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PETITIONER: S.  V. KANDASKAR

       Vs.

RESPONDENT: V.   N. DESHPANDE & ANR

DATE OF JUDGMENT04/01/1972

BENCH: DUA, I.D. BENCH: DUA, I.D. MITTER, G.K. SIKRI, S.M. (CJ) SHELAT, J.M. KHANNA, HANS RAJ

CITATION:  1972 AIR  878            1972 SCR  (2) 965  1972 SCC  (1) 438

ACT: Income Tax-S. 148 and Companies Act-S. 446(1)-Whether Income Tax  Officers  require  leave of the  liquidation  Court  to reopen assessment of a company for escaped income.

HEADNOTE: A company (in liquidation) was ordered by the High Court  to be  wound up and the official liquidator was  appointed  its liquidator.   Thereafter the I.T.O. issued notices under  s. 148  of I.T. Act proposing to reopen the assessment  of  the Company in respect of the assessment years 1950-51 to  1955- 56.  The I.T.O. further notified the official liquidator  to produce accounts and documents specified at the back of  the notice.. The official liquidator made an application  before the High Court questioning the jurisdiction of the I.T.O. to issue the said notices without the leave of the High  Court, as  required  under  S. 446(1) of the  companies  Act.   The learned single Judge of the High Court issued an  injunction restraining  the  I.T.O. to reassess the said  Company.   On appeal,  the appellate bench of the High Court reversed  the order and set aside the injunction.  On appeal to this Court only  one question arose for determination as to whether  it was  necessary  for  the  I.T.O.  to  obtain  leave  of  the liquidation court when he wants to reassess the company  for escaped income in respect of the past years.  Dismissing the appeal, HELD  : The Income Tax Officer need not obtain leave of  the winding up court for commencing or continuing assessment  or reassessment proceedings.  ’Me Income-tax Act is a  complete Code  and s. 147 empowers the Income, Tax Officer to  assess or  reassess  escaped income.  Further while  holding  these assessment  proceedings,  the Income Tax  Officer  does  not perform the functions of a Court as contemplated by s. 446(2) of the Act. The liquidation court cannot perform the functions of Income Tax  Officers while assessing the amount of tax  payable  by the  assessees even if the assessee be the Company which  is being  wound up,, by the Court.  It would lead to  anomalous consequencs  if  the  winding  up  Court  were  to  be  held

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empowered  to transfer the assessment proceedings to  itself and assess the Company to Income tax. [978 B-D] Grovernor-General in Council v. Shiromani Sugar Mills- Ltd.. [1946]  F.C.R.  40,  Shakuntala  v.  The  Peoples’  Bank  of Northern India Ltd. (in liquidation). [1941] T.L.R. 22  Lab. 760  and  M.  K. Ranganathan v. State of  Madras.  [1955]  2 S.C.R. 374, referred to and discussed.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1650 of 1970. Anneal from the Judgment and order dated January 31, 1970 of the Bombay High Court in April No. 94 of 1967. S.   T. Desai, P. C. Bhartari.  Ajit Mehta.  Kirit Mehta, J. B.  Dadaichanji  O. C. Mathur and Ravinder Narain,  for  the appellant. 14-L736SuPCT/72 966 B. Sen, S. K. Aiyar and R. N. sachthey, for the respondents. The Judgment of the Court was delivered by Dua,  J.-The Colaba Land and Mills Co., Ltd.,  (in  liquida- tion)  was  ordered by the Bombay High Court on  October  7, 1959  to be wound up under the provisions of  the  Companies Act, 1 of 1956 and the Official Liquidator was appointed its liquidator.  Earlier on May 1, 1959 the Official  Liquidator had  been  appointed  by  the  High  Court  its  provisional liquidator.   On  August  23, 1966  the  Income-tax  Officer (Companies  Circle) concerned issued six  different  notices under S. 148 of the Income-tax Act, 1961 proposing to reopen the assessment of the Company and to re-assess it in respect of the assessment years 1950-51 to 1955-56.  On December 31, 1966, the Income-tax Officer served further notices under S. 142(1)  of the Income-tax Act upon the  Official  Liquidator calling  upon  him to produce accounts and  documents  speci fied  at  the  back  of  the  notices  and  to  furnish  any information called for by the said officer.  At the foot  of the  said notices it was stated that failure on the part  of the  Official Liquidator to comply with the terms  of  those notices would not only result in exparte assessment  against the  Company but might also entail penalty under S.  271  of the Income-tax AcL Certain negotiations followed between the Official    Liquidator   and   the   Inspecting    Assistant Commissioner of Income-tax but they were infructuous.  On an application  made  by the Official Liquidator  in  the  High Court questioning the jurisdiction of the Income-tax Officer to   issue  the  said  notices  or  to  proceed   with   the reassessment  of the Company without the leave of  the  High Court   winding  up  the  Company,  Vimadlal  J.,  on   28th September,  1967 held that the income-tax  authorities  were not  entitled  to commence the  assessment  or  reassessment proceedings  contemplated against the Colaba Land and  Mills Co.,  Ltd., or to continue the same without obtaining  leave of the Court under S. 446(1) of the Companies Act, 1956 (Act No.  1 of 1956) (hereinafter called the Act).   The  learned Judge  on  this view granted an injunction  restraining  the Incometax  Officer from assessing or re-assessing  the  said Company for the assessment years 1950-51 to 1955-56. On  appeal by the Income-tax Officer and the Union of  India before  the  appellate bench of the High Court  against  the order  of  injunction, the Division Bench (Modi  and  Desai, JJ.) reversed the order of the learned single Judge and  set aside  the injunction issued by him.  Before  the  appellate bench  two contentions were raised on behalf of the  Income- tax Officer: (1) that notices for reassessment issued  under

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s.  148  were not legal proceedings within the  meaning-  of that phrase as used in s. 446(1) of the Act, and (2)   that, assuming the re-assessment proceedings started under the 967 said  notices to be legal proceedings, leave of the  Company Court  under s. 446(1) of the Act was not necessary  because the Incometax Officer had exclusive jurisdiction to make re- assessment   and  to  determine  the  tax  liability.    The proceedings  by  way  of assessment  before  the  Income-tax Officer,  according to the contention were outside the  pale of  jurisdiction of all civil courts including  the  Company Court.  The appellate bench did not consider it necessary to decide  the  first contention because, on the  authority  of Damji Valji Shah v. Life Insurance Corporation of  India(1), the  second contention deserved to be accepted and that  was considered sufficient to conclude the appeal. The  Official  Liquidator, after securing a  certificate  of fitness  from  the High Court under Art.  133(1)(c)  of  the Constitution  has  appealed  to  this  Court  and  the  only question  which  requires consideration here is,  if  it  is necessary for the Income-tax Officer to obtain leave of  the liquidation court when he wants to re-assess the company for escaped income in respect of past years. Section 446 of the Act reads :               "(1) When a winding up order has been made  or               the Official Liquidator has been appointed  as               provisional liquidator, no suit or other legal               proceeding  shall be commenced, or if  pending               at the date of the winding up order, shall  be               proceeded with, against the company, except by               leave  of the Court and subject to such  terms               as the Court may impose.               (2)   The  Court  which  is  winding  up   the               company   shall,   notwithstanding    anything               contained in any other law for the time  being               in  force, have jurisdiction to entertain,  or               dispose of-               (a)   any suit or proceeding by or against the               company;               (b)   any claim made by or against the company               (including  claims  by or against any  of  its               branches in India);               (c)   any question of priorities or any  other               question  whatsoever, whether of law or  fact,               which may relate to or arise in course of  the               winding up of the company;               whether  such  suit  or  proceeding  has  been               instituted or is instituted, or such claim  or               question   has  arisen  or  arises   or   such               application has been made or is made before or (1)  A.I.R. 1966 S.C. 135. 968               after  the  order for the winding  up  of  the               company,  or before or after the  commencement               of the Companies ,(Amendment) Act, 1960.               (3)   Any suit or proceeding by Or against the               company  which is pending in any  Court  Other               than  that  in  which the winding  up  of  the               company  is  proceeding  may,  notwithstanding               anything  contained in any other law  for  the               time  being  in force, be transferred  to  and               ,disposed of by that Court.               (4)   Nothing  in  sub-section  (1)  or   sub-               section  (3)  shall apply  to  any  proceeding               pending in appeal before the Supreme Court  or

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             High Court." To  appreciate  and  understand the precise  scope  of  this section so far as it concerns us in the present controversy, we  consider it pro per to turn to the scheme of the Act  on this  aspect.  Chapter II of Part VII of the  Act  beginning with s. 433 deals with winding up by the Court.  Section 439 provides for applications for winding up and s. 441 tells us when  the  winding  up  of a company  is  to  be  deemed  to commence.  Section 442 which confers power on courts to stay or restrain proceedings against the company reads               "442.  At any time after the presentation of a               winding  up petition and before a  winding  up               order  has  been  made,  the  company  or  any               creditor or contributory               may-               (a)   where any suit or proceeding against the               company is pending in the Supreme Court or  in               any  High Court, apply to the Court  in  which               the  suit or proceeding is pending for a  stay               of proceedings therein; and               (b)   where any suit or proceeding is  vending               against the company in any other Court,  apply               to  the Court having jurisdiction to  wind  up               the  company, to restrain further  proceedings               in the suit or proceeding;               and the Court to which application is so  made               may   stay   or   restrain   the   proceedings               accordingly, on such terms as it thinks fit." Section  444  enjoins  the Court making  an  order  for  the winding  up of a company to cause intimation thereof  to  be sent forthwith to the Official Liquidator and the  Registrar appointed  under  the Companies Act.   Official  Liquidators attached  to  the High Courts are appointed by  the  Central Government  under s. 448 and the Registrars by  the  Central Government under s. 609 of the Act. 969 It  is  the  duty  of  the  petitioner  in  the  winding  up proceedings  and also of the company to file under s. 445  a certified copy of the order of winding up with the Registrar who has to notify in the Official Gazette that such an order has been made.  Such order is to be deemed to be a notice of discharge  of  the  officers and employees  of  the  company except when the business of the company is continued vide s. 445 (3).  Then comes s. 446, which has already been set out. The  present sub-s. (2) of this section was substituted  for the old one in 1960 by Act 65 of 1960 and sub-& (4) was also added by that Act.  Sub-section (2) is on the lines of s.  7 of  the Presidency Towns Insolvency Act, 1909, s. 4  of  the Provincial  Insolvency Act, 1920 and s. 45B of  the  Banking Companies Act.  The object of this sub-section appears to be to   empower  "the  court  as  in  exercise  of   insolvency jurisdiction  to decide, all claims made by or  against  any company  and other questions whatsoever so that  winding  up proceedings  might be expedited".  Subsections (2)  and  (3) both  seem  to  have been inserted to  give  effect  to  the recommendation of the Company Law Committee Report contained in  para  207(c), namely, that "all suits by  or  against  a company in winding up should, notwithstanding any provisions in any law for the time being in force, be instituted in the court  in  which the winding up  proceedings  are  pending". This  was  considered  to be to quote the  exact  words  "on balance an advantage to all concerned, including the parties which have a claim against the companies, to institute suits relating  to its affairs in the Court where the  winding  up proceedings  are  pending".  In the  Indian  Companies  Act,

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1913,  s. 171 provided for preventing litigation  against  a company in the process of being wound up and it read as :               "  171. When a winding up order has been  made               or a provisional liquidator has been appointed               no  suit  or other legal proceeding  shall  be               proceeded   with  or  commenced  against   the               company  except  by leave of  the  Court,  and               subject  to  such  terms  as  the  Court   may               impose." The  words underlined were inserted by the Companies  Amend- ment Act, 1936 which followed the English Act.  It is hardly necessary  to  point out that company legislation  in  India has, ever since the first enactment of 1850 (Registration of Joint-stock  Companies Act, No. XLIII of 1850) broadly  been following  the  lines of development of the company  law  in England.   The object of s. 171 was designed to achieve  was to prevent all litigation against the company in the process of being wound up except with the consent of the court.   We have reproduced this section because the decisions to  which reference has been made by Shri Desai in the very  beginning of his arguments relate to the cons- 970 truction  of this section by the Federal Court of India  and by this Court.  The Federal Court in The Governor-General in Council  v.Shiromani  Sugar Mills Ltd.(1)  while  construing this  section held that the words "other legal  proceedings" in  this  section comprise any proceedings  by  the  revenue authorities under s. 46(2) of the Indian Income-tax Act  and accordingly,  before  forwarding the  requisite  certificate under  S.  46(2)  to  the Collector,  which  would  put  the machinery for the collection of the arrears of land  revenue into  motion,  the Income-tax Officer  should  have  applied under  s. 171 of the Indian Companies Act for leave  of  the winding   up  Court.   The  passage  on  which  Shri   Desai specifically   relied   is  where,  disagreeing   with   the observations  of  a Full Bench of the Lahore High  Court  in Shakuntla  v. The People’s Bank of Northern India  Ltd.  (In Liquidation,)(2),  Spens, C.J. observed that the  expression "or  other  legal  proceedings"  in s.  171  need  not  and, therefore,  should not be confined to "original  proceedings in  a court of first instance analogous to a suit  initiated by  means of a petition similar to a plaint".   The  learned Chief Justice there went on to observe :               "Section   171  must,  in  our  judgment,   be               construed with reference to other sections  of               the   Act   and   the   general   scheme    of               administration  of the assets of a company  in               liquidation   laid  down  by  the   Act.    In               particular, we would refer to s. 232.  Section               232  appears to us to be supplementary  to  s.               171 by providing that any creditor (other than               Government) who goes ahead, notwithstanding  a               winding  up order or in ignorance of  it  with               any  attachment, distress, execution or  sale,               without the previous leave of the Court,  will               find that such steps are void.  The  reference               to  ’distress’  indicates that  leave  of  the               Court is required for more than the initiation               of  original  proceedings in the nature  of  a               suit  in an ordinary Court of law.   Moreover,               the scheme of the application of the company’s               property in the pari passu satisfaction of its               liabilities,  envisaged  in S. 211  and  other               sections of the Act, cannot be made to work in               coordination,  unless  all  creditors  (except

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             such  secured creditors as are ’  outside  the               winding  up  in the sense  indicated  by  Lord               Wrenbury  in his speech in Food Controller  v.               Cork(3)  are  subjected as  to  their  actions               against  the  property of the company  to  the               control  of  the Court.  Accordingly,  in  our               judgment,  no  narrow construction  should  be               placed   upon  the  words  ’or   other   legal               proceeding’ in s. 171.    In our judgment, the               words can and should be held (1) [1946] F.C.R. 40.        (2) [1941] I.L.R. 22 Lah. 760. (3)  [1923] A.C. 647. 971               to cover distress and execution proceedings in               the  ordinary  Courts.   In  our  view,   such               proceedings   are  other   legal   proceedings               against   the  company,  as  contrasted   with               ordinary suits against the company." In that case a company was ordered to be wound up in  April, 1942 and an order of assessment to income-tax of the profits made by the company in the year ending May 31, 1940 was made in 1943 and the Income-tax Officer, without obtaining  leave of the winding up court, commenced proceedings for  recovery of  tax as If it were an arrear of land revenue.  It was  on these  facts that it was observed that the words  "or  other legal proceedings" can and should be held to cover  distress and execution proceedings.  This expression was not held  to cover   assessment  proceedings  to  which   apparently   no objection  was  raised  by  the  parties  though  they  were represented by eminent counsel.  The decision of this  Court to  which Shri Desai has next referred is M. K.  Ranganathan v.  Government of Madras(,’).  The head-note which  gives  a clear idea of the ratio of this decision is in these words               "The  secured creditor is outside the  winding               up  and can realise his security  without  the               leave  of the winding up Court, though  if  he               files a suit or takes other legal  proceedings               for  the  realisation of his  security  he  is               bound under s. 171 of the Indian Companies Act               to  obtain the leave of the winding  up  Court               before he can do so although such leave  would               almost automatically be granted.               It  is  a legitimate rule of  construction  to               construe  words in an Act of  Parliament  with               reference   to   words  found   in   immediate               connection  with  them.  It is  also  a  well-               recognized  rule  of  construction  that   the               legislature   does  not  intend  to   make   a               substantial alteration in the law beyond  what               it explicitly declares either in express words               or  by clear implication and that the  general               words of the Act are not to be so construed as               to  alter  the  previous policy  of  the  law,               unless  no sense or meaning can be applied  to               those words consistently with the intention of               preserving the existing policy untouched.               Held,  therefore,  that having regard  to  the               context  in  which the words  ’any  sale  held               without  leave  of  the Court of  any  of  the               properties’   added  in  s.  232(1)   by   the               amending  Act XXII of 1936 have been  used  in               aposition  with "any attachment,  distress  or               execution put into force without leave of  the               Court against the estate or effects" it  would               be a legitimate construction to

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(1)  [1955] 2 S.C.R. 374. 972               be put upon them that they refer only to sales               held through the intervention of the Court and               not to sales effected by the secured  creditor               outside   the  winding  up  and  without   the               intervention  of  the  Court,  and  that   the               amendment was not intended to bring within the               sweep  of the general words sales effected  by               the secured creditor outside the winding up.               Held accordingly that in the present case  the               sale  effected  by  respondent no.  2  as  the               receiver  of  the trustees  of  the  debenture               holders in July 1954 was valid and binding  on               all  parties concerned and could not be  chal-               lenged  as  it was sought to be  done  by  the               Official Receiver." In  this case the observations already- reproduced from  the judgment  of the Federal Court in Shakuntla’s  case  (supra) were  approved.   It may also be pointed out  that  in  this decision  this  Court  observed that the  winding  up  court assures  pro rata distribution of the assets of the  company in  the  same way in which the court  under  the  Presidency Towns  Insolvency  Act  or  the  Provincial  Insolvency  Act ensures such distribution of assets.  Section 232(1) of  the Act  of 1913 which was held supplemental to S. 171 was  also stated  to have reference to legal proceedings in  the  same way as such proceedings were envisaged by s. 171.  These two decisions  in  our opinion do not lay down  that  assessment proceedings  under the Income-tax Act should be held  to  be within  the contemplation of s. 171 of the Indian  Companies Act,  1913.  The next decision to which reference  has  been made by Shri Desai is Union of India v. India Fisheries  (P) Ltd..(1). In that case the respondents, Fisheries (P)  Ltd., had been directed to be wound up by the winding up court and an Official Liquidator had been appointed by an order of the High  Court  in October, 1950.  The head-note in  that  case gives a clear idea of the facts and the decision.  It  reads :               "The  respondent  company was directed  to  be               wound up and an official liquidator  appointed               by  an  order of the High  Court  in  October,               1950.   In  December 1950 the  respondent  was               assessed to tax amounting to Rs. 8737 for  the               year  1948-49.  A claim made for this  tax  on               the  official  liquidator  was  adjudged   and               allowed as an ordinary claim and certified  as               such in April, 1952.  The Liquidator  declared               a  dividend  of 9 1/2 annas in  the  Rupee  in               August, 1954 and paid a sum of Rs. 5188 to the               Department, leaving a balance of Rs. 3549. (1)  [1965] 3 S.C.R. 678. 973               In  June, 1954, the Department made  a  demand               from  the respondent and was paid Rs. 2565  as               advance  tax  for  the  year  1955-56.   On  a               regular  assessment being made for that  year,               only Rs. 1126 was assessed as payable so  that               a sum of Rs. 1460, inclusive of interest,  be-               came  refundable to the respondent.   However,               the Income Tax Officer, purporting to exercise               the power available to him under s. 49E of the               Income  Tax  Act, 1922, set  off  this  amount               against  the balance of Rs. 3549 due  for  the               year  1948-49.  A revision petition  filed  by

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             respondent  in  respect of this  set  off  was               rejected by the Commissioner of Income-tax.               Thereafter,  petition under Art. 226 filed  by               the respondent to set aside the orders of the               Income   Tax  Officer  and  Commissioner   was               allowed by the High Court, on the ground  that               the demand for Rs. 8737 in respect of 1948-49,               being adjudged and certified came to have  all               the  incidents and character of  an  unsecured               debt   payable  by  the  liquidator   to   the               Department;  it was therefore governed by  the               provisions of Company Law and no other  remedy               or method to obtain satisfaction of the  claim               was available to the creditor.               In  the appeal to this Court it was  contended               on  behalf of the appellant that s.  49E  gave               statutory  power to Income Tax Officer to  set               off  a  refundable  amount  against  any   tax               remaining payable and that this power was  not               subject to any provision of any other law.               Held  the Income Tax Officer was in  error  in               applying s. 49E and setting off the refund due               to the respondent.               The effect of ss. 228 and 229 of the Companies               Act,  1913, is, inter alia, that an  unsecured               creditor   must  prove  his  debts   and   all               unsecured  debts  are to be paid  pari  passu.               Once  the  claim of the Department has  to  be               proved   and   is   proved   in    liquidation               proceedings,  it  cannot,  by  exercising  the               right  under  s. 49E get priority  over  other               unsecured  creditors and thus defeat the  very               object  of  ss. 228 and 229 of  the  Companies               Act.   Furthermore,  if there is  an  apparent               conflict between two independent provisions of               law,  the  special  provision  must   prevail.               Section 49E is a general provision  applicable               to all assessees in all circumstances; ss. 228               and  229  deal with proof of debts  and  their               payment in liqui-               97 4               dation.   Section 49E can be  reconciled  with               ss. 228 and 229 by holding that S. 49E applies               when insolvency rules do not apply." In our opinion this decision is of no greater assistance  to the   appellant   on  the  narrow   point   which   requires determination by us.  On the contrary to some extent it goes against Shri Desai because the assessment made in  December, 1950,  after the appointment of the Official Liquidator  was assumed  to  be  in  order.  It  may  be  recalled  that  in Shiromani Sugar Mills case (supra) the assessment made after the  winding  up  order was not  challenged  though  on  the argument  addressed  by Shri Desai before us it  could  have been  challenged.   The  ratio decidendi  or  the  principle accepted and applied in none of the decisions cited supports the   appellant’s  contention  on  the  precise   point   of assessment  of  tax.  Shri Desai has next referred us  to  a more recent decision of this Court in Balwant Singh v. L. C. Bharumal,  Income-tax Officer, New, Delhi.(1) In  this  case the  Income-tax  Officer  was held to be  a  court  for  the purpose  of s. 195 (1) (b), Cr.  P. C. though it  was  added that  the Income-tax Officer could not be treated as  a  re- venue court and, therefore, neither S. 476 nor s. 479-A, Cr. P. C. would be applicable.  This decision has been cited for the  purpose  of contending that if  the  expression  "other

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legal  proceeding"  in s. 446 is to be construed to  mean  a proceeding in a court, then, the Income-tax Officer must  be considered  to  be a court when holding  assessment  or  re- assessment proceedings.  This contention may be disposed  of with  the  observation that merely  because  the  Income-tax Officer  is considered to be a court for the purpose  of  S. 195 (1) (b), Cr.  P. C. it does not necessarily follow  that the  said officer must be considered to be a court  for  the purposes  of s. 446 of the Act.  There is  no  justification for  extending  the scope of this decision  beyond  its  own facts.   The  decisions which apparently seem to  lend  more direct  support  to the appellants contention are  Union  of India v. Seth Spinning Mills Ltd., (In Liquidation) (2)  and Mysore  Spun  Silk  Mills  Ltd.,  (In  Liquidation),  In  re Official   Liquidator   v.   Commissioner   of   Income-tax, Bangalore(").  Both of them are decisions by single  Judges, the  former by the Punjab High Court and the latter  by  the Mysore  High Court.  In Seth Spinning Mills case (supra)  it was observed "that S. 171 of the Indian Companies Act,  1913 provides that when a winding up order has been made no  suit or  other  legal  proceeding  shall  be  proceeded  with  or commenced  against the company except by leave of the  court and  subject  to such terms as the court  may  impose.   The language   of  this  section  is  wide  enough  to   include proceedings under the Income-tax Act. (1) [1968]70 I.T.R.89(S.C.)   (2) [1962] 46 I.T.R. 193. (3) [1968] 68 I.T.R. 295.  975 No  leave of the court has been obtained.  In view  of  this the claim of the petitioner for Rs. 4,000 on account of  the penalty   order  passed  on  14th  April,  1956  cannot   be entertained".  in this case the Union of India  through  the Commissioner of Income-tax had applied to the learned single Judge,  who was apparently functioning as a  company  Judge, praying that the department’s claim amounting to Rs.  16,500 should  have  been admitted by the Official  Liquidator  and that  his refusal to do so was not justified in  law.   This amount, it appears, consisted of the penalty imposed by  the Income-tax  Department.  Part of the penalty was imposed  by means  of an order passed prior to the company’s going  into liquidation  but a sum of Rs. 4,000 related to  the  penalty imposed  after the date of winding up.  The  learned  single Judge while dealing with that petition observed :               "Section  171  of the  Indian  Companies  Act,               1913,  provides that when a winding  up  order               has   been  made  no  suit  or   other   legal               proceedings   shall  be  proceeded   with   or               commenced against the company except by  leave               of the court and subject to such terms as  the               court  may  impose.   The  language  of   this               section is wide enough to include  proceedings               under  the  Income-tax Act.  No leave  of  the               court has been obtained.  In view of this, the               claim  of  the  petitioner for  Rs.  4,000  on               account  of the penalty order passed  on  14th               April, 1956, cannot be entertained." In the Mysore case it appears that in the course of  winding up of the mills in liquidation large sums of money came into the  hands of the liquidator which could not be  immediately applied  for  distribution of dividends  to  the  creditors. Those   moneys  were  invested  pursuant  to  the   relevant provisions  of  the Companies (Court) Rules.   The  question arose  whether  in  respect of the receipts  of  income  the liquidator  was liable to pay income-tax on those  receipts. The learned single Judge, after discussing the scheme of the

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Companies Act, observed :               "The  liquidator  is only an  officer  of  the               court.   Unlike  a  receiver in  the  case  of               insolvency, properties of the insolvent do not               vest in him but come within the control of the               court.   All  his actions are subject  to  the               control  of  the court for which  purpose  the               court  issues  to him  appropriate  directions               from time to time in the course of winding up.               No  court or other authority (subject  to  the               exception  contained  in  sub-section  (4)  of               section 446 of the Companies Act) can take any               proceedings  or attach or otherwise reach  any               of  the matters, the winding up  court  treats               the liquidator as its special               97 6               officer  specially  charged with the  duty  of               representing  the company and  protecting  its               interests in winding up.               In  the light of the above principles,  it  is               the  duty  of  the  court  to  see  that   all               liabilities  of a company are properly met  in               accordance with the provisions of the law  and               the   special   provisions  in   that   behalf               contained in the Companies Act.  Liability  to               income-tax  is  also one  of  the  liabilities               which the court is expected to provide for  in               the course of winding up.               Such  being  the  position,  the  question  is               whether,  because  the  liquidator  does   not               answer   the  description  of  the   principal               officer as defined in the Income-tax Act,  the               liability, if any, of the company for  payment               of  income-tax  itself  comes to  an  end  and               therefore the winding up court may ignore that               liability." The  Court thereafter observed that the corporate  existence of  the company continues even after the winding  up  order; but  after the winding up order the question of  payment  of income-tax  has  to  be dealt with or answered  on  a  joint application of the terms or provisions of the Income-tax Act and  the  Companies  Act.   After  so  observing  the  court proceeded :               "that even after a winding up order is passed,               the  company continues to be a  person  within               the  meaning  of section 4 of  the  Income-tax               Act, that therefore any receipt in the  course               of winding up which would attract liability to               income-tax under appropriate provisions of the               Income-tax  Act would be liable to  income-tax               or  for payment of tax under Income-tax  Act,               but that before any action can be taken by the               appropriate   Incometax  Officer   under   the               Income-tax    Act   for   the    purpose    of               quantification or collection of the income-tax               he  should obtain the leave of the winding  up               court under section 446 of the Companies  Act,               and further that the collection of the tax can               only be by securing the orders of the  winding               up  court for payment of tax in the  light  of               the  appropriate provisions of  the  Companies               Act." In  this  case so far as collection of the tax  assessed  is concerned  there can scarcely be any difficulty in  agreeing with  the view taken there.  But it is only when  the  court

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said  that for the purpose of quantification of the  income- tax also leave under s. 446 of the Act ha-, to be  obtained that we have to consider if this view 977 is  correct.  It is on this observation that Shri Desai  has principally relied.  The decisions of the Federal Court  and of  this  Court  already  cited by Shri  Desai,  it  may  be recalled, do not support this view. Reference  by  Shri Desai has also been made to  Abdul  Aziz Ansari  v.  The  State  of  Bombay(1)  in  which  assessment proceedings  under  the  Bombay Sales  Tax  Act,  1946  were considered  to  be  legal proceedings  for  the  purpose  of continuance of those proceedings after repeal of the  Bombay Sales Tax Act, 1946 by s. 48(2) of the Bombay Sales Tax Act, 3  of  1953.   We  do not think  this  decision  is  of  any assistance  for considering the question whether  assessment or  re-assessment proceedings can be considered to be  legal proceedings as contemplated by s. 446 of the Act. The  learned  counsel for the appellant has also  drawn  our attention  to Shiromani Sugar Mills v.  Governor General  in Council(2) where, after referring to s. 171 of the Companies Act,  1913  it was held by the Allahabad  High  Court,  that initiation by the Income-tax Officer of steps to recover the amount  of assessment under s. 46 of the Income-tax  Act  of 1922  and  the prosecution by the Collector of  those  steps amounted  to "commencement" or "proceeding with" a "suit  or other legal proceeding." Needless to point out that this  is the  view  which the Federal Court on appeal upheld  in  the decision already referred to. The further submission pressed by Shri Desai that s. 446  of the Act is a special provision and s. 148 of the  Income-tax Act a general provision of law was sought to be supported by reference  to  India  Fisheries case(3).   It  may  here  be pointed out that in that case it was, while dealing with  s. 49E of the Income-tax Act, that this Court observed that the revenue  could  not,  by exercising  the  right  under  that section get priority over other unsecured creditors, and  it was  in  this  context that it was  said  that  there  being apparent conflict between two independent provisions of  law the special provision must prevail.  In order to  understand and appreciate the binding force of a decision it is  always necessary  to see what were the facts of the case  in  which the  decision was given and what was the point which had  to be  decided.  Thus considered India Fisheries case(3)  lends no  assistance to Shri Desai and we are unable  to  construe the  observations in that decision to support  Shri  Desai’s contention that s. 446 of the Act is a special provision  as against s. 148 of the Income-tax Act under which  Income-tax Officers hold proceedings for assessment or re-assessment of income-tax and that therefore the former should prevail over the latter. (1) A.I.R. 1958 Bom. 279.    (2) I.L.R. 1945 Allahabad 352. (3)  [1965] 3 S.C.R. 678. 978 Turning  now to the Income-tax Act it is noteworthy that  s. 148 occurs in Chapter XIV which beginning with S. 139  pres- cribes the procedure for assessment and S. 147 provides  for assessment  or re-assessment of income escaping  assessment. This  section  empowers  the  Income-tax  Officer  concerned subject to the provisions of ss. 148 to 153 to assess or re- assess  escaped  income.   While  holding  these  assessment proceedings  the Income-tax Officer does not, in  our  view, perform  the  functions  of a court as  contemplated  by  S. 446(2)  of the Act.  Looking at the legislative history  and the  scheme  of the Indian Companies Act,  particularly  the

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language  of s. 446 read as a whole, it appears to  us  that the  expression "other legal proceeding" in sub-s.  (1)  and the  expression "legal proceeding" in sub-s. (2) convey  the same sense and the proceedings in both the sub-sections must be such as can appropriately be dealt with by the winding up court.   The Income-tax Act is, in our opinion,  a  complete code  and  it  is  particularly  so  with  respect  to   the assessment and re-assessment of income-tax with which  alone we  are concerned in the present case.  The fact that  after the amount of tax payable by an assessee has been determined or quantified its realisation from a company in  liquidation is  governed by the Act because the income-tax payable  also being  a  debt has to rank pari passu with other  debts  due from   the  company  does  not  mean  that  the   assessment proceedings for computing the amount of tax must be held  to be  such other legal proceedings as can only be  started  or continued  with the leave of the liquidation court under  s. 446  of  the Act.  The liquidation court,  in  our  opinion, cannot  perform the functions of Income-tax  Officers  while assessing the amount of tax payable by the assessees even if the  assessee be the company which is being wound up by  the court.   The  orders made by the Income-tax Officer  in  the course  of  assessment  or  re-assessment  proceedings   are subject to appeal to the higher hierarchy under the  Income- tax  Act.   There are also provisions for reference  to  the High  Court and for appeals from the decisions of  the  High Court to the Supreme Court and then there are provisions for revision  by the Commissioner of Income-tax.  It would  lead to anomalous consequences if the winding up court were to be held  empowered  to transfer the assessment  proceedings  to itself  and assess the company to income-tax.  The  argument on behalf of the appellant by Shri Desai is that the winding up  court  is  empowered in its  discretion  to  decline  to transfer the assessment proceedings in a given case but  the power  on  the plain language of s. 446 of the Act  must  be held  to  vest  in  that  court  to  be  exercised  only  if considered   expedient.   We  are  not  impressed  by   this argument.  The language of s. 446 must be so construed as to eliminate  such  startling  consequences  as  investing  the winding  up) court with the powers of an Income-tax  Officer conferred on him by the Income- 979 tax Act, because in our view the legislature could not  have intended such a result. The  argument  that the proceedings for  assessment  or  re- assessment of a company which is being wound up can only  be started or continued with the leave of the liquidation court is also, on the scheme both of the Act and of the Income-tax Act, unacceptable.  We have not been shown any principle  on which the liquidation court should be vested with the  power to stop assessment proceedings for determining the amount of tax  payable by the company, which is being wound  up.   The liquidation  court would have full power to  scrutinise  the claim  of the’ revenue after income-tax has been  determined and  its payment demanded from the liquidator.  It would  be open  to the liquidation court then to decide how far  under the  law,  the  amount  of  Income-tax  determined  by   the department  should be accepted as a lawful liability on  the funds  of  the company in liquidation.  At  that  stage  the winding  up court can fully safeguard the interests  of  the company  and its creditors under the Act.  Incidentally,  it may  be pointed out that at the bar no English decision  was brought to our notice under which the assessment proceedings were held to be controlled by the winding up court.  On  the view  that we have taken, the decisions in the case of  Seth

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Spinning  Mills  Ltd., (in Liquidation) (1) and  the  Mysore Spun  Silk Mills Ltd., (In Liquidation) (2) do not  seem  to lay  down  the  correct  rule of  law  that  the  Income-tax Officers  must  obtain  leave of the winding  up  court  for commencing   or   continuing  assessment   or   reassessment proceedings. For   the  foregoing  reasons  we  have  no  hesitation   in dismissing the appeal with costs. S.C.                               Appeal dismissed. (1)  46 I.T.R. 193. (2)  68 I.T.R. 695. 980