My assessment was reduced in appeal after the officer had already sent a recovery certificate to the Collector and my property was attached. Can he carry on with the old certificate?
No, on the law as it then stood. By a majority the Supreme Court held that once the assessment order is revised in appeal, the notice of demand founded on it, the default and the recovery proceedings that followed are superseded. There cannot be two defaults in respect of one liability, so the officer must serve a fresh notice of demand for the amount now due, give the assessee an opportunity to pay, and only then treat him as in default. The Mysore High Court had rightly quashed the certificates and the attachment. Shah J dissented, holding that a modification which does not vacate the assessment leaves the earlier default intact.
Decided by the Supreme Court (Supreme Court of India; A.K. Sarkar, M. Hidayatullah and J.C. Shah JJ. Separate opinions by Sarkar J and Hidayatullah J dismissing the appeals; Shah J dissenting) on 1964-03-11, reported as AIR 1964 SC 1473; (1964) 7 SCR 148; 1964 AIR 1473; 1964 SCR (7) 148; AIR 1964 SUPREME COURT 1473. It bears on section 156, section 220, section 222 of the Income Tax Act 1961, in Demand, Recovery & Stay and Appeals matters.
The case is the classic statement of the proposition that recovery machinery runs on a subsisting demand, and that a demand which the appellate order has displaced cannot support coercive process. The reasoning is worth knowing even where later law has changed the result: the appellate authority may itself specify an amount payable, in which case non-payment creates its own default, and the same liability cannot carry two defaults or two starting points of limitation. Sarkar J extended the point to enhancement as well, doubting the view that a fresh notice need issue only for the increase. Hidayatullah J put it on the assessee's right to be told what is now due and to be given a chance to pay before being treated as a defaulter. Shah J's dissent, that a certificate is valid so long as the officer had power to issue it and the assessment was modified rather than vacated, is the view the recovery provisions were later written around.
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By orders of 23 March 1955 made under section 23(4) of the 1922 Act, the Income-tax Officer, Kolar assessed the respondent on estimated incomes of Rs 61,000 for 1953-54, carrying tax of Rs 19,808, and Rs 1,21,000 for 1954-55, carrying tax of Rs 66,601. Notices of demand under section 29 were served. The assessee appealed but did not pay. In September 1955 the officer forwarded certificates to the Deputy Commissioner, Kolar under section 46(2) for recovery as arrears of land revenue, and in the same month various properties were attached under the Revenue Recovery Act. On 17 December 1955 the Appellate Assistant Commissioner reduced the assessable income to Rs 27,000 and Rs 45,000 for the two years and directed the officer to recompute the tax and refund any excess collected. On 19 February 1956 the officer wrote to the assessee stating the reduced liabilities, put in the judgment at Rs 4,215 and Rs 13,346, and called on him to pay them at once into the local treasury, but issued no fresh notice of demand. The assessee appealed further, asked for the recovery proceedings to be stayed, and on refusal moved the Mysore High Court under Article 226. The High Court held that without fresh notices of demand the assessee could not be treated as a defaulter and that the proceedings on the certificates were illegal. The Department appealed by special leave.
By order of the majority the appeals were dismissed, with no order as to costs. On the assessment order being revised in appeal, the default based on it and all consequential proceedings are superseded, and fresh proceedings must be started to realise what is due under the revised order. Hidayatullah J put the matter on section 29: where an order is passed in appeal and the tax reduced, the officer must intimate the reduced amount to the assessee, make a demand and give him an opportunity to pay before treating him as a defaulter; he noted that a fresh notice of demand had in fact by then issued, and that if it were disobeyed the officer could recall the old certificate, amend it to match the tax now demandable and return it to the Revenue Officer to continue recovery. Shah J dissented and would have allowed the appeal and dismissed the writ petition with costs, holding that in the absence of any provision obliging the officer to issue successive notices of demand as the assessment moves through appeal, the original notice must be enforced under section 46 within the limitation in section 46(7), subject to adjusting the amount recovered in the light of the appellate order.
Sarkar J worked from the scheme of the Act. Tax becomes due on an order, section 29 requires a notice of demand specifying the sum payable, and section 45 makes an assessee who fails to pay within the time and at the place mentioned a deemed defaulter, after which the coercive process in section 46 becomes available. He pointed out that section 45 attaches the same consequence to non-compliance with an order under section 31, which is the appellate order. So if the Appellate Assistant Commissioner specifies an amount payable with the time, place and person for payment, non-compliance with that order creates a default of its own. Since there is one liability, there cannot be two defaults, and the Act must by necessary implication be taken to supersede the earlier default. The same follows even where the appellate order fixes only a different amount without the other particulars, because the two orders cannot stand together, and the earlier order and the default connected with it must go, leaving a fresh notice under section 29 to be issued. He rejected the argument that a default can end only where the assessment is annulled, and the argument that his view makes the officer's discretion under the proviso to section 45 pointless. He also doubted the line of cases holding that on an enhancement only the additional amount need be demanded afresh, since a notice under section 29 can only be for the amount due in consequence of the order. Shah J read the same sections the other way: the validity of a certificate depends on the officer's power to issue it, which exists if the assessee is in default and the proceedings are within time under section 46(7), and a person already in default does not cease to be in default merely because the assessment is modified without being vacated. He treated the wide observations of Chakravartti CJ in the Metropolitan Structural Works case as unnecessary to that decision and as not correctly interpreting sections 29, 45 and 46, preferring the later explanation in Ladhuram Taparia.
In such a case along with the superseded order the default if any incurred in connection with it must also disappear.
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Handle my notice → Ask a CA on WhatsAppNo, on the law as it then stood. By a majority the Supreme Court held that once the assessment order is revised in appeal, the notice of demand founded on it, the default and the recovery proceedings that followed are superseded. There cannot be two defaults in respect of one liability, so the officer must serve a fresh notice of demand for the amount now due, give the assessee an opportunity to pay, and only then treat him as in default. The Mysore High Court had rightly quashed the certificates and the attachment. Shah J dissented, holding that a modification which does not vacate the assessment leaves the earlier default intact. This was decided by the Supreme Court (Supreme Court of India; A.K. Sarkar, M. Hidayatullah and J.C. Shah JJ. Separate opinions by Sarkar J and Hidayatullah J dismissing the appeals; Shah J dissenting) and bears on section 156, section 220, section 222 of the Income Tax Act 1961. It is reported as AIR 1964 SC 1473; (1964) 7 SCR 148; 1964 AIR 1473; 1964 SCR (7) 148; AIR 1964 SUPREME COURT 1473. The case is the classic statement of the proposition that recovery machinery runs on a subsisting demand, and that a demand which the appellate order has displaced cannot support coercive process. The reasoning is worth knowing even where later law has changed the result: the appellate authority may itself specify an amount payable, in which case non-payment creates its own default, and the same liability cannot carry two defaults or two starting points of limitation. Sarkar J extended the point to enhancement as well, doubting the view that a fresh notice need issue only for the increase. Hidayatullah J put it on the assessee's right to be told what is now due and to be given a chance to pay before being treated as a defaulter. Shah J's dissent, that a certificate is valid so long as the officer had power to issue it and the assessment was modified rather than vacated, is the view the recovery provisions were later written around. If it applies to you, the first step is this: Check the demand your recovery proceeding rests on: identify the order that created it, and whether that order has since been varied on appeal.
By orders of 23 March 1955 made under section 23(4) of the 1922 Act, the Income-tax Officer, Kolar assessed the respondent on estimated incomes of Rs 61,000 for 1953-54, carrying tax of Rs 19,808, and Rs 1,21,000 for 1954-55, carrying tax of Rs 66,601. Notices of demand under section 29 were served. The assessee appealed but did not pay. In September 1955 the officer forwarded certificates to the Deputy Commissioner, Kolar under section 46(2) for recovery as arrears of land revenue, and in the same month various properties were attached under the Revenue Recovery Act. On 17 December 1955 the Appellate Assistant Commissioner reduced the assessable income to Rs 27,000 and Rs 45,000 for the two years and directed the officer to recompute the tax and refund any excess collected. On 19 February 1956 the officer wrote to the assessee stating the reduced liabilities, put in the judgment at Rs 4,215 and Rs 13,346, and called on him to pay them at once into the local treasury, but issued no fresh notice of demand. The assessee appealed further, asked for the recovery proceedings to be stayed, and on refusal moved the Mysore High Court under Article 226. The High Court held that without fresh notices of demand the assessee could not be treated as a defaulter and that the proceedings on the certificates were illegal. The Department appealed by special leave. The matter was decided on 1964-03-11 by the Supreme Court (Supreme Court of India; A.K. Sarkar, M. Hidayatullah and J.C. Shah JJ. Separate opinions by Sarkar J and Hidayatullah J dismissing the appeals; Shah J dissenting). On those facts the Supreme Court held as follows. By order of the majority the appeals were dismissed, with no order as to costs. On the assessment order being revised in appeal, the default based on it and all consequential proceedings are superseded, and fresh proceedings must be started to realise what is due under the revised order. Hidayatullah J put the matter on section 29: where an order is passed in appeal and the tax reduced, the officer must intimate the reduced amount to the assessee, make a demand and give him an opportunity to pay before treating him as a defaulter; he noted that a fresh notice of demand had in fact by then issued, and that if it were disobeyed the officer could recall the old certificate, amend it to match the tax now demandable and return it to the Revenue Officer to continue recovery. Shah J dissented and would have allowed the appeal and dismissed the writ petition with costs, holding that in the absence of any provision obliging the officer to issue successive notices of demand as the assessment moves through appeal, the original notice must be enforced under section 46 within the limitation in section 46(7), subject to adjusting the amount recovered in the light of the appellate order.
Sarkar J worked from the scheme of the Act. Tax becomes due on an order, section 29 requires a notice of demand specifying the sum payable, and section 45 makes an assessee who fails to pay within the time and at the place mentioned a deemed defaulter, after which the coercive process in section 46 becomes available. He pointed out that section 45 attaches the same consequence to non-compliance with an order under section 31, which is the appellate order. So if the Appellate Assistant Commissioner specifies an amount payable with the time, place and person for payment, non-compliance with that order creates a default of its own. Since there is one liability, there cannot be two defaults, and the Act must by necessary implication be taken to supersede the earlier default. The same follows even where the appellate order fixes only a different amount without the other particulars, because the two orders cannot stand together, and the earlier order and the default connected with it must go, leaving a fresh notice under section 29 to be issued. He rejected the argument that a default can end only where the assessment is annulled, and the argument that his view makes the officer's discretion under the proviso to section 45 pointless. He also doubted the line of cases holding that on an enhancement only the additional amount need be demanded afresh, since a notice under section 29 can only be for the amount due in consequence of the order. Shah J read the same sections the other way: the validity of a certificate depends on the officer's power to issue it, which exists if the assessee is in default and the proceedings are within time under section 46(7), and a person already in default does not cease to be in default merely because the assessment is modified without being vacated. He treated the wide observations of Chakravartti CJ in the Metropolitan Structural Works case as unnecessary to that decision and as not correctly interpreting sections 29, 45 and 46, preferring the later explanation in Ladhuram Taparia. In the words reproduced by the source cited on this page: "In such a case along with the superseded order the default if any incurred in connection with it must also disappear."
It was decided by the Supreme Court on 1964-03-11 and is reported as AIR 1964 SC 1473; (1964) 7 SCR 148; 1964 AIR 1473; 1964 SCR (7) 148; AIR 1964 SUPREME COURT 1473. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 156, section 220, section 222, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. By order of the majority the appeals were dismissed, with no order as to costs. On the assessment order being revised in appeal, the default based on it and all consequential proceedings are superseded, and fresh proceedings must be started to realise what is due under the revised order. Hidayatullah J put the matter on section 29: where an order is passed in appeal and the tax reduced, the officer must intimate the reduced amount to the assessee, make a demand and give him an opportunity to pay before treating him as a defaulter; he noted that a fresh notice of demand had in fact by then issued, and that if it were disobeyed the officer could recall the old certificate, amend it to match the tax now demandable and return it to the Revenue Officer to continue recovery. Shah J dissented and would have allowed the appeal and dismissed the writ petition with costs, holding that in the absence of any provision obliging the officer to issue successive notices of demand as the assessment moves through appeal, the original notice must be enforced under section 46 within the limitation in section 46(7), subject to adjusting the amount recovered in the light of the appellate order. It arises in Demand, Recovery & Stay and Appeals matters, on section 156, section 220, section 222 of the Income Tax Act 1961, and was decided by Supreme Court of India; A.K. Sarkar, M. Hidayatullah and J.C. Shah JJ. Separate opinions by Sarkar J and Hidayatullah J dismissing the appeals; Shah J dissenting. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the appellate order itself specifies an amount payable and the time and place for payment, treat that as the operative demand and pay against it. Do not assume this decision still gets an attachment lifted; the recovery provisions of the 1961 Act deal expressly with what happens to a certificate when the demand is varied, and the position must be checked against the current section before the argument is run. Whatever the year, ask for and keep the intimation of the revised demand; the entitlement to be told the reduced figure and given time to pay it is the practical core of the majority's reasoning.
Validity check could not be completed. The decision construes sections 29, 45 and 46 of the 1922 Act, whose broad counterparts in the 1961 Act are sections 156, 220 and 222. The 1961 Act deals expressly with what is to happen to a recovery certificate when the demand is later varied, which the 1922 Act did not, so the result here cannot be assumed to hold today. Whether and how the position was altered by later legislation was not established in this session, and the harvested text, being from March 1964, could not address it. The source page records the decision as cited in some eighty later cases, with the Supreme Court itself referring to it in 1975 and 1979. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Until build 87 this library carried a second entry on the same judgment, at /caselaw/case/ito-v-seghu-buchiah-setty-fresh-demand-after-appeal/, which asked: My assessment was cut in appeal — can the department keep going with the recovery certificate it issued on the original demand? It was the shorter of the two write-ups and has been merged into this one. That address now redirects here, and every citation, section and subject it carried that this entry did not has been folded in. The harvested page is marked as clipped and about 27,000 characters from the middle of the judgment are not reproduced. What is missing is the later part of Sarkar J's opinion and almost the whole of Hidayatullah J's opinion, of which only the closing paragraphs survive. Sarkar J's statement of the scheme and his central reasoning, Hidayatullah J's conclusion, the whole of Shah J's dissent and the operative order are all present, so the outcome and the ratio are clear, but the majority's full treatment of the authorities could not be read. The batch line gave the sections as 220, 220(2), 156, 221 and 222; the judgment decides sections 29, 45 and 46 of the Indian Income-tax Act, 1922, and nothing on interest or on penalty for default. The figures in the judgment differ from those in the headnote, which gives the reduced incomes as Rs 28,000 and Rs 46,000 against Rs 27,000 and Rs 45,000 in the body; the body has been followed. The sentence recording the reduced tax for 1953-54 is printed with two figures run together. The further appeals filed by the assessee against the appellate orders were not before the Court and their fate is not recorded. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
By order of the majority the appeals were dismissed, with no order as to costs. On the assessment order being revised in appeal, the default based on it and all consequential proceedings are superseded, and fresh proceedings must be started to realise what is due under the revised order. Hidayatullah J put the matter on section 29: where an order is passed in appeal and the tax reduced, the officer must intimate the reduced amount to the assessee, make a demand and give him an opportunity to pay before treating him as a defaulter; he noted that a fresh notice of demand had in fact by then issued, and that if it were disobeyed the officer could recall the old certificate, amend it to match the tax now demandable and return it to the Revenue Officer to continue recovery. Shah J dissented and would have allowed the appeal and dismissed the writ petition with costs, holding that in the absence of any provision obliging the officer to issue successive notices of demand as the assessment moves through appeal, the original notice must be enforced under section 46 within the limitation in section 46(7), subject to adjusting the amount recovered in the light of the appellate order.
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