SOKKALAL RAM SAIT T P FACTORY P LTD Vs. IN RE

JUDGEMENT

(1.) THIS is an application for a direction to stay all further proceedings in pursuance to the certificate issued by the Income-tax Officer, Central Circle IX, Madras-600034, under the following circumstances: Company Petition No. 84 of 1969 was filed for relief regarding management of the affairs of the company, T. P. Sokkalal Ram Salt Factory Private Ltd., and for the protection of the interest of the applicant by removing the managing director and placing the management of the company in the hands of an administrator. The said application has already been heard and the matter is pending for judgment. On September 26, 1973, the managing director of the company in which the applicant is a shareholder wrote to him claiming a sum of Rs. 5,56,866.43 as on August 16, 1973, and wanted confirmation of the balance due from the applicant. The applicant replied on October 18, 1973, saying that he did not owe any sum to the company and repudiated the claim. The applicant is a shareholder of the said company and the managing director is his mother.

(2.) ON January 24, 1974, the Income-tax Officer wrote a letter regarding the tax arrears in the case of T. P. Sokkalal Ramsait Factory Private Ltd., Mukkudal, in which the applicant is a shareholder. It was stated in the said letter that the applicant had to pay a sum of Rs. 3,30,103 as on August 15, 1970, and the applicant was asked to indicate the amount owed by him as on August 15, 1973, to the company. As the company was a defaulter, the applicant's properties were to be attached and a tax recovery certificate was issued to the Tax Recovery Officer, Tirunelveli. The Tax Recovery Officer, Tirunelveli, sent a notice of demand and a copy of a certificate issued under Section 226(3) of the Income-tax Act, 1961.

(3.) SECTION 220 of the Income-tax Act provides that any amount specified as payable in a notice of demand under SECTION 156 had to be paid within the time limits at the place and to the person, mentioned in the notice. Sub-section (4) of SECTION 220 provides that if the amount is not paid within the time limited under Sub-section (1) of that section then the assessee shall be deemed to be in default. SECTION 222 of the Act authorises the Income-tax Officer to forward to the Tax Recovery Officer a certificate under his signature specifying the amount due from the assessee and the Tax Recovery Officer on receipt of such certificate, had to proceed to recover from the assessee the amount specified therein in accordance with the rules laid down in the Second Schedule to the Income-tax Act. SECTION 225 of the Income-tax Act empowers the Income-tax Officer to grant time for the payment of taxes and thereupon the Tax Recovery Officer has to stay the proceedings until the expiry of the time so granted. SECTION 226(3) of the Act authorises the Income-tax Officer to require by notice in writing any person from whom money is due or may become due to the assessee who was in default to pay the amount due to him either forthwith upon the money becoming due or within the time specified in the notice so much of the money as is sufficient to pay the amount due as and by way of arrears. Clause (iv) of SECTION 226(3) provides that every person to whom such a notice was issued was bound to comply with such notice. Where a person, to whom a notice issued under SECTION 226 of the Act was sent, objected to it by a statement on oath that the sum demanded or any part thereof was not due to the assessee who was in default, then nothing contained in SECTION 226(3) shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it was discovered that such statement was false in any material particular the person who made the statement on oath was personally liable to the Income-tax Officer to the extent of his own liability to the assessee who was in default on the date of the notice. The Income-tax Officer has powers to amend or revoke any notice issued under that Sub-section or extend the time for making any payment in pursuance of such notice. Any person who has paid the amount in compliance with the notice issued under SECTION 226(3) of the Act was fully discharged from his liability to the. assessee who had defaulted in payment of tax to the extent of the amount so paid to the Income-tax Officer. Under Clause (x) of SECTION 226, where a person to whom a notice under that section was sent, failed to make payment in pursuance thereof, he was deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings could be taken against him for the realisation of the amount as if it were an arrear of tax due from him.