All developed economies of the world strive to move towards voluntary compliance of tax payment. However, a few assesses do fall into the category of defaulters, compelling the Tax Authorities to adopt coercive modes of recovery. The role of Tax Recovery Officer (TRO) becomes very crucial in this regard. Section 222 of Income Tax Act, 1961 provides that the TRO will draw a certificate in a prescribed form under his signature specifying the amount of arrears due from the assessee-in-default. It is also provided that the TRO shall proceed to recover the arrears in one or more of the following modes in accordance with the Rules laid down in Second Schedule. These modes are:
(a) Attachment and Rule of Moveable Property
(b) Attachment and rule of Immovable Property
(c) Arrest the assessee and his detention in
prison (civil)
(d) Appointing a receiver to manage assessee’s
properties.
In the present scenario
of mounting arrears, the power of the TRO to arrest the assessee and put him in
detention in civil prison becomes important. Arrest and detention are invasions
on human liberty and, hence, such powers are not to be resorted to frequently
and routinely. The modalities are contained in part-V
of Schedule II of the Income Tax Act, 1961 enshrined in Rules 73 to 81.
Section 222 of the Income Tax Act, 1961 gives power to TRO to arrest a defaulter. For this purpose, he has to take necessary steps as per the rules laid down in Second Schedule of the Act and also follow the relevant provisions of Criminal Procedure Code (Cr PC). Such steps are to be taken in five stages. These are as under:
B. Enquiry before arrest;
C. Arrest of defaulter;
D. Detention of defaulter;
E. Release of defaulter;
Recording of Reasons is mandatory for
following :
(a) issue of a show cause notice;
(b) issue of an arrest warrant; and
(c) ordering detention in Civil prison.
Difference between detention and arrest
There is a difference between a detention and an arrest because rights
of the defaulters change drastically from one to the other. In arrest the TRO
can direct the person of the defaulter to be produced before him by issuing
I.T.C.P. 26 who can be released as provided under Schedule II Part V Rule 73,
if the defaulter pays the amount entered in the warrant of arrest as due and
the costs of the arrest to the officer arresting him. On the other hand, for
detention of the defaulter in the civil prison the TRO has to issue notice in
I.T.C.P 27.
No authority other than
the TRO has the powers of arrest and detention
Under Section 222 of the
Income Tax Act and Rules made thereunder, no authority other than the TRO has
the powers of arrest and detention. Such powers shall be used in judicious
manner, though there is a presumption in R. 82 that a TRO or any officer acting
under Schedule II exercises his powers in a judicious manner within the meaning
of the Judicial Officers Protection Act 1850 (18 of 1850). In a case where the
TRO has exceeded his jurisdiction or has acted against conditions specified in
Rules 73 to 81 in a reckless manner, he will be personally liable for damages
caused by an illegal order.
Part-V of Schedule II of
the Income Tax Act, 1961
[1] Notice to show
cause [Rule 73 of Part-V of Schedule II of the Income Tax
Act, 1961]
Rule 73 (1) Provides that no order for the arrest and
detention in civil prison of a defaulter shall be made unless the Tax Recovery
Officer is satisfied, for the reason recorded in writing and has issued and
served a notice upon the defaulter calling upon him to appear before him on the
date specified in the notice and to show cause why he should not be committed
to the civil person.
Text of Rule 73 of Part-V of Schedule II of the Income Tax
Act, 1961
Notice to show cause.
(1) No order for the arrest and
detention in civil prison of a defaulter shall be made unless the Tax
Recovery Officer has issued and served a notice upon the defaulter
calling upon him to appear before him on the date specified in the notice
and to show cause why he should not be committed to the civil prison, and
unless the Tax Recovery Officer for reasons recorded in writing is
satisfied –
(a) That the
defaulter, with the object or effect of obstructing the execution of the
certificate,
has, after
the drawing up of the certificate by the Tax Recovery Officer, dishonestly
transferred,
concealed or removed any part of his property; or
(b) That the defaulter has, or has
had since the drawing up of the certificate by the Tax
Recovery
Officer, the means to pay the arrears or some substantial part thereof and
refuses or
neglects or has refused or neglected to pay the same.
(2) Notwithstanding anything contained in sub-rule (1), a warrant for the
arrest of the defaulter may be issued by the Tax Recovery Officer if the
Tax Recovery Officer is satisfied, by affidavit or otherwise, that
with the object or effect of delaying the execution of the
certificate the defaulter is likely to abscond or leave the local limits
of the jurisdiction of the Tax Recovery Officer.
(3) Where appearance is not made in obedience to a notice issued and
served under sub-rule (1), the Tax Recovery Officer may issue a warrant
for the arrest of the defaulter.
(3A) A warrant of arrest issued by a Tax Recovery Officer under sub-rule
(2) or sub-rule (3) may also be executed by any other Tax Recovery
Officer within whose jurisdiction the defaulter may for the time being be
found.
(4) Every person arrested in pursuance of a warrant of arrest
under this rule shall be brought before the Tax Recovery Officer issuing
the warrant as soon as practicable and in any event within twenty-four
hours of his arrest (exclusive of the time required for the journey) :
PROVIDED that, if the defaulter pays the amount entered in the warrant of
arrest as due and the costs of the arrest to the officer arresting him,
such officer shall at once release him.
Explanation : For the purposes of this rule, where the
defaulter is a Hindu undivided family, the Karta thereof shall be deemed
to be the defaulter.
Show
cause notice to defaulter
After it has been found that the
defaulter is not cooperating in payment of certified demand and all steps taken
by TRO to persuade him have failed and other measures taken for recovery by attachment
of his bank accounts and movable and immovable properties has not resulted in
recovery of entire certified demand, this mode may be adopted. However, before
taking this extreme step, TRO should ensure correctness of the certified demand
after making all necessary verification from assessment record and giving
credit for payment of taxes.
Rule 73(2) Provides that a warrant for arrest of the
defaulter may be issued if the TRO is satisfied by affidavit or otherwise that
the defaulter is likely to abscond or move away from the area of jurisdiction
of the TRO.
When Notice under Rule 73(1) can be
dispensed with:-
Rule
73(2) provides for issue of show cause notice under Rule 73(1) to be dispensed
with if TRO is satisfied, (by an affidavit or otherwise) that-
(i)
defaulter is likely to abscond or
(ii)
defaulter is likely to leave the local
limits of TRO’s jurisdiction and
(iii)
such likelihood is with the object or has
effect of delaying execution of the certificate,
Rule 73 (3) provides that when the defaulter does not appear
in response to a notice u/R 73(1), the TRO may issue a warrant.
Rule 73 (3A) Provides that when the defaulter moves away from
the jurisdiction of the TRO, a warrant can be issued by the TRO to the other
TRO having jurisdiction over the area where the defaulter has moved to.
Rule 73 (4) Provides that the arrested defaulter has to be
produced before the TRO, who issued the warrant within twenty-four hours,
excluding the travel time. Provided that if the defaulter pays the amount of
tax referred to in the warrant, he shall be released.
Rule
73 of Second Schedule requires issuing show cause notice to the defaulter after
recording of reasons for resorting to this mode of recovery.
As
per Rule 73, no order for the arrest and detention in Civil prison of a
defaulter shall be made unless TRO has issued and served a notice under ITCP 25
upon defaulter calling upon defaulter to appear before him on the date
specified in the notice and to show cause why he should not be committed to
civil prison. Before issuing this notice, TRO has to record reasons bringing
out his satisfaction that:
(i)
defaulter with the object or effect of
obstructing the execution of TRC, has dishonestly transferred, concealed, or
removed any part of his property or
(ii)
defaulter has means to pay the arrears in
full or in part and refuses or neglects to pay the same.
The show cause is not required if TRO is
satisfied for reasons to be recorded in writing that defaulter is likely to
abscond or leave local limits of jurisdiction of TRO for delaying the execution
of TRC. In such circumstance, warrant for arrest of defaulter may be issued
immediately.
Where
defaulter does not appear in response to ITCP 25, TRO may issue a warrant for
his arrest.
A
warrant issued as per Rule 73 may also be executed by any other TRO within
whose jurisdiction defaulter may be found. A person arrested in pursuance of a
warrant of arrest under this Rule shall be brought before TRO issuing the
warrant as soon as practicable and in any event within twenty-four hours of his
arrest (exclusive of the time required for the journey). If defaulter pays the
amount entered in the warrant of arrest as due and the costs of the arrest to
the officer arresting him, such officer shall release him forthwith.
Under
Rule 73 it has been clarified, where defaulter is a Hindu undivided family, its
karta shall be deemed to be the defaulter.
Therefore,
it is desirable that TRO, before taking steps to start this mode of recovery,
should ensure that a speaking order giving sufficient cause should be passed
refusing to continue the stay. If any stay has been granted by the Assessing
Officer under section 220(6) or if any stay granted by the higher authority
such as, Addl. CIT/JCIT or Pr. CIT, continues, then, the stay has to be revoked
in consultation with them.
In
case of stay by CIT(A), Tribunal or High Court, no warrant for arrest can be
issued. However, if any information is gathered by TRO that defaulter is using
such stay period, to dispose of his assets to show that he has become man of no
means to avoid payment of any tax in future, immediate steps should be taken by
TRO to make application to the concerned authority/ court that has granted stay
to get it vacated and then immediately start recovery proceeding under this
mode after vacation of stay order.
Proclamation
for person absconding
A
person is said to be absconding, if he hides himself to avoid service of
notice. It has been held in M. Srinivasa Ayyargarv. Queen, 4 Mad. 393
that if a person concealed himself before the process was issued and continued
to remain so thereafter, he absconds. Absconding to avoid service of notice is
offence under section 172 of the Indian Penal Code.
If
TRO is satisfied that the defaulter is absconding, he should publish a written
proclamation under Section 87 of Criminal Procedure Code (herein after referred
as CrPC), requiring the defaulter to appear before him at a specified time and
place. The time given for appearance should not be less than thirty days from
the date of publishing the proclamation; otherwise the proclamation would be
illegal as held in Jogdav Khan v. Emperor, AIR 1948, Lah.151.
After
publishing the proclamation in the aforesaid manner, TRO has to record a
statement in writing to the effect that the proclamation was duly published on
a specified day. Such a statement shall be conclusive evidence that the
requirements of Section 87 (Cr PC) have been complied with and that the proclamation
was published on such a day [sub-Section (3), Section 87). If TRO fails to
record the statement about due publishing of the proclamation, there will be no
proclamation according to law. Strict compliance with the provisions is
necessary. [Parmar Lajubha Karnubha v. State A.I.R. 1954 Sau. 145].
Failure
to appear in response to the proclamation is an offence punishable under section 174 of the Indian Penal Code [Allah Baksh v.
Empress 28 P.R. 1890]
Text of Section 174 of Indian Penal Code, 1860
Non-attendance in obedience to an order from public servant
Whoever, being legally bound to attend in person or by an
agent at a certain place and time in obedience to a summons, notice, order, or
proclamation proceeding from any public servant legally competent, as such
public servant, to issue the same, intentionally omits to attend at that place
or time, or departs from the place where he is bound to attend before the time
at which it is lawful for him to depart, shall be punished with simple
imprisonment for a term which may extend to one month, or with fine which may
extend to five hundred rupees, or with both;
Or, if the summons, notice, order or proclamation is to
attend in person or by agent in a Court of Justice, with simple imprisonment
for a term which may extend to six months, or with fine which may extend to one
thousand rupees, or with both.
[2] Hearing [Rule 74 of
Part-V of Schedule II of the Income Tax Act, 1961]
Rule
74 provides hearing before TRO when defaulter appears before him in response to
a notice under rule 73. The TRO then gives defaulter an opportunity to show
cause why he should not be committed to civil prison.
Text of Rule 74 of Part-V of
Schedule II of the Income Tax Act, 1961
Hearing
74. When a defaulter
appears before the Tax Recovery Officer in obedience to a notice to show cause
or is brought before the Tax Recovery Officer under rule 73, the Tax Recovery
Officer shall give the defaulter an opportunity of showing cause why he should
not be committed to the civil prison.
Conducting enquiry before arrest
Under Rule 74 of Second Schedule, TRO shall give defaulter an
opportunity to show cause why he should not be committed to the civil prison.
As per Rule 75 of Second Schedule, pending the conclusion of the inquiry, TRO
may, in his discretion, order the defaulter to be detained in the custody of
such officer as TRO may think fit or release him on his furnishing security to
the satisfaction of TRO for his appearance when required. An enquiry is
required to be conducted as per the information provided by him to ascertain
his financial position to find out whether he is in position to pay taxes in
arrears.
Conducting enquiries
Certain types of enquiries that are required to be conducted
by the Tax Recovery Inspector are as under:
(i) Enquiry relating to properties of the defaulter -
Attachment and sale of the properties, movable and immovable,
of the defaulter is essential to recovery proceedings. Therefore, TRI must have
a correct and complete picture of the properties owned by defaulter. For this
purpose, both open and discreet enquiries are required to be conducted.
(ii) Enquiries about absconding defaulter -
When the defaulter facing recovery is difficult to locate, it
becomes the duty of TRI to ascertain defaulter’s where about.
(iii) Enquiries relating to write off of arrears -
Enquiries made in context of a proposal to write off the
arrears must essentially be directed towards the objective of ascertaining the
capacity of defaulter to pay arrears.
[3] Custody pending hearing [Rule 75 of Part-V of Schedule II of the Income Tax Act,
1961]
Rule 75 is regarding custody pending hearing. Pending the
conclusion of inquiry the TRO in his discretion orders either the detention of
the defaulter or for his release on the defaulter furnishing satisfactory
security.
Text of Rule 75 of Part-V of Schedule II of the Income Tax
Act, 1961
Custody pending hearing.
75. Pending the conclusion of the inquiry, the Tax Recovery
Officer may, in his discretion, order the defaulter to be detained in the
custody of such officer as the Tax Recovery Officer may think fit or release
him on his furnishing security to the satisfaction of the Tax Recovery Officer
for his appearance when required.
[4] Order of detention [Rule 76 of Part-V of Schedule II of the Income Tax Act,
1961]
Rule 76 is regarding order of detention. The TRO on
conclusion of the inquiry may pass an order of detention of the defaulter in
civil prison.
Text of Rule 76 of Part-V of Schedule II of the Income Tax
Act, 1961
Order of detention.
76. (1) Upon the conclusion of the inquiry, the Tax Recovery
Officer may make an order for the detention of the defaulter in the civil
prison and shall in that event cause him to be arrested if he is not already
under arrest:
PROVIDED that in order to give the defaulter an opportunity
of satisfying the arrears, the Tax Recovery Officer may, before making the
order of detention, leave the defaulter in the custody of the officer arresting
him or of any other officer for a specified period not exceeding 15 days, or
release him on his furnishing security to the satisfaction of the Tax Recovery
Officer for his appearance at the expiration of the specified period if the
arrears are not so satisfied.
(2) When the Tax Recovery Officer does not make an order of
detention under sub-rule (1) he shall, if the defaulter is under arrest, direct
his release.
[5] Detention in and release from prison [Rule 77
of Part-V of Schedule II of the Income Tax Act, 1961]
Rule 77 is regarding detention and release from prison. The
minimum period is for six weeks and the maximum period is of six months,
depending on the amount of demand in default.
Text of Rule 77 of Part-V of Schedule II of the Income Tax
Act, 1961
Detention in and release from prison.
77. (1) Every person
detained in the civil prison in execution of a certificate may be so detained,
-
(a) where the certificate is for a demand of
an amount exceeding two hundred and fifty rupees -for a period of six months,
and
(b) in any other case
- for a period of six weeks:
PROVIDED that he shall
be released from such detention -
(i) on the amount mentioned in the warrant for his detention being paid
to the officer-in-charge of the civil prison, or
(ii) on the request of the Tax Recovery
Officer on any ground other than the grounds mentioned in rules 78 and 79.
(2) A defaulter released from detention under this rule shall
not, merely by reason of his release, be discharged from his liability for the
arrears; but he shall not be liable to be rearrested under the certificate in
execution of which he was detained in the civil prison.
[6] Release [Rule 78 of Part-V of Schedule II of
the Income Tax Act, 1961]
Rule 78 is regarding
release of the defaulter. TRO may release the arrested and detained defaulter
if the later one discloses his property and places it at the disposal of the
TRO. But if the TRO has ground to believe that the disclosure of the property
is untrue, the TRO may re-arrest the defaulter. The period of detention however
will be governed by Rule 77.
Text of Rule 78 of
Part-V of Schedule II of the Income Tax Act, 1961
Release.
78. (1) The Tax Recovery Officer may order the release of a
defaulter who has been arrested in execution of a certificate upon being
satisfied that he has disclosed the whole of his property and has placed it at
the disposal of the Tax Recovery Officer and that he has not committed any act
of bad faith.
(2) If the Tax Recovery Officer has ground for believing the
disclosure made by a defaulter under sub-rule (1) to have been untrue, he may
order the rearrest of the defaulter in execution of the certificate, but the
period of his detention in the civil prison shall not in the aggregate exceed
that authorised by rule 77.
[7] Release on ground of illness [Rule 79 of
Part-V of Schedule II of the Income Tax Act, 1961]
Rule 79 is regarding
release on ground of illness. The illness must be serious, or the defaulter may
be in a state of bad health to be detained, or he is suffering from an
infections or contagious disease.
Text of Rule 79 of
Part-V of Schedule II of the Income Tax Act, 1961
Release on ground of illness.
79. (1) At any time after a warrant for the arrest of a defaulter
has been issued, the Tax Recovery Officer may cancel it on the ground of his
serious illness.
(2) Where a defaulter has been arrested, the Tax Recovery
Officer may release him if, in the opinion of the Tax Recovery Officer, he is
not in a fit state of health to be detained in the civil prison.
(3) Where a defaulter has been committed to the civil prison,
he may be released therefrom by the Tax Recovery Officer on the ground of the
existence of any infectious or contagious disease, or on the ground of his
suffering from any serious illness.
(4) A defaulter released under this rule may be rearrested,
but the period of his detention in the civil prison shall not in the aggregate
exceed that authorised by rule 77.
[8] Entry into dwelling house [Rule 80 of Part-V
of Schedule II of the Income Tax Act, 1961]
Rule 80 is regarding entry into a dwelling house which shall
be after sunrise and before sunset. A dwelling house shall not be broken open
subject to certain conditions.
Text of Rule 80 of Part-V of Schedule II of the Income Tax
Act, 1961
Entry into dwelling house.
80. For the purpose of
making an arrest under this Schedule—
(a) no dwelling house
shall be entered after sunset and before sunrise;
(b) no outer door of a
dwelling house shall be broken open unless such dwelling house or a portion
thereof is in the occupancy of the defaulter and he or other occupant of the
house refuses or in any way prevents access thereto; but, when the person
executing any such warrant has duly gained access to any dwelling house, he may
break open the door of any room or apartment if he has reason to believe that
the defaulter is likely to be found there;
(c) no room, which is
in the actual occupancy of a woman who, according to the customs of the
country, does not appear in public, shall be entered into unless the officer
authorised to make the arrest has given notice to her that she is at liberty to
withdraw and has given her reasonable time and facility for withdrawing.
[9] Prohibition against arrest of women or
minors, etc. [Rule 81 of Part-V of Schedule II of the Income Tax Act, 1961]
81. The Tax Recovery
Officer shall not order the arrest and detention in the civil prison of -
(a) a woman, or
(b) any person who, in
his opinion, is a minor or of unsound mind.
Text of Rule 81 of
Part-V of Schedule II of the Income Tax Act, 1961
Prohibition against arrest of women or minors, etc.
Rule 81 The Tax Recovery Officer shall not order the arrest
and detention in the civil prison of-- (a) a woman, or (b) any person who, in
his opinion, is a minor or of unsound mind.
Who can be Arrested
(i) Arrest
is normally possible only if defaulter is a natural person, i.e., a human
being.
(ii) In
the case of dissolved firm, discontinuance of business by a firm or disruption
of HUF, the Act fixes the tax liability on partners of firm and members of HUF
and as such, if they are in default they can be arrested.
(iii) Likewise
in the case of liquidation of companies, the liquidators (Section 178) and
Directors of Private companies in liquidation (Section 179) may also be
arrested to recover the demand to the extent they are made personally liable
for payment.
(i) By virtue of Rule 81 of Second Schedule, women,
minors and persons of unsound mind are exempt from arrest.
(ii)
Legal heir of a deceased defaulter, unless the
legal heir is personally liable under section 159(4), or the legal heir has appeared before
the TRO in response to the notice by the TRO and has submitted to the TRO's
jurisdiction.
(iii) Member or
manager of HUF cannot be arrested or detained for the default of HUF but the
Karta of the HUF shall be deemed to be the defaulter for the arrears of the
HUF. [refer- Kapurchand Shrimal v. TRO (1969) 72 ITR 623 (SC)]
(iv)
Partners of a partnership firm unless the name of
the partner appears in the TRC. [refer- S. M. Ibrahim v. Dy Collector Sales
tax (1978) CTR 356 (All)]
(v)
Power of detention and arrest can be exercised only
in respect of arrears under the Income Tax Act and not under other Acts (like
Travancore Act) unless so provided thereunder. [refer- Annamma Kunjacko v.
Tax Recovery Officer (1967) 64 ITR 85 (Ker.)]
(vi)
Entities other than individuals as
defined in Section 2(31) of the Act unless specifically made responsible under
the Act for discharging the tax liability.
(vii) If
the individual defaulter has died after the commencement of recovery
proceedings, his legal heir(s) cannot be arrested as per Rule 85 of Second
Schedule.
(viii) Under
Section 135 of the CPC (i) no Judge, Magistrate or other judicial officer shall
be arrested under Civil process while going to, presiding in or returning from,
his court; and (ii) no person who is going to and returning from any tribunal
in connection with any litigation (with which such person is connected) pending
before such tribunal, shall be arrested. This exemption is, however, not
available, under Section 135(3) of the CPC to the judgment-debtor.
Section 135 of Code of Civil Procedure –
Exemption from arrest under civil
process.
(1) No Judge, Magistrate or other
judicial officer shall be liable to arrest under civil process while going to,
presiding in, or returning from his Court.
(2) Where any matter is pending before a
tribunal having jurisdiction therein, or believing in good faith that it has
such jurisdiction, the parties thereto, their pleader, mukhtars, revenue-agents
and recognized agents, and their witnesses acting in obedience to a summons,
shall be exempt from arrest under civil process other than process issued by
such tribunal for contempt of Court while going to or attending such tribunal
for the purpose of such matter, and while returning from such tribunal.
(3) Nothing in sub-section (2) shall
enable a judgment-debtor to claim exemption from arrest under an Order for
immediate execution or where such judgment-debtor attends to show cause why he
should not be committed to person in execution of a decree.
When Arrest can be made
(i) Non- Compliance of Show Cause Notice
If a defaulter does not appear before TRO, he
may issue a warrant of arrest as per Rule 73(3). Failure to appear in response
to the proclamation is an offence punishable under Section 174 of the Indian
Penal Code, 1860.
Text
of Section 174 Indian Penal Code, 1860
Non-attendance
in obedience to an order from public servant
Whoever,
being legally bound to attend in person or by an agent at a certain place and
time in obedience to a summons, notice, order, or proclamation proceeding from
any public servant legally competent, as such public servant, to issue the
same, intentionally omits to attend at that place or time, or departs from the
place where he is bound to attend before the time at which it is lawful for him
to depart, shall be punished with simple imprisonment for a term which may
extend to one month, or with fine which may extend to five hundred rupees, or
with both;
Or,
if the summons, notice, order or proclamation is to attend in person or by agent
in a Court of Justice, with simple imprisonment for a term which may extend to
six months, or with fine which may extend to one thousand rupees, or with both.
When
a defaulter appears before TRO in response to a show cause notice or is brought
before TRO under Rule 73, TRO shall give defaulter an opportunity of making
payment of certified demands, failing which TRO may issue a warrant of arrest
as per Rule 73(3).
Procedure for Preparation of Arrest
Warrant
§ Warrant
of arrest shall be issued in ITCP 26.
§ It
must bear the seal and signature of TRO.
§ It
is a public document and affects the personal liberty of the subject; as such,
any laxity of proof might have serious consequences.
§ A
warrant must clearly identify the person to be arrested. It must also specify
the offence charged.
§ It
should not be general (as to say, authorizing all defaulters to be arrested).
§ Similarly,
blank warrants are illegal, warrant which contains the name of the defaulter in
the margin and not in its body is illegal.
§ A
warrant containing a wrong description of defaulter cannot be executed.
§ A
warrant cancelled cannot be re-issued (In Re Guru Charan Aich 1 CWN 650).
§
A warrant of arrest must show the name
and designation of the person to whom it is issued for execution. If it is not
shown, the same is defective and the rescue of a person arrested on such
defective warrant is not an offence under section 225B of IPC.
§
Liability under the Act being of a civil
nature, TRO can address warrant of arrest to any person, not necessarily a
police officer. It is, however, desirable that such warrants are addressed to Tax
Recovery Inspector.
§
Where the judgment debtor is to be
arrested under Rule 37, (Order XXI of CPC), warrant is addressed for being
executed by the bailiff of the court.
§
The officer executing warrant must have
the warrant in his possession at the time of arrest. The warrant is the
justification of arrest by the officer and should not be parted with.
§
Section 80 of the CPC lays down that a
person executing a warrant of arrest shall notify the substance thereof to the
person arrested and if so required, shall show him the warrant.
§
A public servant executing a warrant of
arrest, who does not notify as required by this section, will not be
discharging his functions in a manner authorized.
Text of Rule 37 Order XXI of Code of Civil Procedure 1908
Discretionary power to permit judgment
debtor to show cause against detention in prison
(1) Notwithstanding anything in these
rules, where an application is for the execution of a decree for the payment of
money by the arrest and detention in the civil prison of a judgment-debtor who
is liable to be arrested in pursuance of the application, the Court shall,
instead of issuing a warrant for his arrest, issue a notice calling upon him to
appear before the Court on a day to be specified in the notice and show cause
why he should not be committed to the civil prison :
PROVIDED that such notice shall not be
necessary if the Court is satisfied, by affidavit, or otherwise that, with the
object or effect of delaying the execution of the decree, the judgment-debtor
is likely to abscond or leave the local limits of the jurisdiction of the
Court.
(2) Where appearance is not made in
obedience to the notice, the Court shall, if the decree- holder so requires,
issue a warrant for the arrest of the judgment-debtor.
Prescribed procedure for making arrest
Second schedule has not prescribed procedure for making arrest. Therefore,
procedure as laid down in Section 80 of Cr PC should
be followed. Rule 80 of Schedule - II of the Income Tax Act, 1961 provides that
:
§
No dwelling house shall be entered after
sunset and before sunrise;
§
No outer door of a dwelling house shall
be broken open unless such dwelling house or a portion thereof is in the
occupancy of the defaulter and he or other occupant of the house refuses or in
any way prevents access thereto; but, when the person executing any such
warrant has duly gained access to any dwelling house, he may break open the
door of any room or apartment if he has reason to believe that the defaulter is
likely to be found there;
§
No room, which is in the actual occupancy
of a woman who, according to the customs of the country, does not appear in
public, shall be entered into unless the officer authorised to make the arrest
has given notice to her that she is at liberty to withdraw and has given her
reasonable time and facility for withdrawing.
§
Procedure for securing entry in premises
should be strictly complied with by the person executing warrant of arrest.
Before entry, it must be ensured that defaulter is present in the premises. An
outer door can be broken only if entry has been refused. Notice should be given
to the females that they are at liberty to withdraw from the premises intended
to be entered into and reasonable time should be allowed for withdrawal. An
oral announcement is sufficient notice in this regard.
§
If arrest is to be made from other places
e.g. shop, godown, hotel, private or public conveyance, the person executing
warrant of arrest may make the arrest by measures as may be convenient, prudent
and reasonable depending on the circumstances. No specific restriction is laid
down for entry into such places.
Action to be taken after arrest of
defaulter
§ Under
Rule 38 Order XXI of the CPC, the person arrested shall be brought before TRO
as soon as practicable and in any case within 24 hours from the time of arrest.
The provisions of Rule are imperative and TRO is duty bound to ensure
compliance.
§ Rule
74 has to be read along with Rule 73(1) & (2).
§ No
order for committing the arrested defaulter to civil prison can be passed
unless TRO is satisfied that on any of the grounds set forth in Rule 73(1) or
(2), defaulter requires to be sent to civil prison.
§ Burden
of proof in this regard lies on TRO.
§ If
defaulter pays the amount shown as payable in the arrest warrant, together with
the cost of arrest, the arresting officer shall at once release him from
custody.
§ Pending
conclusion of inquiry, TRO may order defaulter to be detained in custody of
such person as TRO thinks fit or release him on his furnishing security to his
satisfaction for defaulter’s appearance.
Text of Rule 38 Order XXI of Code of
Civil Procedure 1908
Warrant for arrest to direct
judgment-debtor to be brought up
Every warrant for the arrest of a
judgment-debtor shall direct the officer entrusted with its execution to bring
him before the Court with all convenient speed, unless the amount which he has
been ordered to pay, together with the interest thereon and the costs (if any)
to Which he is liable, be sooner paid.
Detention and Imprisonment
§ After
arrest of defaulter and completing enquiry under Rule 74, if TRO is satisfied
that detention of the defaulter is required, he will proceed under Rule 76.
§ Proviso
of Rule 76 gives one last opportunity to defaulter to pay the certified demand
before decision to send him to civil prison is taken.
§ In
order to enable him to satisfy the arrears, TRO may leave him in custody of the
arresting officer, or any other officer for a period not exceeding fifteen
days, or in the alternative, he may release the defaulter on his furnishing
adequate security (not his personal security) for his appearance on expiry of
the said period.
§ The
defaulter may pay the amount within this period; if not, TRO will pass an order
for detention of the defaulter in civil prison.
Release from Prison
§ Procedure
for release of defaulter are given in Rules 77 to 79.
§ Defaulter
may be re-arrested and sent to civil prison if TRO has reasons to believe that
the disclosure of property made by defaulter under Rule 78(1) was untrue or an
act of bad faith.
§ But
total period of imprisonment should be limited to the period prescribed in Rule
77(1).
Procedure on death of defaulter [Rule 90 of Part-VI of Schedule II of the Income Tax Act, 1961]
Under Rule 85, if at any time after the
TRC is drawn by TRO, defaulter dies, proceedings under Second Schedule (except
arrest and detention) may be continued against the legal heir(s) of defaulter
and these provisions shall apply as if legal representative were defaulter.
Text of Rule 85 of Part-VI of Schedule II of the Income Tax Act, 1961
Procedure on death of defaulter.
85. If
at any time after the certificate is drawn up by the Tax Recovery Officer the
defaulter dies, the proceedings under this Schedule (except arrest and
detention) may be continued against the legal representative of the defaulter,
and the provisions of this Schedule shall apply as if the legal representative
were the defaulter.
Subsistence allowance
[Rule 90 of Part-VI of Schedule II of the Income Tax Act, 1961]
Rule 90 of Second Schedule provides:-
(a) When a defaulter is arrested or detained in
the civil prison, the sum payable for subsistence of defaulter shall be borne
by TRO from the time of arrest until he is released;
(b) Such sum
shall be calculated on scale fixed by the State Government for subsistence of
judgment-debtors arrested in execution of a decree of a Civil Court;
(c) Sums
payable under this Rule shall be deemed to be costs of the proceeding but the
defaulter shall not be detained in the civil prison or arrested on account of
any sum so payable.
Text of Rule 90 of Part-VI of Schedule II of the Income Tax Act, 1961
Subsistence allowance.
90. (1)
When a defaulter is arrested or detained in the civil prison, the sum payable
for the subsistence of the defaulter from the time of arrest until he is
released shall be borne by the Tax Recovery Officer.
(2) Such sum shall be calculated on the
scale fixed by the State Government for the subsistence of judgment-debtors
arrested in execution of a decree of a civil court.
(3) Sums payable under this rule shall be
deemed to be costs in the proceeding:
PROVIDED that the defaulter shall
not be detained in the civil prison or arrested on account of any sum so
payable.
In this regard, Rule 54 of Income-tax (Certificate Proceedings) Rules, 1962 states
that the subsistence allowance shall be supplied by TRO by monthly instalments
in advance before the first day of each month. First payment shall be released
to TRO for such portion of current month as remains unexpired before the
defaulter is committed to the civil prison, and subsequent payment (if any)
shall be made to the officer in charge of the civil prison.
ARREST
AND DETENTION
53.
Prison in which defaulter may be detained:-
A person against whom an order of
detention has been passed under Part V of the Second Schedule may be detained
in the civil prison of the district in which the office of the Tax Recovery
Officer ordering the detention is situate, or, where such civil prison does not
afford suitable accommodation, in any other place which the State Government
may appoint for the detention of persons ordered by the civil courts of such
district to be detained.
(1) The subsistence
allowance shall be supplied by the [Tax Recovery
Officer] by monthly installments in advance before the first day of each month.
(2) The first payment
shall be made to the Tax Recovery Officer for such portion of the current
monthasremains unexpired before the defaulter is committed to the civil prison,
and the subsequent payment (if any) shall be made to the officer in charge of
the civil prison.
The following Forms, which may be so
varied as the circumstances of each case may require shall be used for the
purpose mentioned against each:
(i) Form
No. ITCP 25, for issuing a notice to show cause why a warrant of arrest should
not issue under rule 73 of the principal rules;
(ii) Form
No. ITCP 26, for issuing a warrant of arrest under Part V of the principal
rules;
(iii) Form No.
ITCP 27, for issuing a warrant of detention under Part V of the principal
rules;
(iv) Form No.
ITCP 28, for issuing an order of release under rule 77 or rule 78 or rule 79 of
the principal rules.
List of forms to be used by Tax Recovery Officer
As per provisions of Second Schedule 49 and ITCP
Rules 50, various forms for taking action during recovery proceedings are as
under:
|
Form
No. I.T.C.P |
Subject-matter |
Relevant rule of the (ITCP) Rule |
Relevant rule of the Second Schedule |
|
I.T.C.P.
25 |
Notice to show cause why a warrant of
arrest should not be issued |
55(i) |
Rule 73 |
|
I.T.C.P.
26 |
Warrant of arrest |
55(ii) |
Rule 73 to 81 (Part V) |
|
I.T.C.P.
27 |
Warrant of detention in civil Prison |
55(iii) |
Rule 73 to 81 (Part V) |
|
I.T.C.P.
28 |
Order of release |
55(iv) |
77, 78 or 79 |
APPENDIX 45
FORM NO. I.T.C.P. 25
[See rule 73 of the Second Schedule to
the Income-tax Act, 1961]
Notice to show cause why a warrant of
arrest should not be issued
Office of the
Tax Recovery Officer, __
To
______________
______________
Whereas you have failed to pay the amount
of arrears specified in certificate No.____________ dated__________ [drawn up
by the undersigned/* the Tax Recovery Officer], _____________ a certified copy
of which has been forwarded by the said Tax Recovery Officer to the undersigned
under section 223(2) of the Income-tax Act, 1961, for recovery of arrears from
you and the interest payable under section 220(2) of the Income-tax Act, 1961
and it is proposed to execute the above certificate by arrest and imprisonment
of your person;
You are hereby required to appear before
the undersigned on the ___________ day of _______ at _______ A.M./P.M. and to
show cause why you should not be committed to the civil prison in execution of
the said certificate.
Given under my hand and seal at this
______ day of ___________ (SEAL) Tax Recovery Officer
* Score out portion in italics, if not applicable.
APPENDIX 46
FORM NO. I.T.C.P. 26
[See Part V of the Second Schedule to the
Income-tax Act, 1961]
Warrant of arrest Office of the Tax
Recovery Officer, ____________________________ To: ___________________
___________________ Whereas certificate No. _________________ dated
______________ was [drawn up by the *undersigned the Tax Recovery Officer for
recovery of arrears from ________________________ of
_________________________],
[defaulter]
[address]
and
the said Tax Recovery Officer has sent to the undersigned a certified copy of
the said certificate under section 223(2) of the Income-tax Act. 1961,
specifying that an amount of Rs.__________ is to be recovered from the
defaulter, and the sum of Rs.________ as noted
below is due from the said defaulter in respect of the said certificate:
Rs. P.
+ Certificate amount/Specified amount —
Cost and charges —
Interest
up to the date of issue of this warrant —
________
Total
________
and whereas the said sum of Rs.___________ has not
been paid in satisfaction of the said certificate;
These are to command you to arrest the
said defaulter and bring him before the undersigned as soon as practicable and
in any event within 24 hours of his arrest (exclusive of the time required for
the journey) unless the defaulter pays to you the said amount of Rs.__________
together with further interest on Rs.________ [at the rate of one and one-half
per cent per month or pan of a month] for the period commencing immediately
after the date of issue of this warrant and Rs._________ for the cost of
executing this process.
You are hereby further commanded to
return the warrant on or before the _________ day of _______ with an
endorsement certifying the day on which and the manner in which it has been
executed or the reason why it has not been executed. In case the defaulter is
not found within the jurisdiction of the undersigned, you are hereby authorised
to move the Tax Recovery Officer within whose jurisdiction the defaulter may
for the time being be found for executing this warrant.
Given under my hand and seal at ______ this day of
____
(SEAL)
Tax
Recovery Officer
* Score out portion in italics, if not applicable.
+ Delete inappropriate words.
APPENDIX 47
FORM NO. I.T.C.P. 27
[See Part V of the Second Schedule to the
Income-tax Act, 1961]
Warrant of detention in civil prison
Office of the
Tax Recovery Officer, _______
To
The Officer-in-charge of the Civil Prison of
________________
____________________
*Whereas ___________ has been brought
before the undersigned under a warrant in execution of certificate No. dated
_____________ [drawn up by the undersigned] for recovery of arrears from him;
*Whereas ____________ has been brought
before the undersigned under a warrant in execution of certificate No.
____________ dated _______________ [forwarded by the Tax Recovery Officer to
the undersigned], for recovery of arrears from him, a certified copy of which
has been forwarded to the undersigned under section 223(2) of the Income-tax
Act, 1961, specifying that an amount of Rs. ___________is to be recovered from
him;
And whereas he has not satisfied that
undersigned that he is entitled to be discharged from custody and has not paid
the amount due from him as detailed below:
Rs. P.
+ Certificate amount/Specified amount —
Cost and charges —
Interest up to the date of issue of this warrant —
_________
Total
_________
And whereas the undersigned is satisfied
that the said _________ should be committed to the civil prison and an order to
that effect has been passed by the undersigned on the __________ day of
____________.
You are hereby commanded and required to
take and receive the said _____ into the civil prison and to keep him
imprisoned therein for a period of __________or until the amount aforesaid
together with further interest on Rs. _________ [at the rate of one and
one-half per cent per month or part of a month] for the period commencing
immediately after the date of issue of this warrant payable under section
220(2) of the Income-tax Act, 1961, is paid to you or until you receive an
order of release horn the undersigned. The undersigned does hereby fix Rs.______
P _____ per diem (calculated under rule 90(2) of the Second Schedule to the
said act as the rate for subsistence allowance of the said _________ during his
confinement under this warrant.
Given under my hand and seal at
_____________this day of ____ .
(SEAL)
Tax Recovery Officer
*Score out whichever paragraph is not applicable.
+ Delete inappropriate words.
APPENDIX 48
FORM NO. I.T.C.P. 28
[See rules 77, 78 and 79 of the Second
Schedule to the Income-tax Act, 1961]
Order of release
Office of the
Tax Recovery Officer, _______
To
The Officer-in-charge of the Civil Prison
of __________
_________________________
Under orders passed this day, you are
hereby directed to forthwith set free ________ who is now in your custody as a
result of the warrant of detention issued by the undersigned on the
_______________ day of____________
Given under my hand and seal at _____
this _______ day of ______.
(SEAL)
Tax Recovery Officer
High Court explains Law related to Arrest for
Income Tax Default - Distinguishes between tax-recovery notice under Rule 73
& offence under section 276C; Dismisses ‘anticipatory bail’ plea
A notice was issued by the ACIT, the Tax
Recovery Office, Bengaluru under Rule 73 of Second Schedule directing M A
Zahid. Apprehending his arrest pursuant to the said communication, the assessee
approached the Addl. City Civil & Sessions Judge, Bangalore for grant of
anticipatory bail. The Sessions Judge having rejected the petition, the
assessee approached Karnataka High Court seeking protection from arrest under
section 438 of Cr.P.C.
The Revenue contended that objection raised by the assessee under
section 438 of Cr.P.C. is not maintainable against the show cause notice issued
under Rule 73 of the Second Schedule of the Income Tax Act. With regard to
assessee’s reliance on section 276C, the Revenue highlighted that show cause
notice was issued by the Principal Commissioner of Income Tax for the purpose
of issuing sanction for offence punishable under section 276C(2) of the Act and
Income Tax Department has no power to arrest in the course of proceedings under
section 276C(2) of the Income Tax Act. The Revenue contended that Show
cause notice under Rule 73 of the Second Schedule is for non-payment of the tax
dues pursuant to the demand raised by the Assessing Officer, whereas the show
cause notice under section 276C(2) of the Act is for willful attempt to evade
payment of any tax, penalty or interest. The Revenue contended that show cause
notice under section 276C(2) of the Act issued for non-payment of admitted tax
on the income voluntarily admitted by the petitioner is not under dispute and
the attempt of the assessee interlinking these two different proceedings is an
attempt to mislead this Court. Therefore, the assessee is not entitled to
maintain the petition under section 438 of Cr.P.C.
The assessee has knocked the doors of this Court on the apprehension
that he is likely to be arrested by the Assistant Commissioner of Income Tax
(OSD) pursuant to the notice and has placed reliance on Section 276-C and part
II of the First Schedule of the Code of Criminal Procedure to plea that an act
of willful attempt to evade any tax, penalty or interest is made punishable
with rigorous imprisonment for a term which shall not be less than six months,
but which may extend to seven years and with fine in case where the amount
sought to be evaded exceeds twenty-five hundred thousand rupees. This provision
when conjointly read with Part II of the First Schedule of the Criminal
Procedure Code undoubtedly renders the offence non-bailable in nature and
therefore, the notice issued under Rule 73 of the Second Schedule of Income Tax
Act has to be construed to have been issued in respect of the commission of a
nonbailable offence.
High Court noted that Section 438 of Cr.P.C provides for direction for
grant of bail to person apprehending arrest and states that (1) Where any
person has reason to believe that he may be arrested on accusation of having
committed a non-bailable offence, he may apply to the High Court or the Court
of Session for a direction under this section that in the event of such arrest
he shall be released on bail; and that Court may, after taking into
consideration, inter alia, the following factors, namely:- (i) the nature and
gravity of the accusation; (ii) the antecedents of the applicant including the
fact as to whether he has previously undergone imprisonment on conviction by a
Court in respect of any cognizable offence; (iii) the possibility of the
applicant to flee from justice; and (iv) where the accusation has been made
with the object of injuring or humiliating the applicant by having him so
arrested, either reject the application forthwith or issue an interim order for
the grant of anticipatory bail” High Court noted that ‘Reason to believe’ that
a person is likely to be arrested for a non-bailable offence is a sine qua non
for invoking the jurisdiction under section 438 of Cr.P.C.
High Court held that assessee’s reliance on Section 276C and the
argument of the assessee that notice under Rule 73 of Second Schedule is for
commission of a nonbailable offence is totally misplaced. High Court held that
There cannot be two opinions that section 276 is a penal provision which
constitutes evasion of tax, penalty or interest an offence under the Income Tax
and therefore by virtue of the First Schedule Part II of Cr.P.C., the offence
under section 276 has to be classified as a non-bailable offence.”
High Court held that the assessee is not sought to be prosecuted for the
offence under Section 276-C but under Rule 73. High Court held that notice
under Rule 73 is issued for the recovery of the tax dues determined under
section 222 of the Act and it is recovery proceeding and the assessee is not
sought to be prosecuted for the alleged offence under section 276-C of the Act.
Therefore, High Court remarked that the contention of the petitioner that he is
apprehending his arrest in a non-bailable offence has no legs to stand.”
High Court remarked that The petitioner in the instant case is not an ‘offender’
but a ‘defaulter’ as defined in the Second Schedule. Part V of the Second
Schedule deals with arrest and detention of the defaulter.”
High Court held that even though the assessee had invoked the
jurisdiction under section 438 Cr.P.C. on the supposition that the said notice
has given rise to 'reason to believe' that he would be arrested and detained by
the Tax Recovery Officer, yet Rules 74-76 completely dispels the apprehension
entertained by the assessee since Rules 74 to 76 would show that elaborate
procedure has been prescribed under the Second Schedule of the Income Tax Act
regarding the arrest and detention of a defaulter.
High Court held that there was no justifiable reason to believe that the
assessee would be arrested in a non-bailable offence as contended as the
assessee is not accused of committing any nonbailable offence so as to invoke
the jurisdiction under section 438 of Cr.P.C. High Court held that the
apprehension of the petitioner that on issuance of a show cause notice under
Rule 73 of the Second Schedule of the Income Tax Act, he has a reason to
believe that he would be arrested and detained in prison is wholly misconceived
and misplaced.
High Court held that issuance of notice under Rule 73 of the Second
Schedule of the Income Tax Act, the assessee is not accused of committing any
non-bailable offence and the said notice does not give rise to any apprehension
of immediate arrest so as to invoke the jurisdiction of the Sessions Court or
High Court under section 438 of Cr.P.C. Since both the constituents of section
438 of Cr.P.C. are not attracted to the facts of this case, High Court held
that the petition under section 438 of Cr.P.C. is not maintainable.
High Court dismisses
assessee-individua’s petition under section
438 of Criminal Procedure Code (CrPC) seeking protection from arrest, as
assessee not an ‘offender’ but a ‘defaulter’ as per the Second Schedule. [In
favour of revenue] – (Related Assessment year : 2007-08) - [M A Zahid v. ACIT/Tax Recovery Officer (2019) 412 ITR 135 (2018) 257 Taxman 137 : 95
taxmann.com 71-TS-353-HC-2018(KAR) (Karn.)
TRO
issued warrant of arrest to assessee without issuing notice to show cause as to
why he should not be detained in civil prison, since said notice did not fulfil
requirements prescribed under rule 73(1) of Schedule II of Act, same being
procedurally ultra vires, deserved to be quashed
Assessee
filed instant petition has assailing the validity of the warrant of arrest
issued by TRO, Debts Recovery Tribunal. From a perusal of the provisions of rule
73(1) of Second Schedule of the Act it is evident that no order for the arrest
and detention in civil prison of a defaulter shall be made unless the Tax
Recovery Officer has issued and served a notice upon the defaulter calling upon
him to appear before him on the date specified in the notice and to show cause
as to why he should not be committed to civil prison, unless the Tax Recovery
Officer is satisfied for the reasons which are mentioned in clauses (a) and (b)
of sub-rule (1) of rule 73 of Schedule II of the Act. In the instant case, the
impunged notice does not fulfil the requirements prescribed under rule 73(1) of
Schedule II of the Act, inasmuch as, no specific show-cause notice has been
given to the assessee asking him to show cause as to why he should not be
detained in civil prison. Therefore, the impugned order is procedurally ultra
vires. It is accordingly quashed and set aside. [In favour of assessee] – [Lalith
kumar Ramani v. Tax Recovery Officer, Bengaluru (2019) 265 Taxman 305 : 108
taxmann.com 44 (Karn.)]
Detention order was passed against detenu for recovery of arrears of tax by Tax Recovery Officer after following due procedure established under provisions of Income Tax Rules, order could not be said to be in violation of article 21 of Constitution
Property of the detenu admeasuring 0.0405 hectares
was attached by the Income Tax department. Thereafter, efforts were made by the
department for sale of the property, but the efforts made by the department
failed. The assessment was challenged by the father of the petitioner before
different forums, but the said assessment was finalized. Thereafter, the father
of the petitioner was arrested by the Income Tax Authority in purported
exercise of his jurisdiction under rule 76 of Second Schedule of Income Tax Act
and brought to Indore Office where he was committed to civil prison. The
petitioner filed the instant petition for issuance of a writ of habeas corpus
directing the Income Tax Authorities to produce/release his father.
As per rule 73 of the Second Schedule, the Recovery
Officer is having discretion to pass an order that detenu be detained in the
custody and under the aforesaid powers the TRO has issued detention warrant
against the detenu. The father of the petitioner has been arrested under the
warrant of the Income Tax Department and after the arrest he was produced
before the Police Authorities and was sent for safe custody till the
finalisation of the investigation and after that on 23.02.2018, the detention
order was passed, therefore, there was no need to produce him before the
Magistrate, under the provision of section 57 of the Cr.P.C. Proceedings done
by the TRO is under the statutory provisions and therefore, no violation has
been made under article 21 of the Constitution of India. Before a person can
be arrested and detained provisions contained in rule 73 of second
schedule are to be complied with. Where Tax Recovery Officer had
followed due procedure established under provisions of Income
Tax Rules before directing arrest of detenu for recovery of
arrears of tax, order could not be said to being violation of article 21
of Constitution. In the light of the
above, the present writ petition stands dismissed. [In favour of revenue] – [Ayush
Kataria v. Union of India (2018) 97 taxmann.com 137 (MP)]
Arrest for recovery of arrears: It is a question of
confinement of a person in jail due to non-payment of tax dues. Since the
recovery of outstanding dues has been stayed except deposit of specified
amount, the TRO is ordered to arrange for release of the assessee immediately
on deposit of said amount. Income Tax Authorities are directed to promptly do
the necessary formalities including issue of release warrant to the Jail
officials on compliance of the directions of the Tribunal
The sole motive of the
Department for aforesaid action of putting the assessee in jail is to recover
outstanding tax dues which are otherwise impugned before us, however, the
Department has failed to recover any amount from the assessee despite putting the
assessee behind the bars for 12 days as on today. Whereas by our above
directions not only the Department will get recovery of Rs. 20 lacs out of the
outstanding dues against the assessee but also the interest of justice will be
served so far as the grievance of the assessee is concerned. (Related Assessment
years : 2007-08 & 2008-09) – [Devinder Singh Gill v. DCIT – Date of
Judgement : 24.08.2018 (ITAT Chandigarh)]
Tax Recovery Officer resorts to the mode of arrest and detention, it is necessary to refer to Part V of Schedule II to the Income-tax Act, which deals with the mode of 'arrest and detention of the defaulters'.
In
recovery proceedings initiated by SEBI, petitioner failed to furnish proposal
of payment of dues, detention and arrest order passed by Tax Recovery Officer
against petitioner was arbitrary and illegal
Rule
73 does not confer power on Tax Recovery Officer to arrest and detain defaulter
for not giving a proposal for payment of dues. Petitioner was called upon by
SEBI to pay certain dues. On failure of petitioner, SEBI initiated recovery
proceedings under section 28A. Petitioner had appeared before Tax Recovery
Officer in terms of notice under rule 73(1) and was advised to make payment
towards dues and/or submit a proposal for payment of dues. On failure of
petitioner to furnish any substantial proposal for payment of dues, by impugned
order petitioner was arrested and sent to civil prison. Order of arrest and
detention by Tax Recovery Officer for not giving a proposal of repayment was a
sheer abuse of power. In absence of finding that petitioner had means to pay,
mere non-payment of dues did not constitute neglect or refusal to pay. Since
authority of respondent had not arrived at a satisfaction that conditions
specified in clauses (a) and (b) of rule 73(1) were satisfied and had further
not complied with mandate of rule 73(1) of recording reasons of satisfaction in
writing, detention and arrest order was patently illegal and arbitrary and,
therefore, same was to be quashed. [In favour of assessee] – [Vinod
Hinigorani v. Securities & Exchange Board of India, Mumbai (2015) 278 CTR
232 : 230 Taxman 25 : 56 taxmann.com 81 (Bom.)]
Section 179 imposes a vicarious liability on the directors of private limited companies. Their liability is co-extensive with the company and a director is liable only in respect of arrears of tax for the assessment year when he was functioning as a director. For invoking Section 179(1), it is a sine qua non that TRO must record a finding that the tax due from the company cannot be recovered from the company. In the absence of such a finding, TRO has no jurisdiction to invoke Section 179(1)
The petitioner was made director of company SPL with effect from 03.04.1993, The petitioner had resigned from the directorship of SPL on 20.09.1997 and he had not received any remuneration whatsoever from SPL in the capacity of director. The Tax Recovery Officer (TRO), issued a notice dated 26.03.2002 calling upon the petitioner to show cause as to why the warrant of arrest be not issued against him for non-payment of outstanding dues of SPL. The petitioner explained that when he became a director on 03.04.1993, SPL had already become a public limited company with effect from 09.02.1992 under section 43A of the Companies Act, 1956. He further stated that he was a director for namesake only. The petitioner challenged the show-cause notice and consequent recovery proceedings under writ petition.
The fact that the company SPL became a public company on 09.02.1992 was not being disputed by the respondents. The instant outstanding dues of SPL which was sought to be recovered from the petition under section 179 of the Act relate to the assessment years 1983-84 to 1990-91 and 1992-93. It was for the period prior to induction of the petitioner as director in company SPL i.e., prior to 03.04.1993.
Section 179 is a departure from the provisions of the Companies Act, where a director is not personally liable for the company’s debts unless the Company Court finds him guilty of misfeasance or of any other wrong. Section 179 imposes a vicarious liability on the directors of private limited companies, even though a private limited company is a separate entity. The liability is co-extensive with the company and the director is liable only in respect of arrears of tax for the assessment year when he was functioning as a director.
For invoking section 179(1), for thrusting upon the director the vicarious liability, it is a sine qua non that the Assessing Officer must record a finding that the tax due from the company cannot be recovered from the company. In the absence of such a finding, the Assessing Officer has no jurisdiction to invoke section 179(1).
In M. Rajamoni Amma v. DCIT (1992) 195 ITR 873 (SC), the Apex Court has held that where the company has become a deemed public company by virtue of section 43A of the Companies Act, 1956 with effect from 01.10.1975 and arrears sought to be recovered related to the assessment years 1977-78 to 1982-83 obviously, the company being a public company, the proceedings against the directors for recovery of the tax due from the company could not be taken, and certainly not proceeded with under section 179.
In Jagadish Jagmohandas Kapadia v. CIT (1990) 183 ITR 143 (Bom.), the Bombay High Court has held that in the absence of an order under section 179 passed legally, it was not open to the ITO or the TRO to issue a demand notice to the petitioner and/or to take further proceedings in pursuance thereto.
In the instant case, there was no order under section 179 when the notice to show cause as to why the warrant of arrest be not issued to the petitioner, was issued. The said notice had been issued on 26.03.2002 whereas the order under section 179 had been passed on 29.05.2003. Thus, the notice was itself illegal and without jurisdiction and was to be quashed. Further, it was an admitted case of the department that the petitioner was made a director only on 03.04.1993 and the outstanding tax dues of SPL related to the assessment years 1983-84 to 1990-91 and 1992-93, i.e., when the petitioner was not even a director of SPL, thus, the recourse to section 179(1) could not have been taken at all. Moreover, it was also an admitted position that SPL had become a deemed public company under section 43A of the Companies Act, with effect from 09.02.1992. Thus, in view of the decision of the Apex Court in M. Rajamoni Amma’s case (supra), the outstanding tax dues of SPL which related to a period prior to 09.04.1992 could not be recovered under section 179(1) from the petitioner.
In view of the above, the order passed under section 179 was contrary to the well settled principles and, therefore, could not be sustained and was to be quashed. However, it will be open to the department to recover the outstanding amount of tax from the company or its directors who were there at the relevant time. Both the writ petitions were to be allowed. (Related Assessment years : 1983-84 to 1990-91 and 1992-93) – [Arvind Kumar Gupta vs. TRO (2005) 276 ITR 373 : 199 CTR 36 : 146 Taxman 579 (All)]
Notices issued to defaulter assessee, not containing place and office where amounts had to be deposited, not scoring out unnecessary words therein and not mentioning details of amounts outstanding, did not satisfy requirements of law and were not proper – Therefore, pursuant to aforesaid notice order of arrest of assessee passed by TRO in exercise of power under rule 76 of Second Schedule, was to be set aside
While considering the statutory background of section
222 and relevant rules of the Second Schedule, the Gujarat High Court in Mahmed
Akhtar Hussein v. State of Gujarat (1992) 198 ITR 229 (Guj.), inter alia,
held that rule 76 (1) and rule 73(1) clearly indicate that no final order of
detention in civil prison may be passed by the TRO against any defaulter unless
he, for reasons to be recorded in writing, was satisfied that either the
defaulter, with the object or effect of obstructing the execution of the
certificate had, after drawing up of the certificate by the TRO, dishonestly
transferred, concealed or removed any part of his property, or the TRO was
satisfied that the defaulter had or had, since the drawing up of the
certificate by the TRO, the means to pay the arrears or some substantial part
thereof and had refused or neglected to pay the same. These were held to be
conditions precedent on which relevant satisfaction of TRO had to exist, before
he could pass the final order of detention of the defaulter in civil prison.
The final order was, however, to be passed under rule 76(1) after hearing the defaulter
as per rule 74.
In the instant case, notice issued under rule 2 of
the Second Schedule described the petitioner as managing director of ‘B’ Jute
Corporation, but upon a perusal thereof it appeared that the place where he had
to deposit the amount in question was not stated. Other unnecessary words in
paragraph 2 of the said notice, the words which were not applicable to him were
also not scored out. Furthermore, the said notice issued in Form I. T. C. P. I
shows that a certificate case had been initiated against the detenu for the
recovery of an amount of Rs. 42,98,000 but the details thereof had not been
stated on the reverse thereof. The said notice, therefore, did not satisfy the
requirements of law.
Further, the said notice was purported to have been
served by Inspector of Income-tax, and from the report submitted by him it
appeared that he had visited the residence of detenu and made an attempt to
serve the same on 03.10.1994, and again on 04.10.1994, but he failed to serve
the same. He, thereafter, purported to serve the notice by affixation on 06.10.1994,
The signature of the witness appeared in the said notice and the same had been
accepted as valid by respondent No. 2. However, in support of the said service
no affidavit was filed.
An order under rule 76 cannot be passed unless both
or either of the conditions laid down in rule 73(1)(a) or (b) are satisfied. In
the instant case, reliance placed by the respondent on rule 73(2) was of no
consequence inasmuch as the said provision deals with an absolutely different
situation. The records reveal that the order dated 23.02.1990 suffered from
various infirmities. Respondent No. 2 in his order states that upon enquiry it
had been revealed that the defaulter has means to pay but in support thereof no
reason had been assigned. He had not stated as to on what basis he had come to
that conclusion. Only because allegedly the defaulter had refused or neglected
to pay the arrear income-tax demand, that did not by itself reveal that he had
means to pay. If he had not the means to pay, the question of his failing to
satisfy the debt did not arise. The said order did not also reveal as to how
and in what manner the show-cause notice as to why he should not be detained in
civil prison was served.
For the reasons aforementioned the writ application
was to be allowed and the respondents were to be directed to set the detenu at
liberty forthwith. However, it did not mean that the detenu who admittedly was
defaulter should be allowed to go scot-free.
The court, in the peculiar facts and circumstances of
the case, is also entitled to grant certain directions upon the detenu so as to
enable the TRO to recover the arrears of tax from the detenu, albeit upon
following the procedure established by law. It would be thus open to respondent
No. 2 to serve a fresh notice in terms of rule 2 of the Second Schedule which
the detenu must accept. The detenu must also appear before the TRO on each and
every date fixed therefor except for very cogent reasons. He would show-cause
as and when called upon to do so by the TRO without delay. The detenu was
further directed to disclose all his assets before the TRO which would be
subject to verification by respondent No. 2. In the event, it was found that
the detenu had taken recourse to suppressio veri and suggestio falsi or other
acts of bad faith, the TRO may take appropriate action against him in
accordance with law. The TRO would also be entitled to proceed as against the
detenu and pass an appropriate order as he may deem fit and take recourse to
any of the modes to recover the arrears of the taxes as is permissible in law
including taking recourse to detention of the detenu in custody in terms of the
rules laid down under the Second Schedule. The detenu would not leave the
jurisdiction of respondent No. 2 without his prior permission. The decision was
in favour of the assessee but with certain directions. - [Gajendra
Kumar Banthia v. UOI (1996) 222 ITR 632 (1997) 140 CTR 150 (Cal.)]
Petitioner was one of
three partners of assessee-firm. As a consequence of ex parte assessment order
passed petitioner was served with a demand notice by TRO. Petitioner’s prayer
for rectification of ex parte assessment order under section 154 was rejected
by ITO. Petitioner appealed to Commissioner (Appeals) against both orders.
Pending these proceedings petitioner was served with a show-cause notice under
rule 73 of Second Schedule. Said notice being a procedural one and where a
decision for arrest of petitioner was to be taken by TRO after getting
satisfied as to advisability of arrest and detention in civil prison, writ
filed by petitioner against said notice issued under rule 73 of Second Schedule
was liable to be dismissed. Mere filing of an appeal by petitioner under
section 220(6) could not stay proceedings in tax recovery matters.
The reading of rule 73(1) of the
Second Schedule makes it clear that as a condition precedent for arrest and
detention in civil prison of a defaulter, the TRO must find out that any of the
conditions mentioned in rule 73(1)(a) and (b) of the Second Schedule has been
satisfied. At the time of issuing notice it had been made clear that the said
notice was issued under rule 73 of the Second Schedule and the same had been
issued since the assessee had failed to pay the amount of arrears specified in
certificate. The notice also was specific to the effect that the assessee had
to show cause before the TRO. It was a procedural safeguard for the assessee
concerned and this rule clearly satisfied the principles of natural justice
before issuance of any order of arrest and detention. When the rule itself had
been mentioned in the notice, the assessee concerned was made known under what
rule the notice was issued and the said rule clearly spelt out the ground on
which the Recovery Officer had to get satisfied. It was not as if this notice
issued under rule 73 of the Second Schedule straightway authorised the officer
concerned to arrest and detain the assessee as if the reasons mentioned in rule
73(1)(a) and (b) of the Second Schedule were there for the officer to order the
arrest and detention. In the instant case, the notice which was issued clearly
spelt out that such a notice was issued since the assessee had failed to pay
the amount of arrears specified in the certificate. Such a show-cause notice
was a procedure adopted by the department and that was why rules 73(3),
73(3)(a), 74 (4) and 74 of the Second Schedule made it clear that the
department is particular to have the defaulter present before the officer to
show cause. Therefore, it was clear that the notice issued under rule 73 of the
Second Schedule was a procedural one and the decision was to betaken by the TRO
only after the defaulter appeared before the officer concerned and after
hearing the party and the officer getting satisfied as to the advisability of
arrest and detention of the defaulter in civil prison.
As regards pendency of the appeal
under section 220(6), there was nothing in that section debarring the officer
concerned from refusing grant of stay. The mere filing of an appeal or an
application for stay in such an appeal would not ipso facto grant stay of
further proceedings in a tax recovery matter. The writ petition was, therefore,
dismissed. (Related Assessment year : 1980-81) – [Vikrant Tyres Ltd. v S. M. Ajbanj, Recovery Officer
And Other (1989) 182 ITR 413 (Guj.)]
According to
petitioners, TRO tried to recover income-tax dues by arresting them even though
they had no assets – There is ample safeguard under Rule 73 which empowers TRO
to proceed only after being satisfied about various conditions mentioned in
sub-rules (1) and (2) – Therefore, petitioners should not be arrested or
detained unless TRO proceeded in accordance with rule 73 and recorded reasons
as contemplated therein
The petitioners claimed that even
though they had no assets, the TRO was trying to recover the income-tax dues by
arresting them. On writ:
There is ample safeguard under rule
73 of the Second Schedule to the Act which empowers the TRO to proceed only
after he is satisfied about the various conditions mentioned in sub-rules (1)
and (2). In view of those safeguards, the petitioners should not be arrested or
detained unless the TRO proceeded in accordance with rule 73 and recorded
reasons as contemplated therein.
The petitioners seek a direction
from this court restraining opposite parties from arresting them for
realisation of income-tax dues against them or the firm, Goyal Industries,
Sultanganj, Agra,. It is claimed that even though petitioners have no assets, opposite
parties are trying to recover the amount by arresting the petitioners. We do
not think that it is necessary for us to decide at this stage any of the
controversies raised by the petitioners as, in our opinion, there is ample
safeguard under rule 73 of the Second Schedule to Income-tax Act, 1961, which
empowers the Tax Recovery Officer to proceed only after he is satisfied about
the various conditions mentioned in sub-rule (1) and sub-rule (2). In view of
these safeguards, we dispose of this petition by directing that the petitioners
shall not be arrested or detained unless the Recovery Officer proceeds in
accordance with rule 73 and records reasons as contemplated therein. The
petition is disposed of accordingly. The case was decided in favour of the
petitioners. – [Dau Dayal Goyal
v. TRO (1989) 177 ITR 397 (All.)
A person should be held liable for arrest
after prescribed procedure in Rule 73 to Rule 76 has been followed
Notice under rule 73 was issued to the petitioner. Petitioner appeared before the TRO. He submitted his case for not issuing arrest and detention. ITO who issued the certificate was also present before the TRO. He let in evidence to substantiate the case for personal execution against the petitioner. After appreciating the materials placed before the TRO he came to the conclusion that the petitioner had to be arrested and detained in civil prison. Petitioner was arrested and later released for 15 days as per proviso to rule 76. Petitioner failed to appear after 15 days. TRO then issued formal order under rule 76. It could not be held that TRO did not conduct enquiry contemplated by rule 74 before ordering arrest of petitioner
Merely because Commissioner directed the
defaulter to pay at least 50 per cent of the demand and avoid the rigour of
detention under proviso to rule 76, it could not be said that the Commissioner
had taken a decision on the issue and any appeal would be an empty formality
Before ordering the arrest and
detention of the defaulter, the TRO has to issue a notice under rule 73(1)
calling upon the defaulter to show cause why he should not be committed to
civil prison. The TRO should have come to a satisfaction regarding the
existence of the conditions mentioned in clause (a) or (b) of rule 73(1) for issuing the notice. On
receipt of the notice when the defaulter appears under rule 74, the TRO should
hear the ITO and take evidence produced by him in support of execution by
arrest. The defaulter should be given an opportunity to show cause why he
should not be committed to civil prison. Rule 75 relates to the custody of the
defaulter pending enquiry under rule 74. After the conclusion of the above
enquiry an order under rule 76 has to be passed. In the instant case, notice
under rule 73 was issued to the petitioner. The petitioner appeared before the
TRO. He submitted his case for not issuing arrest and detention. The ITO, who
issued the certificate, was also present before the TRO. He let in evidence to
substantiate the case for personal execution against the petitioner. After
appreciating the materials placed before the TRO, he came to the conclusion
that the petitioner had to be arrested and detained in civil prison and he
passed an order under rule 76. The petitioner was arrested and later he was
released as per the proviso to rule 76. From these circumstances it was
difficult to hold that the TRO did not conduct an enquiry contemplated by rule
74 of the Second Schedule before ordering the arrest of the petitioner.
The fact that the entire proceedings were
completed in one day was irrelevant. The TRO should afford sufficient
opportunity to the defaulter to rebut the evidence of the ITO. When the
petitioner appeared in pursuance of notice under rule 73(1) he was aware of the
purpose for which he was summoned. He should have all evidence ready with him
to substantiate his case for the non-issue of an order of arrest and detention.
Therefore, the order of the TRO was not open to challenge.
Further, the TRO issued a formal
order under rule 76 of the Second Schedule on 16.03.1985 because the petitioner
was released on 28.02.1985 on the specific understanding that he will appear
after 15 days and he failed. That order is appealable under rule 86(1)(c) of the Second Schedule.
No appeal had been filed challenging its correctness. The ground stated by the
petitioner for not preferring an appeal was that the Commissioner directed the
defaulter to pay at least 50 per cent of the demand and avoid the rigour of
detention under proviso to rule 76, and this showed that the Commissioner had
taken a decision on the issue and any appeal would be an empty formality. This
argument could not be accepted. If the petitioner had filed the statutory
appeal it would have been disposed of by the Commissioner in a judicial manner.
The failure of the petitioner to resort to the statutory appeal before the
Commissioner before approaching the High Court under article 226 of the Constitution,
was a matter to be taken note of by the High Court. Therefore, the
petition had to be dismissed. – [Antonitto v. TRO (1988) 171 ITR 456 :
(1987) 35 Taxman 261 (Ker..)]
Once a defaulter has appeared in response to a notice under rule 73(1) before TRO, he is not to be arrested or detained in civil prison unless either enquiry contemplated by rule 74 is over or conditions mentioned in sub-rules (2) and (3) of rule 73 are fulfilled
The TRO issued a notice to the
petitioners requiring them to show cause why they should not be committed to
civil prison, in execution of the recovery certificates issued by the ITO. The
notice was served on the petitioners on 02.03.1976. The petitioner’s accountant
appeared before the TRO on 27.03.1976 and filed objections claiming that the
recovery was illegal as credit of the taxes already paid had not been given
either in the case of the firm or its partners. He was then informed that a
warrant for the petitioners’ arrest had already been issued on 26.03.1976.
On writ:
Once the defaulter has, appeared in
response to the notice issued under rule 73(1), before the TRO, he is not to be
arrested or detained in civil prison unless either the enquiry, contemplated by
rule 74, is over or the conditions mentioned in sub-rules (2) and (3) of rule
73 are fulfilled.
In the instant case as the petitioners
had put in appearance before the TRO on the date mentioned in the show-cause
notice, prima facie, there was no occasion for the TRO to issue a warrant for
the petitioner’s arrest on 26.03.1976, in exercise of the powers conferred by
sub-rules (2) and (3) of rule 73 of the Second Schedule. Moreover, there was no
material before the court to show that the conditions mentioned in sub-rules
(2) and (3) of rule 73, enabling the TRO to issue a warrant for the
petitioners’ arrest, existed. In view of above, the attempt made by TRO to
arrest the petitioners was not justified. Therefore, the TRO was to be directed
not to take steps to get the petitioners arrested in pursuance of the warrants
issued on 26.03.1976, and not to commit them to civil custody under rule 76,
without first disposing of the proceedings as contemplated by rule 74. [In
favour of assessee] – [S.K. Agarwal v. TRO (1980) 125 ITR 389 (All.)]
When a firm is in default, if partner of firm is treated as assessee in default, he can be arrested. Partner is not immune from arrest in the proceedings for recovery of income tax due. – [S.M. Ibrahim v. Dy. Collector Sales tax (1978) CTR 356(All.)]
A partner can not be proceeded against or be detained in civil prison under Second Schedule on strength of certificate that has named firm alone as assessee
One
must also bear in mind the basic principle of partnership law that for the
liabilities of the firm the assets of the firm should be proceeded against in
the first instance. All these considerations pointed to the conclusion that a
partner cannot be said to be liable under Schedule 2 unless the certificate
expressly names him and he continues a “defaulter” as defined by rule 1.
There is no equity about a tax. There is no
presumption as to a tax. Nothing is to be read in, nothing is to be implied.
One can only look fairly at the language used. On this principle it must be
held that the certificate issued in the name of the firm cannot be said to be
effective against the individual partners also so as to make them liable on the
strength of a certificate naming the firm alone.
There is no warrant for the view that on the strength
of a certificate naming the firm as a defaulter it will be permissible to
arrest as individual partner. The construction of the relevant provisions of
law advocated by the counsel for revenue could not be accepted. It was,
however, open to the ITO to amend the certificate already issued by him naming
the individual partner also as a defaulter. - [Kethmal Parekh v. Tax
Recovery Officer (1973) 87 ITR 101 (AP)]
Defaulter has right to cross-examine the
persons whose statements, books of accounts and evidence are to be relied upon
in support of execution of certificate (by arrest) and the refusal to allow
such cross examination vitiates the proceeding – [K. T. Shaduli v. State of
Kerala, 1972 Tax LR 1659 Ker.]
Partner is not immune from arrest in the
proceedings for recovery of the income-tax dues of a firm even if no notice was
served upon him for assessment proceedings of said firm because he is jointly
and severally liable for all the debts of firm
Petitioner sought for quashing recovery
proceedings initiated against him in respect of tax demand outstanding against
firm in which he was partner on ground that no notice was served upon him for
assessment proceedings of said firm. If a notice of demand has been served upon
a partnership firm, it is not necessary that a further notice should be served
upon partner of firm in order to render that partner liable for payment to tax.
If a partner can be proceeded against for debts of firm, it is clearly on
principle that he is jointly and severelly liable for those debts, liability is
a personal liability and for enforcement of that liability, partner is
vulnerable to all processes of recovery which can be taken as if it was his
personal debt. It is open to recovering authority to proceed by way of arrest
of partner and, therefore petitioner was not immune from arrest in proceedings
for recovery of income-tax dues in question. The petition failed and was
dismissed. [In favour of revenue] (Related Assessment years : 1951-52 to
1956-57) – [Ram Das Jaiswal v. ITO (1971) 79 ITR 570 (All.)
Revenue can resort to attachment as well as arrest-Simultaneous execution both against the property and person of judgment debtor is allowed
The power exercisable by the Collector in recovering arrears
of income-tax which are recoverable as arrears of land revenue are, not
restricted to the Land Revenue Code; the Collector is entitled to exercise all
the powers of a civil Court for the purpose of recovery of an amount due under
a decree under the Code of Civil Procedure, 1908 and the Code of Civil
Procedure imposes no obligation to recover the dues by sale of movables or by
arrest and detention of the defaulter before immovable property may be attached.
By virtue of Order 21, rule 30(e) of the Code of Civil Procedure, simultaneous
execution both against the property and person of the judgment debtor is
allowed. To hold, therefore, that in seeking to recover income-tax dues the
Collector is in the first instance by virtue of sub-section (2) of section 286,
restricted to the recovery of arrears by attachment and sale of movables or by
arrest and detention in prison of the defaulter, and if he can not recover the
amount then and then only to have recourse to the immovable property of the
judgment-debtor is to seek to amend both the Income-tax Act, 1922, as well as
the Code of Civil Procedure. – [Padrauna Raj
Krishna Sugar Works Ltd. v. Land Reforms Commissioner, UP and other (1970) 75
ITR 358 (SC)]
For tax arrears of HUF, arrest and detention of members of HUF cannot be made; however, Karta of HUF deemed to be defaulter
There is no provision in Act which deems manager to be
assessee for purpose of assessment and recovery of tax. Legislature having treated
a HUF as a taxable entity distinct from individual members constituting it, and
proceedings for assessment and recovery of tax having been taken against HUF,
it was not open to TRO to initiate proceedings against manager of HUF for his
arrest and detention. (Related Assessment years : 1955-56 to 1959-60) – [Kapurchand
Shrimal v. TRO (1969) 72 ITR 623 (SC)]
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