CHAMPA KUMARI SINGHI & ORS. vs. THE MEMBER BOARD OF REVENUE, WEST BENGAL AND OTHERS

CIVIL APPEAL No. 564/1968Supreme Court[1970] 3 S.C.R. 46702 February 1970Bench: 6 JudgesAuthor: M. HIDAYATULLAH, J.C. SHAH, K.S. HEGDE, A.N. GROVER, A.N. RAY, I.D. DUA14 pages
AI SummaryDismissed

What were the facts?

The assessees entered into an agreement with the Revenue to settle their income-tax liabilities for several past years, with payment to be made in installments. The last installment was due by March 31, 1957. The agreement stipulated that default in a single installment would make the entire balance exigible. Assessment orders were passed in accordance with this agreement. Demand notices were issued in September 1952, with the first installment due by March 31, 1953. The assessees filed revisions, which were upheld. Later, the agreement was varied, reducing the penalty and fixing smaller installments. In March 1956, certificates under Section 46(2) were issued, and recovery proceedings were initiated under the Bengal Public Demands Recovery Act, 1913. The issue arose whether these recovery proceedings were barred by limitation under Section 47(1) of the Indian Income-tax Act, 1922.

What did the Supreme Court hold?

The majority of the Supreme Court (Justices Hidayatullah, Shah, Grover, Ray, and Dua) held that the recovery certificates were not barred by time. They reasoned that the assessment order incorporated the agreement, making its terms part of the assessment. Upon the assessees' failure to pay the first installment by March 31, 1953, they became defaulters, and the entire amount became exigible. The Court found that Clause (iv) of the proviso to Section 46(7) applied. This clause, despite its potentially unfortunate language, was interpreted to mean that when installments are granted, the limitation period is calculated from the date the last installment is payable. This interpretation was consistent even with the second agreement. The Court concluded that the scheme of installments brought the matter within the proviso to Section 46(7), giving the Government the option to wait until the last installment was payable. Justice Hegde, dissenting, held that the assessees became defaulters upon non-compliance with the demand notices under Section 45. He argued that non-fulfillment of the agreement terms did not amount to a default under Section 45, and the limitation period should be computed from the date the tax was due under Section 45, not from the agreement's terms. Therefore, he found the proceedings barred.

What were the issues?

1. Whether the recovery proceedings initiated in March 1956 were barred by limitation under Section 47(1) of the Indian Income-tax Act, 1922, considering the agreement for payment by installments and the default in the first installment. Assessee's contentions (implied from the dissenting opinion and the majority's reasoning): The assessees argued that the recovery proceedings were initiated more than one year after the default in the first installment (March 31, 1953), and therefore, were barred by limitation under Section 46(7). They contended that the 'was due' in Section 46(7)(iv) refers to the tax due under Section 45, and non-fulfillment of the agreement terms does not constitute a default under Section 45. The agreement itself cannot extend the period of limitation prescribed by the Act. Revenue's contentions (implied from the majority opinion): The Revenue argued that the assessment order incorporated the agreement, making it binding. Under the agreement, upon default of a single installment, the whole amount became exigible. Crucially, they relied on Section 46(7)(iv) of the proviso, which states that if installments are granted, the one-year period is to be calculated from the date the last installment was payable. They contended that this clause allows them to wait until the last installment is due, even if earlier installments were defaulted upon.

Which sections of the Income-tax Act were involved?

Section 46,Section 47(1),Section 46(2),Section 46(7),Section 45,Section 29,Section 23A,Section 31,Section 33,Section 30,Section 42

AI-generated summary — verify with the full judgment below

A B c D E f G II CHAMPA KUMARI SINGm & ORS. ~· THE MEMBER BOARD OF REVENUE, WEST BENGAi, AND OTHERS February 2, 1970 (M .. HiDKYATULLAH, C.J., J. C. SHAH, K. S. HEGDE, A. N. G,ROVER, A. N. RAY AND I. D. DuA, JJ.] ' .

Indian Income.Tax Act (ll of 1922), ss. 46 and 47-Liability agreed to be .~id by instclments, and in default of single instalment entire balanc:e. exigible-Asressment orders in terms. of agreement-Demand notices- issu£'d-Default in instahnent-Recovery proceeding after more than one year of the default but before the last instalment due-Whether claint bc·rred.

An agreement was signed between the Revenue and the assessees fix ... ing the assessees' income-tax liability for several past years, and fixing instalments for its payment.

The last instalment was payable on March 31, 1957. It was also stipulated that on the breach of a single instalment the whole amount would become exigible. The Income-tax Officer made the assessment orders in acco'rdance with the agreement.

These orders and demand notices to pay the amount by March 31, 1953 were sent to the assessees in September 1952 with letters stating that if there was no default in pay

The order continues below.

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