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PETITIONER: CHAMPA KUMARI SINGHI & ORS.

       Vs.

RESPONDENT: THE MEMBER BOARD OF REVENUE, WEST BENGALAND OTHERS

DATE OF JUDGMENT: 02/02/1970

BENCH: HIDAYATULLAH, M. (CJ) BENCH: HIDAYATULLAH, M. (CJ) SHAH, J.C. HEGDE, K.S. GROVER, A.N. RAY, A.N. DUA, I.D.

CITATION:  1970 AIR 1108            1970 SCR  (3) 467  1970 SCC  (1) 404

ACT: Indian Income Tax Act (11 of 1922), ss. 46 and  47-Liability agreed  to be paid by instalments, and in default of  single instalment  entire  balance  exigible-Assessment  orders  in terms   of   agreement-Demand  notices   issued-Default   in instalment-Recovery  proceeding after more than one year  of the default but before the last instalment due-Whether claim barred.

HEADNOTE: An  agreement  was  signed  between  the  Revenue  and   the assessees  fixing  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 accordance  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 payment of the instalment due on March 31,  1953, further  extension  of time for paying the balance  will  be granted.   The  assessees filed revisions under s.  23-A  of ’the Income-tax Act, 1922 against the orders of  assessment. The Commissioner held the assessments were properly made  as they  were made in accordance with the settlement after  the assessees’  disclosure.   Later the  earlier  agreement  for payment  by instalments was varied.  The main  variation  in the  second agreement was that the penalty was  reduced  and smaller instalments were fixed.  In March 1956  certificates under s. 46(2) of the Act were issued and notices under  the Bengal  Public Demands Recovery Act, 1913 were  served.   On the  question  whether  the  certificates  were  barred   by limitation  under s. 47(1) Indian Income-tax Act, 1922  this Court, HELD : (Per Hidayatullah, C. J., Shah, Grover, Ray and  Dua, JJ.) The certificates were not barred by time.

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The assessment order reproduced the agreement as part of  it and  the  agreement therefore became the  assessment  order. Under  the assessment order a notice of demand was  sent  to pay the money of the first instalment by March 31, 1953.  on breach  of it the whole amount was said to be  exigible  and the  demand  in  ’respect  of  that  was  also  made.    The assessees,  therefore, became defaulters on the  failure  to pay  the first instalment.  Since instalments were  granted, cl.  (iv) of the proviso to S. 47(7) applied.   That  clause does  not mention about the exigibility of the whole  amount or  exigibility of any particular instalment.  It only  says that if instalments are granted time of one year ending with the  end of the financial year is to be calculated from  the date on which the last instalment is payable.  The  language of  cl.  (iv) of the proviso was unfortunate  in  expressing this intent and has now been corrected in the new Income-tax Act but theintention  was       obvious. always Even  in the  second      agreement      which      replaced      the agreement the same condition 468 obtained.   There  was a concession shown in the  matter  of penalty and smaller instalments were fixed.  But the revenue had stipulated even then that the concession mentioned above would only be available if the revised scheme of payment was strictly followed. in other words, payment was to be made by instalments  and  this concession therefore,  attracted  the provisions of cl. (iv).  The Government could always  accept any  instalment  even if paid late without having  to  worry about the period of limitation of one year from the date  of demand,  since  cl. (iv) of the first proviso gave  them  an option  to wait till the last instalment was  payable.   The scheme  of instalments took the matter out of the main  part of  sub-s. (7) and brought it within the proviso  to  clause (iv). [476 G477 D] (Per Hegde, J. dissenting) :-If an assessee fails to  comply with the demand made in accordance with the provision in  s. 45 within the time mentioned therein then he is  ’defaulter’ within  the  meaning of the Act.  Unless the assessee  is  a defaulter,  no action can be taken against him under s.  46. Non-fulfilment of the terms of the agreement does not amount to a default under s. 45.  Sub-section (7) of s. 46, clearly says  that  no proceedings for recovery of any  sum  payable under  the Act can be commenced after the expiration of  one year  from the last day of the financial year in  which  any demand  is  made under the Act.  Under subcl.  (iv)  of  the proviso  to s. 47(7) where the sum payable is allowed to  be paid  in  instalments, the one year prescribed in  s.  46(7) will  be  computed from the date on which the last  of  such instalments was due.  The expression "was due" can only mean "is  due" under the Act.  The expression does not appear  to be  grammatically correct; this correction has been made  in the  new  Act,  but that correction is  immaterial  for  the present purpose.  For finding out when the sum claimed  ’was due’,  one  must go to s. 45, and cannot fall  back  on  the agreement.  Chapter V of the Act has nothing to do with  the agreement  between  the  assessees  and  the  revenue.   The expression  "was due" in s. 46(7) has reference to  the  tax which is due in accordance with the provisions in ss. 45 and 46. In  view of the demand notices issued in September 1952  the sum  became  due when the assessees became  defaulters,  and therefore the reconvey proceedings under the Act should have been initiated before March 1954.  The same having not  been initiated before that date, the proceedings in question must be held to have been barred. [478 A-G; 479 F-H]

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JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 564 to 571 of 1968. Appeals by special leave from the judgments and orders dated December 10, 1963 and November 24, 1964 of the Calcutta High Court,  in appeals from Original Orders Nos. 139 to  142  of 1959. M.   C. Chagla, P. N. Tiwari, J. B. Dadachanji, 0. C. Mathur and  Ravinder  Narain,  for  the  appellants  (in  all   the appeals). Jagadish Swarup, Solicitor-General, R. Gopalakrishnan and R.   N. Sachthey, for the respondents (in all the appeals). The  Judgment  of  M. HIDAYATULLAH, C.J.,  J.  C.  SHAH  A.N GROVER,  A.  N.  RAY and 1. D. DUA,  JJ.  was  delivered  by HIDAYATULLAH,  C.J.,  K.  S. HEGDE,  J.  gave  a  dissenting opinion. 469 Hidayatullah,  C.J.-This  judgment shall  dispose  of  Civil Appeals  564-571  of 1968.  of these, four are  against  the common  judgment  and  order  of a  Division  Bench  of  the Calcutta High Court, December 10, 1963, dismissing 4 appeals (139-142 of 1959) from the order of a learned single  Judge, April  23,  1959  in Writ Petitions 159-162  of  1958.   The remaining  four appeals are against the order, November  24, 1964, refusing to certify the case as fit for appeal to this Court under Art. 133(1) of the Constitution. The  facts are as follows : One Dalchand Singh held a  pros- pecting license in the erstwhile Koree State (now in  Madhya Pradesh).  His son Bahadur Singh Singhi took a mining, lease and  started a colliery known as Jhagrakhand  Colliery.   In 1942  a  private  limited  Company  called  the  Jhagrakhand Collieries  Ltd. was started with an authorised  capital  of Rs. 24 lakhs (2400 shares of Rs. 1,000 each).  Bahadur Singh divided  equally the 2400 shares between himself and  his  3 soils  Rajendra  Singh  Singhi, Narendra  Singh  Singhi  and Birendra  Singh Singhi.  In 1943 the colliery  business  and its  assets  were  transferred by the joint  family  to  the Company.   In 1944 the father and his 3 sons  separated  and partitioned the property.  Bahadur Singh Singhi died on July 7,  1944 leaving a will-Letters of Administration  with  the will  annexed  were  granted  in  1945.   The  register   of Jhagrakhand   Collieries  Ltd.  was  rectified  and   showed thereafter  900 shares in the name of Narendra Singh  Singhi and  Rajendra  Singh Singhi and 6600 shares in the  name  of Birendra  Singh  Singhi.   Birendra  Singh  Singhi  died  on December  12, 1950 leaving a widow Smt.  Champa  Kumari  and two minor soils Ashok Kumar Singhi, Chandra Kumar Singhi and also  a  minor  daughter.  These minors  have  now  attained majority, Under  what is known as the ’Tyagi Scheme’ announced on  May 19, 1951 a voluntary disclosure was made by the  Jhagrakhand Collieries  Ltd. and the shareholders.  The time  limit  for such  disclosure  was  August 31,  1951.   Before  this  the Incometax Officer had filed a complaint for certain offences and  under a search warrant seized the books of  account  of the  company from 1945 to 1950.  This was ’on July 3,  1951. The shareholders and the company then disclosed on July  31, 1951  a concealed income of Rs. 42,52,501 during  the  years 1945 to 1948. On November 28, 1951 the Commissioner of Income-tax  offered to withdraw prosecutions if the Company and the shareholders agreed  to pay taxes due on a total income of Rs.  90,00,000

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to be distributed over the years 1945-1950 (both  inclusive) together  with a penalty of 20% and interest at 3%  p.a.  on unpaid tax.  There we’re certain other conditions with which we  need  not concern  ourselves.   Certain  representations followed and L 7 Sup.  CI (NP)170-15 470 finally on December 26, 1951 it was agreed that the  parties jointly  and  severally pay Rs. 67,48,841/11.  It  was  also agreed  that a sum of Rs. 55,99,832/6 would be  accepted  in full satisfaction upon the parties paying the amount in  the following instalments      (a)  By December 31, 1951     Rs. 7,50,000      (b)  By March 31,     1952    Rs. 5,00,000      (c)  By March 31, 1953   Rs. 9,50,000      (d)  By March 31, 1954   Rs. 9,50,000      (e)  By March 31, 1955   Rs. 9,50,000      (f)  By March 31, 1956   Rs. 9,50,000      (g)  By March 31, 1957   the balance On  the failure of any of the instalments the whole  sum  of Rs. 67,48,341/11 together with interest would become due.  A deed of Agreement, Guarantee and Equitable Mortgage  showing the  total income and total net tax liability of each  share holder were shown.  They were - - -      1947/48 to 1951/52      Total tax      Smt. Champa Kumari’s husbandRs. 5,28,817-11      RajendrA Singh Singhi    Rs. 9,30,498-03      Narendra Singh Singhi    Rs. 9,93,816-15      Jhagrakhand Collieries Ltd.Rs. 43,99,712-11 The Company paid the following sums by way of tax      February 1, 1952    Rs.  3,50,000      April 1, 1952  Rs.  90,000      April 22, 1952 Rs.  1,22,000 NarendRa Singh Singhi paid the following Sums by way of tax      February 1, 1952    Rs.1,50,000      April 1, 1952  Rs.60,000      April 22, 1952 Rs.48,000 Smt.  Champa Kumari paid the following sums by way of tax      April 1, 1952  Rs.1,00,000      April 1, 1952  Rs.40,000      April 22, 1952 Rs.32  ’  000 RaJendra Singh Singhi paid the following sums by way of tax      April 1, 1952  Rs.1,50,000      April 1, 1452  Rs.60,000      April 22, 1952 Rs.48,000 .LM0 On April 22, 1952 they signed the agreement.By  that   date the position in the payment of instalments had reached  item (c) above showing Rs. 9,50,000 as due on March 31, 1953.  471 On  August  29,  1952 the Income-Tax  Officer  made  several assessment orders in respect of the assessment years 1947-48 to 1951-52.  Each such order included the following : "In  accordance with the terms of the Agreement  dated  22nd April 1952, executed in connection with the petitions  dated 18the  July,  1951 filed by the assessee  and  others  under concessional  scheme  for  the  settlement  of   disclosures announced by the Government of India, the assessment is made as under :" and  then  follows  the computation  of  total  income,  the computation of tax and the total amount demanded. On  September  22, 1952 the  Income-tax  Officer  (Companies District  1),  Calcutta sent the following  letter  to  each assessee.   The  one sent to Smt Champa  Kumari  Singhi  may

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alone be quoted here as an example "From : Sri V. Satyamurti, M.A., B.L., Income Tax Officer,               Companies District 1, Calcutta. To Smt.  Champa Kumari Singhi, 49 Garishat Road, Calcutta. Madam, I am sending today by separate post (Regd. with A/D)  copies of  Assessment  orders, Penalty Orders  Demand  notices  and challans etc. in regard to the amount of taxes and penalties payable by you in accordance with the terms of the Agreement dated 22nd April, 1952 between you and the Government  drawn up  in  connection  with, the  disposal  of  the  disclosure petition filed by you under the concessional scheme. In the Demand notices and challans, demands have been  shown to be payable on or before the 31st March 1953 when the next instalment  of  payment  under  this  Agreement  falls  due. Needless  to  say, if there is no default in the  matter  of payment  of  that instalment (viz., Rs.  9,50,000  with  all interest due thereon by 31st March, 1953) further  extension of time for payment of the balance will be granted by me.                      Yours faithfully,                        Sd/- Illegible                     Income Tax Officer." Dt. 22’9-52. Sup CI(NP)70-6 472 With  this letter were forwarded the assessment  orders  and notices ,of demand under s. 29 of the Income-tax Act,  1922. These notices of demand reached the several appellants on 24 September  1952.   Similar  notices  of  demand  for  excess Profits  Act  and  Business Profits  Tax  were  also  served calling upon the assessee to pay the dues on or before March 31, 1953. On  March  25, 1953 the appellants  filed  applications  for revision  under  s. 33-A of the Income Tax Act  against  the orders  of  assessment and application of s.  23-A  of,  the Income-tax Act, The Commissioner held the assessments to  be proper  as they were made in accordance with the  settlement after  the  appellants’ ,disclosures.  The  appellants  next asked that Rs. 1,00,000 be accepted instead of Rs.  9,50,000 payable  on  March  31,  1953 and they  be  not  treated  as defaulters.  The amount was appropriated towards the current liability for the current financial year. In February 1954, the Commissioner after hearing the  appel- lants,  promised  reference to the Board of  Revenue  for  a variation  of  the agreement of April 22,  1952.   The  main variation  was  to be that the penalty would be  reduced  to half  and the appellants would have to pay Rs.  5,60,000  on March  31, 1954, and similar instalments each year  for  six years.  The agreement was revised on December 27, 1954.  The company  sent  a cheque for Rs. 5,60,000 on March  31,  1954 earmarking  it as the said payment but it  was  appropriated towards the demand on the company for 1947-48. On March 14, 1956 certificates under s. 46(2) of the  Indian Income-tax  Act, 1922 were issued and notices under s. 7  of the Bengal Public Demands Recovery Act, 1913 were served  on the  appellants in May, 1956.  In June 1956  the  appellants filed  several  petitions  under s. 9 of  the  Recovery  Act contending  inter alia that the proceedings were  barred  by limitation.   This  objection was overruled  on  January  5, 1957. The  appellants appealed to the Commissioner under S. 51  of the  Recovery  Act and the objection that  the  certificates

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were  barred  by  limitation under s. 46(7)  of  the  Indian Income-tax Act, 1922 was accepted and the certificates  were cancelled.   The  Union  of India  thereupon  filed  several revisions  before  the Board of Revenue under s. 53  of  the Public  Demands  Recovery  Act, against  the  order  of  the Commissioner.   They  were allowed by a common  order  dated June.-  27, 1958.  The appellants were again called upon  to pay the amount on pain of distress warrants. The above facts were necessary to understand the  background of  the dispute from which the petitions under Art.  226  of the Constitution arose.  The appellants filed Writ Petitions 473 159-162 of 1958 asking for a writ of certiorai to quash  the orders   of  the  Board  of  Revenue  and  prohibiting   the certificate    Officer   from   enforcing    the    recovery certificates, The writ petitions were heard by Sinha J,  and were dismissed on April 23, 1959.  The recovery  proceedings were  held  not barred by limitation.  The  appellants  then filed  appeals  in the High Court against the  judgment  and order  of Sinha, J. (.Nos. 139-142 of 1959).  These  appeals were  heard  by  Mookerji and Sen, JJ. who,  by  the  common _judgment  now  under  appeal  in  four  of  these  appeals, dismissed them.  The applications for certificate under Art. 13  3  (1) of the Constitution were also rejected  and  have given rise to the other four appeals before us. Mr. Chagla who argued these appeals submitted. the  question of  limitation at the forefront and then attempted to  argue the merits such as the interpretation of the agreements  and the   reliance  placed  on  them  in  the  High  Court   and distribution pro rata of the amounts paid on March 31, 1954. These  points  were not allowed to be raised by  us.   These questions  were not raised before Sinha, J.  The  Divisional Bench also did not allow these points to be raised. The   short  question,  therefore,  in  one  of   limitation applicable in  this  case.   We are concerned  in  answering this question with s.    46  of the Indian Income  Tax  Act, 1922.   We are not required to consider the  entire  section but only sub-ss.  1 and 7 which are relevant.  They read "46.  Mode and time of recovery.- 1)   When  an assessee is in default in making a payment  of income-tax  the  Income-tax Officer may  in  his  discretion direct that in addition to the amount of the arrears, a  sum not  exceeding  that  amount shall  be  recovered  from  the assessee by way of penalty." "(7) Save  in accordance with the provisions  of  subsection (1)  of  section  42, or to the proviso to  section  45,  no proceedings  for the recovery of any sum payable under  this Act shall be commenced after the expiration of one year from the  last day of the financial year in which any  demand  is made under the Act: 474 Provided  that  the period -of one year herein  referred  to shall- (iv) where  the  sum  payable  is  allowed  to  be  paid  by instalments,  from  the  date  on which  the  last  of  such instalments was due Provided further that nothing in the foregoing proviso shall have  the  effect  of  reducing  the  period  within   which proceedings for recovery can be commenced, namely, after the expiration  of one year from the last day of  the  financial year in which the demand is made. Explanation.--A preceding for the recovery of any sum  shall be  deemed  to  have commenced within the  meaning  of  this section, if some action is taken to to recover the whole  or any part of the sum, within the period hereinbefore referred

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to, and for the removal of doubts It is hereby declared that the several modes of recovery specified in this section  are neither mutually exclusive, nor affect in any way any  other law for the time being in force relating to the recovery  of debts  due  to Government, and it shall be  lawful  for  the Incometax Officer, if for any special reasons to be recorded he  so  thinks  fit, to have recourse to any  such  mode  of recovery notwithstanding that the tax due is being recovered from an assessee by any other mode." The contention of the appellants is that we have to find out when  they could be treated as defaulters within  the  first subsection and whether under the main part of sub-s. (7) the proceedings  for the recovery of the tax with penalty  could be commenced after the expiration of one year from the  last day of the financial year in which the-demand was made.  The argument of the Department is that the matter is covered  by clause (iv) of the first proviso which allows limitation  of one  year to be calculated from the date on which  the  last instalment was due in the present case. To begin with there is an error in the fourth clause of  the first proviso inasmuch as the words "be reckoned" have  been inadvertently left out in that clause.  The intention to use these  words  is obvious from the way, in  which  the  first three  clauses  are worded.  Supplying those  words  because they were inadvertantly omitted it is clear that one of  two limitations is applicable 475 to  the present case, according to the circumstances of  the case If it is to be considered under the main clause of sub- s.  (7), then we have to find out whether the whole  of  the amount  was  payable  by  a particular  date  on  which  the assessee  can  be  said to have  become  a  defaulter.   If, however,  the fourth clause of the proviso applies  then  we have  to see whether by reason of the grant of  instalments, limitation would only commence to run from the date on which the last of the instalments was payable.  In this connection reference has been made, by the High Court and the Board  of Revenue  to the agreements and the letters  written  sending the  assessment  orders  and the  notices  of  demand.   The agreements  set out a scheme of payments by instalments  and the  entire  sum payable was Rs. 67,48,841/11/-.   This  was payable  in different instalments, from 1952 to 31st  March, 1957. It was, however, provided as follows: "........  provided  however that in the event  of  due  and punctual payment of all instalments Government will give  up the  sum of Rs. 11,49,019/-5/- with interest  thereon,  from the last instalment and accept the sum of Rs.  55,99,822/6/- with interest thereon in full settlement of the balance  due provided further that in the event of any default in payment of any sum on due date therefrom or in the event of it being found that the guarantee hereby given or any part thereof is not  enforceable for any reason whatsoever there will be  no abatement and the parties of the first and second part  will pay the full sum of Rs. 67,48,841/-ll/-. The  monies payable on 31st March, 1953, 31st  March,  1954, 31st  March 1955, 31st March 1956 and 31st March 1957  shall be  applied pro rata towards the tax liability of the  party of  the  first  part  and the parties  of  the  second  part mentioned in Schedule "Y" here- to. The  said  parties shall however be at liberty to  make  any part  payment at any time towards the said  instalments  not less than Rs. 10,000/- (Rupees ten thousand) at a time. 4.   in  the event of any instalment not being  paid  within the  time mentioned above (such time being deemed to  be  of

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the essence of the arrangement) or in the event of it  being found that the guarantee hereby given or any part thereof is not  enforceable for any reason whatsoever the whole of  the balance  of the said sum of Rs. 67,48,841/11/- will at  once become due 476 and  payable  with interest at the rate  aforesaid  and  Go- vernment will (in addition to all rights for enforcement  of this  document)  be entitled to take ail  steps  to  enforce payment  including issue of certificate under Section  46(2) of the Income Tax Act and proceedings under the West  Bengal Public Demands Recovery Act and Revenue Recovery Act." The contention of the appellants is that the letters of  the 22nd September, 1952 (one of which has been reproduced above as  a sample) were accompanied by the notices of demand  and on  the  breach  of, the payment of the  instalment  of  Rs. 9,50,000/on   31st  March,  1953,  the   appellants   became defaulters  within the meaning of the Act in respect of  the whole  amount of tax.  Therefore recovery proceedings  could only commence within the end of a financial year  commencing from  31st March, 1953 since the payment of  the  instalment ’was co-terminus with the end of the financial year.   This, according  to them, was provided in the agreement itself  in the extract _just reproduced from the agreements above.  The other  side contends that cl. (iv) of the proviso to S.  46, sub-s. (7) takes no account of the exigibility of the  whole amount  under a scheme of payment by instalments.   Whenever instalments are granted the period of limitation counts from the last instalment and here it would be one year from March 31,  1957.  The default could be taken note of earlier  also because  the whole amount remained exigible the  moment  the first default was made.  In the present case the certificate was  issued  on March 14, 1956 and, therefore, it  was  well within the period of limitation. The learned single Judge in the case (Sinha J.) very rightly pointed out that under the agreements two things were  done. Firstly,  the total liability of the parties was  calculated and  each party became jointly and severally liable for  the whole sum.  Then instalments were fixed and on the breach of a single instalment the whole of the amount became exigible. The assessment order reproduced the agreement as part of  it and  the  agreement therefore became the  assessment  order. Under  the assessment order a notice of demand was  sent  to pay  the money of the first instalment of Rs. 9,50,000/-  by March  31, 1953.  On breach of it the whole amount was  said to  be exigible and the demand in respect of that  was  also made.   The  appellants  therefore,  rightly  concluded  the Judge,  became  defaulters on the failure to pay  the  first instalment.  Since instalments were granted, cl. (iv) of the proviso  to sub-s. (7) of s. 46 applied to the  case.   This conclusion  is correct.  That clause does not mention  about the  exigibility of the whole amount or exigibility  of  any particular instalment.  It only says that if 477 instalments are granted time of one year ending with the end of the financial years is to be calculated from the date  on which  the last instalment is payable.  The language of  cl. (iv)  of  the  proviso was unfortunate  in  expressing  this intent  and  has now been corrected in the new Act  but  the intention was always obvious.  Even in the second  agreement which  replaced  the  first  agreement  the  same  condition obtained.   There  was a concession shown in the  matter  of penalty and smaller instalments were fixed.  But the Central Board   of  Revenue  had  stipulated  even  then  that   the concession  mentioned above would only be available  if  the

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revised  scheme of payment was strictly followed.  In  other words,  payment  was  to be made  by  instalments  and  this concession  therefore attracted the provisions of cl.  (iv). The  Government could always accept any instalment  even  if paid  late  without  having to worry  about  the  period  of limitation  of one year from the date of demand,  since  cl. (iv)  of the first proviso gave them an option to wait  till the  last  instalment  was  payable.   The  scheme  of   the instalments  took the matter out of the main part of  sub-s. (7)  and brought it within the proviso to clause  (iv).   We are,  therefore, satisfied that the High Court was right  in holding that the certificates were issued within the  period of limitation prescribed by law and were not barred by time. The first four appeals therefore fail and are dismissed with costs.   The  other  appeals need not  be  considered  since special  leave was granted against the main order and  those appeals themselves have failed.  The remaining four  appeals against order refusing certificate are accordingly dismissed as infructuous with no separate order as to costs. Hegde, J.-These appeals should be allowed, as in my  opinion the impugned certificate is barred under sub-s. (1) of s. 46 of the Indian Income Tax Act, 1922 (in short ’the Act’). The  facts of the case are fully set out in the judgment  of my Lord, the Chief Justice.  Hence there is no need to state them over again. Under  the agreement entered into between the assessees  and the department, if the assessees fail to pay any one or more of the instalments fixed, the entire tax became  recoverable forthwith.   Admittedly  the  assessees failed  to  pay  the instalments as stipulated in the agreement and therefore  it was open to the department to recover the entire arrears  of tax.   It is true that the default clause in  the  agreement was intended for the benefit of the department and therefore under the law of contract, it was open to the department  to waive  that clause and sue for the recovery of  the  various instalments  as and when they fell due.  But that aspect  of the question is not relevant for considering the true 478 scope of sub-s. (7) of S. 46.  Section 46 creates a  special machinery for the recovery of arrears of tax.  Section 46 is found  in Ch. IV of the Act which deals with recovey of  tax and  penalties.   Section 45 prescribes,  when  an  assessee becomes a defaulter.  The main part of that section says : "Any amount specified as payable in a notice of demand under sub-section  (3)  of section 23A or under section 29  or  an order  under section 31 or section 33, shall be paid  within the  time, at the place and to the person mentioned  in  the notice or order or if a time is not so mentioned, then on or before the first day of the second month following the  date of  the  service of the notice or order,  and  any  assessee failing so to pay shall be deemed to be in default, provided that, when an assessee has presented an appeal under section 30,  the Income-tax Officer may in his discretion treat  the assessee  as not being in default as long as such appeal  is undisposed of." (The  proviso  to that section and the explanation  are  not relevant for our present purpose). For  finding out whether an assessee is a defaulter or  not, all  that we have to see is whether he has failed to  comply with  the provisions of s. 45.  If he has failed  to  comply with the demand made in accordance with the provisions in S. 45 within the time mentioned therein then he is  ’defaulter’ within  the meaning of ’the Act’.  Unless the assessee is  a defaulter,  no action can be taken against him under s.  46. Non-fulfilment of the terms of the agreement does not amount

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to  a.  default under S. 45.  Therefore the first  thing  we have  to see is when the assessees became  defaulters.   For deciding  that  question  reference  to  the  agreement   is irrelevant.  Admittedly demand notices under S. 29 had  been issued to the assessees ’on September 22, 1952 in respect of the  entire  tax  due  from  them.   Therefore  they  became defaulters  as  soon  as they failed to  comply  with  those demands. This takes us to S. 46.  Sub-s. (1) of S. 46 says "When  an  assessee  is in default in making  a  payment  of income-tax,  the  Income-tax Officer may in  his  discretion direct that, in addition to the amount of the arrears, a sum not  exceeding  that  amount shall  be  recovered  from  the assessee by way of penalty." The default referred to in this sub-section is necessarily a default  under s. 45.  That much is obvious from the  scheme of  Ch. VI.  Now let us read sub-s. (7) of s. 46.  It is  as follows 479 "Save  in accordance with the provisions of sub-section  (1) of  section  42  or  to  the  proviso  to  section  45,   no proceedings  for the recovery of any sum payable under  this Act shall be commenced after the expiration of one year from the  last day of the financial year in which any  demand  is made under this Act: Provided  that  the period of one year  herein  referred  to shall (iv) where  the  sum  payable  is  allowed  to  be  paid  by instalments,  from  the  date  on which  the  last  of  such instalments was due". If  we  read the impugned sub-s. (7) of s. 46, it  is  clear that  no  proceedings for the recovery of  any  sum  payable under  the Act can be commenced after the expiration of  one year  from the last day of the financial year in  which  any demand  is  made under the Act.  In the  instant  case,  the demands  in  question  were  made  on  September  22,  1952. Therefore   the  recovery  proceedings  should   have   been commenced  before  31st March 1953 but  actually  they  were commenced  on  March 14, 1956.  Hence they are  prima  facie barred. This  takes us to sub-cl. (iv) of the proviso to sub-s.  (7) of  s.  46.   Under that proviso where the  sum  payable  is allowed to. be paid by instalments, the one year  prescribed in  sub-s.  (7) of s. 46 will be computed from the  date  on which the last of such instalments was due.  The  expression "was  due" does not appear to be grammatically correct.   It should have been "is due".  This correction has been made in the  corresponding provision of the 1961 Indian  Income  Tax Act;  but that error is immaterial for our present  purpose. The  words "was due" can only mean "is due" even  under  the Act.   For  finding out when the sum claimed ’was  due’,  we must again go back to s. 45.  In view of the demand  notices issued  in  September  1952  and sum  became  due  when  the assessees  became  defaulters  and  therefore  the  recovery proceedings under the Act should have been initiated  before March, 1954.  The same having not been initiated before that date, the proceedings in question must be held to have  been barred.  In my opinion for finding out the date on which the last  instalment  was  due,  we  cannot  fall  back  on  the agreement between the assessees and the revenue.  Chapter  V of the Act has nothing to do with the agreement between  the assessees  and the revenue.  The expression "was due" in  s. 46(7)  has reference to the tax which is due  in  accordance with the provisions in ss. 45 and 46, 480

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For the reasons mentioned above I allow these appeals.                            ORDER In  accordance  with  the opinion  of  the  majority,  Civil Appeals Nos. 564, 566, 568 and 570 of 1966 (arising from the common  judgment  and  order of the Division  Bench  of  the Calcutta  High Court, December 10, 1963) are dismissed  with costs.  The other appeals are also dismissed as  infructuous with no separate order as to costs. Y.P. 481