the case will ultimately go to trial.

      Section 89 is a new provision and even though arbitration or conciliation has been in place as a mode for setting the disputes, this has not really reduced the burden on the courts. Thus the court suggested that certain modalities have to be framed to make this amendment work. It being suggested to form a Committee to ensure that the amendments made become effective and result in quicker dispensation of justice.
      Any creases which require to be ironed out can be identified and apprehensions which may exist in the minds of the litigating public or the lawyer's clarified.

      A model case management formula as well as rules and regulations which should be followed while taking recourse to the ADR (Alternative Dispute Resolution) is referred to in Section 89. The model rules, with or without modification, which are formulated may be adopted by the High Courts concerned for giving effect to Section 89(2)(d).

      Intra Court Appeal.

      Section 100A which deals with intra-court appeals was absolutely fine as opined by the hon'ble court. No prejudice would be caused to the litigants by not providing for intra-court appeal, even where the value involved is large. The High Court by Rules, can provide that the Division Bench will hear the regular first appeal. A further right of appeal where the amount involved is nominal to a Division Bench will be increasing the workload of courts unnecessarily.

      Rejection of the Plaint.

      Order 7 Rule 11 to which Clauses (e) and (f) have been added which enable the court to reject the plaint where it is not filed in duplicate or where the plaintiff fails to comply with the provisions of Rule 9 of Order 7. There may not be an automatic rejection of the plaint at the first instance. The court should give an opportunity to rectify the defect and if the same not being done the court will have the liberty or the right to reject the plaint.

      Examination of Chief of the Witnesses.

      Order 18, Rule 4 has been substituted and Sub-rule (1) provides that in every case examination-in-chief of the witnesses shall be on affidavits and copies thereof shall be supplied to the opposite parties by the party who calls them for evidence.

      It being contended that it may not be possible for the party calling the witness to compel the witness to file an affidavit. It often happens that the witness may not be under the control of the party who wants to rely upon his evidence and that witness may have to be summoned through court.

      Order 16 Rule 1 provides for list of witnesses being filed and summons being issued to them for being present in court for recording their evidence. Rule 1A, on the other hand, refers to production of witnesses without summons where any party to the suit may bring any witness to give any evidence or to produce documents.

      Held by the apex court, reading the provisions of Order 16 and Order 18 together it appears to us that Order 18 Rule 4(1) will necessarily apply to a case contemplated by Order 16 Rule 1A, i.e. where any party to a suit, without applying for summoning under Rule 1 brings any witness to give evidence or produce any document. In such a case, examination-in-chief is not to be recorded in court but shall be in the form of an affidavit.

      Held that whether a witness shall be directed to file affidavit or be required to be present in court for recording of his evidence is a matter to be decided by the court in its discretion having regard to the facts of each case.

      Evidence of a witness to be taken by the Court or by the Commissioner.

      Order 18 Rule 4(2) gives the court the power to decide as to whether evidence of a witness shall be taken either by the court or by the Commissioner.

      An apprehension was raised to the effect that the court has no discretion and once it decides that the evidence will recorded by the Commissioner then evidence of other witnesses cannot be recorded in court.

      The hon'ble bench did not agree to the above contention. The Court has a discretion to either record the evidence in Court or through Commissioner or either of them.

      Order 18 Rule 4(3) provides that the evidence may be recorded either in writing or mechanically in the presence of the Judge or the Commissioner. The use of the word 'mechanically' indicates that the evidence can be recorded even with the help of the electronic media, audio or audio-visual, and whenever the evidence is recorded by the Commissioner it will be advisable that it should be done simultaneously,at least an audio recording of the statement of the witnesses so as to obviate any controversy at a later stage.

      Held by the court that Rule 17A has been deleted by the Amendment Act, 2002 with a view that unnecessarily applications are not filed primarily with a view to prolong the trial. The contention of the counsel as to deletion may cause hardship to the litigants was not accepted by the hon'ble court.

      Memorandum of Appeal.

      Rule 9 which was inserted in Order 41 states of "Registry of memorandum of appeal". The court from whose decree an appeal lies shall entertain the memorandum of appeal and shall endorse thereon the date of presentation and shall register the appeal in a book of appeal kept for that purpose. This book be called the register of appeal.
      It being a clear proposition of law that an appeal is to be filed under Order 41 Rule 1 in the court in which it is maintainable.

      Order 41 Rule 9 contemplates that a copy of memorandum of appeal which has been filed in the Appellate Court should also be presented before the court against whose decree the appeal has been filed and endorsement thereof shall be made by the decreeing court in a book called the Register of Appeals.

      The intention of the Legislature being that the court against whose decree an appeal has been filed should be made aware of the factum of the filing of the appeal which may or may not be relevant at a future date.

      Now just because a memorandum of appeal is not filed under Order 41 Rule 9 will not, to our mind, make the appeal filed in the appellate court as a defective one.

      The hon'ble court  hoped that the amendments made in the Code of Civil Procedure would help in expeditious disposal of cases in the trial courts and the appellate courts.

      The hon'ble apex court further held, that a copy of the judgment of the present matter/writ petition be sent to the Registrars of all the High Court’s so that necessary action can be taken by the respective High Courts and any writ petition pending in those High Courts can be formally disposed of.

      Thus the amendments made to the Code of Civil Procedure, 1908 by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002 were upheld/guarded by the hon'ble apex court in the present Writ Petition (civil) 496 of 2002.

      Procedure is an enabling tool to achieve the objectives of equity and justice. It may not be easy to challenge the same by way of invoking the writ jurisdiction/s.

       

       


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      2002 (10) TMI 796 - Supreme Court

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