- (1.) THIS is a petition under article 226 of the Constitution directed against the order of the Income-tax Officer dated the 27th of July, 1962, whereby the Income-tax Officer considered that he was competent to proceed to make an assessment on the company for the assessment year 1958-59 notwithstanding that some liquidation proceedings had intervened and had terminated in a scheme sanctioned by this court. A writ of prohibition is also prayed for directing the Income-tax Officer not to make the assessment against the petitioner for the assessment year 1958-59.
(2.) THE material facts leading up to this petition are these : THE petitioner, Tika Ram and Sons, is a private limited company (hereinafter referred to as the company). A notice under section 22 (2) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act), was served on the petitioner in respect of the year 1958-59 and the company in compliance therewith filed a return of its income on the 17th of July, 1958. While these assessment proceedings were pending an application was made under section 439 of the Companies Act, 1956, for the winding up of the company and this court on the 8th of January, 1960, ordered the winding up of the company on the ground that it was just and equitable to do so. By that order it was noticed that the shareholders of the company were all members of the family of Lala Tika Ram except for two outsiders; that disputes had arisen between various members of the family which had resulted in dissension and litigation which was continuing till then. THE winding-up order was directed to be published pursuant to rules 112 and 113 of the Companies (Court) Rules, within fourteen days in one issue each of the Hindustan Times and the Bharat newspapers. The official liquidator took charge of the property and a statement of the affairs of the company was made to him under section 454 of the Companies Act, 1956. In this statement the income-tax department was not shown as a creditor so far as the tax liability for the assessment year 1958-59 was concerned. During the continuance of the liquidation proceedings a compromise was proposed between the company and its creditors and the company judge was pleased to order the holding of a meeting of the contributories of the company and of the creditors for consideration of the compromise and arrangement proposed in respect of the company in liquidation. The learned company judge by his order dated 25th of March, 1960, ordered that separate meetings of the creditors and members be called for the same day to consider the proposed scheme and arrangement. The meeting of the members of the company was fixed for the 1st of May at 10 a.m. whereas that of the creditors at 2 p.m. on the same day. Notice of the meetings was to be sent to the creditors by registered post and also to be published in the leader and the Bharat. The meetings were duly held but the Income-tax Officer concerned did not put in any claim as no notice to him as such had been served. The scheme as proposed was sanctioned, subject to the modification that the sales tax dues assessee so far...... shall be a charge on the following property.... It was further provided that the creditors to the compromise were to be paid within two years from the date of the coming into operation of the scheme. The payment was to be made in two or more instalments; that neither the company shall have any claims whatsoever against the petitioners jointly or severally nor the petitioners shall be liable for the liabilities of the company as to creditors, depositors, income-tax and sales tax, etc., or any other contingent liabilities; nor the petitioners will have any claim whatsoever against the company. Further, that there shall remain no further claim of any sort of the company against Dr. R. S. Gupta, Veda Prakash Gupta or Om Prakash Gupta (shareholders as well as creditors of the company) either jointly or severally. Lastly that the official liquidator shall cease and the company shall come back to its shareholders and directors. The official liquidator of the company, vide his letter dated the 15th of January, 1960, informed the Income-tax Officer that the company was in liquidation. Thereafter, no proceedings were taken by the income-tax department till the 8th of May, 1962, which was more that two years of the passing of the winding up order by the High Court. On the 8th of May, 1962, the Income-tax Officer issued a notice under section 23(2) calling upon the petitioner to appear on 22nd of May, 1962. The company protested against the continuance of the proceedings which had been commenced prior to the winding up order on the ground that the Income-tax Officer had no longer any jurisdiction to continue the same. The Income-tax Officer had no longer any jurisdiction to continue the same. The Income-tax Officer did not accept the contention of the petitioner and by his letter dated July 27, 1962, held that he had jurisdiction to proceed with the assessment and fixed August 6, 1962, for the production of account books, etc. Challenging this decision of the Income-tax Officer and praying that the Income-tax Officer be prohibited from proceeding further with the assessment for the year 1958-59, the present writ petition has been filed.
(3.) THE contention of Mr. Hari Swarup, the learned counsel for the petitioner, in the main is that on the filing of the winding up petition in the High Court all income-tax proceedings stood automatically stayed and could not be resuscitated after the winding up proceeding had resulted in the dissolution of the company or in the sanctioning of a scheme. THE income-tax department, according to the learned counsel, was a creditor on the day when the winding up order under section 439 of the Companies Act was passed and even though the assessment had not been made, the department was obliged to prove its claim before the liquidator or suffer the penalty of losing its right to make an assessment or recover the amount found due thereon. The questions, which fall for consideration are, firstly, whether even before an assessment is made, the department can be said to be a creditor, contingent or prospective, of the company within the meaning of section 391 of the Companies Act, 1956, and, secondly, whether income-tax assessment proceeding are other legal proceedings which cannot thereafter be proceeded with within the meaning of section 446 of the Companies Act, 1956.;