Section 222

Section 222 — the law in short

What the courts have decided on section 222, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• TRO v Gangadhar Vishwanath Ranade Supreme CourtHelps taxpayer
  The TRO has attached property the defaulter transferred years ago and calls the transfer void. Can he do that?
  No. In a Rule 11 enquiry under the Second Schedule the Tax Recovery Officer can only decide who is in possession and in what capacity; he has no power to declare a transfer by the assessee to a third party void under s.281. To get that declaration the Department must file a suit.
• ITO, Kolar v Seghu Buchiah Setty Supreme CourtHelps taxpayerSuperseded by amendment
  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is revised in appeal, the notice of demand founded on it, the default and the recovery proceedings that followed are superseded.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.
• Rajendra Kumar v ACIT High CourtHelps taxpayer
  The CPC has adjusted my entire refund against a demand that is under appeal. Do I have to file a separate stay application before I can complain?
  No. The Rajasthan High Court held that nowhere in section 220(6) is it specified that a stay application has to be filed; once an appeal under section 246A has been filed within time and in the prescribed form, the assessee is not to be treated as an assessee in default. Adjusting the whole refund suo motu, without the intimation and opportunity that section 245 requires, was held to be de hors sections 245 and 220(6) and outside the recovery machinery of sections 222 and 223. The Court directed refund, with statutory interest, of everything adjusted beyond twenty per cent of the disputed demand.
• Leo Edibles & Fats Ltd v Tax Recovery Officer High CourtHelps taxpayerNo later treatment found
  I bought a property at the liquidator's e-auction. The Income Tax Department had attached it before the liquidation started and the Sub-Registrar will not register my sale deed. Where do I stand?
  Section 178 has no application at all to a liquidation under the Insolvency and Bankruptcy Code, so the department cannot claim the priority that s.178(3) and (4) would otherwise give it. The Income Tax Department is not a secured creditor; at best it has a charge under its attachment order in terms of s.281, and an attached asset still forms part of the liquidation estate under s.36(3)(b) of the Code. The department must file its claim with the liquidator and take its place in the s.53(1) waterfall.
• Shriya Bhupal v ACIT High CourtHelps departmentNo later treatment found
  The department has declared my purchase void under s.281 and attached the property. Do they not have to go to a civil court first, as the Supreme Court said in Gangadhar Vishwanath Ranade?
  The Andhra Pradesh High Court held that they do not. It reasoned that once a statute itself declares a transfer void there can be no further judicial declaration to be obtained, that s.281 is unlike s.53 of the Transfer of Property Act because it makes the transfer void and not voidable, and that since the words 'with the intention to defraud the revenue' were deleted in 1975 there is nothing left for the Revenue to prove in a suit. The remedy under Rule 11(6) of the Second Schedule belongs to the transferee, who must go to the civil court, not to the department.
• Statutory position — s.115P interest at one per cent a month and s.115Q deeming the company an assessee in default on unpaid DDT CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  My company paid its dividend distribution tax late. What interest runs, from when, and what can the Department do to recover the tax itself?
  Section 115P charges simple interest at one per cent for every month or part of a month on the unpaid tax on distributed profits, running from the date immediately after the last date on which the tax was payable under s.115-O(3) — fourteen days from the earliest of declaration, distribution or payment — and ending on the date the tax is actually paid. Section 115Q then deems the principal officer and the company to be an assessee in default in respect of the amount payable, and applies all the provisions of the Act for the collection and recovery of income-tax.
• Statutory position — s.225: once the certificate is drawn up the Tax Recovery Officer has his own power to grant time and stay, a duty to stay the reduced part, and a duty to amend or cancel CBDT Circulars & InstructionsCuts both ways
  The certificate has already gone to the Tax Recovery Officer. The Commissioner (Appeals) has cut the addition but the Department has gone to the Tribunal. Do I have to pay the whole certificate amount, and who do I ask?
  You ask the Tax Recovery Officer, and on the reduced part he has no discretion. Section 225 has three sub-sections. Sub-section (1) makes it lawful for the Tax Recovery Officer to grant time for the payment of any tax, and provides that when he does so he shall stay the proceedings for the recovery of such tax until the expiry of the time so granted. Sub-section (2) deals with your situation: where the order giving rise to a demand for which a certificate has been drawn up is modified in appeal or other proceeding under the Act and, as a consequence, the demand is reduced, but the order is the subject-matter of further proceeding under the Act, the Tax Recovery Officer shall stay the recovery of such part of the amount specified in the certificate as pertains to the said reduction, for the period for which the appeal or other proceeding remains pending. Sub-section (3) requires him, once the order which was the subject-matter of the appeal or other proceeding has become final and conclusive, to amend the certificate or cancel it, as the case may be. Each of the second and third is expressed with 'shall'.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.