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PETITIONER: KAPURCHAND SHRIMAL

       Vs.

RESPONDENT: TAX RECOVERY OFFICER, HYDERABAD & ORS.

DATE OF JUDGMENT: 14/08/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V. GROVER, A.N.

CITATION:  1969 AIR  682            1969 SCR  (1) 691  CITATOR INFO :  R          1979 SC1588  (7)

ACT: Income-tax Act (11 of 1922)-Hindu undivided family--Defaults in payment of tax-Whether Karta can be detained.

HEADNOTE: A  Hindu  undivided family committed default in  payment  of income-tax, and a certificate for recovery of tax due to the family  was issued by the Income Tax Office in  exercise  of the power conferred by  rule 76 of Sch. II of the Income Tax Act, 1961.  The Tax Recovery Officer directed the arrest and detention  in  prison of the karta of the  family  for  non- payment  of  tax.  The Karta then moved a  petition  in  the High  Court  of Andhra Pradesh challenging his detention  on the  ground that he was not a defaulter.  The  petition  was rejected.   The  Karta appealed.  He also moved  a  petition under  Art. 32 of the Constitution in the Supreme Court  for an order for his release from custody. HELD  :--The  Legislature having treated a  Hindu  undivided family  as  a taxable entity distinct  from  the  individual members constituting it,. and proceedings,for assessment and recovery  of  tax  having  been  taken!  against  the  Hindu undivided  family,  it  was not open  to  the  Tax  Recovery Officer  to initiate proceedings against the manager of  the Hindu  undivided family for his arrest and  detention.   The manager  by virtue of his status is competent  to  represent the  Hindu undivided family, but on that account  he  cannot for  the purpose of s. 222 of the Act of 1961 be  deemed  to be.  the assessee when assessment is made against the  Hindu undivided family and certificate for recovery is also issued against the family. [695 B-D] For the purposes of cl. (a) of s. 2(7)  the  person  against whom, any proceeding under the Act has been taken is  deemed an assessee:  but that postulates that the proceeding should be lawfully taken against the person before he may be deemed to  be an assessee for the purpose of s. 222 or r. 2 and  r. 73.   There  is  no provision in the  Act  which  deems  the manager to be the assessee for the purpose of assessment and recovery  of  tax, when the income of  the  Hindu  undivided family of which he is the Manager is assessed to tax. Nor is

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there  any  provision  in the Act  enabling  the  Income-tax Officer or the Tax Recovery Officer to treat the manager  of the  Hindu  undivided family as an assessee  in  default  in respect  of  tax  due by the Hindu  undivided  family.   The Legislature has again made no provision for recovery of  tax by  resort  to the personal property of the manager  of  the Hindu undivided family assessed to tax or by his arrest  and detention for default by  the  family in paying the tax due. [695 H696D]

JUDGMENT: CIVIL  APPELLATE/ORIGINAL JURISDICTION: Civil  Appeals  Nos. 1319 and 1320 of 1966. Appeals by special leave from the judgments and orders dated February 16, 1966 and February 1, 1966 of the Andhra Pradesh High Court in Writ Appeals Nos. 143 of 1966 and 166 of 1965 respectively and Writ Petition No. 103 of 1966. 3Sup.C1/68-13 692 Petition under Art. 32 of the Constitution of India for  the enforcement of fundamental rights. B.C.  Misra,  Om  Prakash Gupta and M.V.  Goswami,  for  the appellant/petitioner (in all the matters). B.  Sen  and R.N. Sachthey, for the respondent (in  all  the matters ). The Judgment of the Court was delivered by Shah,  J..  Kapurchand Shrimal  a  Hindu  undivided  family- committed default in payment of income-tax due by it for the assessment   years  1955-56  to  1959-60.   The   Income-tax Officer,  Special  Investigation Circle,  Hyderabad,  issued certificate on ,June 16, 1959, under s. 46 of the Income-tax Act, 1922, fox’ recovery of tax due by the family.  Pursuant to the certificate, properties of the Hindu undivided family movable  and  immovable and outstandings were  attached  for realizing the tax dues. In  exercise of the powers conferred by r. 76 of Sch. II  of the Income-tax Act, 1961, the Tax Recovery Officer  directed on  August 10, 1965, that Kapurchand Shrimal manager of  the family  be detained in civil prison for fifteen  days.   The manager  then moved a petition in the High Court  of  Andhra Pradesh  against the order of detention.  The  petition  was rejected  by a single Judge of the High Court  holding  that the manager had, in contravention of r. 16(2) of Sch. II  of the  Income-tax Act, 1961, dealt with the properties of  the family  after  receiving  notice of the  issue  of  the  tax recovery  certificate.   In appeal against that  order,  the manager applied for leave to raise the contention that where a Hindu undivided family had committed default in payment of the tax, its Karta not being the assessee against  whom  the certificate  is  issued,. is not liable to be  detained  for recovery of tax due by the Hindu undivided family.  The High Court declined to allow the contention to be raised and held that  the manager having acted in contravention of r.  16(2) of  Sch. II of the Income-tax Act, 1961, the ingredients  of r.  73  were attracted and he was liable to be  detained  in civil  prison.   A,  day before this order  was  passed  the appellant  filed  another  petition under Art.  226  of  the Constitution  challenging  the validity of  the  proceedings against  him  on the ground that he was not  a  "defaulter". That  petition was dismissed by the High Court holding  that the  earlier  judgment  of the High Court  operated  to  bar investigation into the plea raised. Appeals  Nos.  1319 & 1320 of 1966 arise out of  the  orders

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made  by the High Court in the two petitions under Art.  226 of  the Constitution.  The manager was, after the  order  of the High 693 Court,  arrested  and sent to prison for  six  months.   The manager   then   filed  petition  under  Art.  32   of   the Constitution  praying  for a writ in the  nature  of  habeas corpus  for  an order for his release from  the  custody  of Superintendent  District Prison, Hyderabad. In our  judgment the  claim  of  the  manager that he is  not  liable  to  be arrested  and detained in prison for failure to satisfy  the tax due by the Hindu undivided family in enforcement of  the certificate  issued  under  s. 222 of  the  Income-tax  Act, 1961,, must be upheld. By virtue of s. 297(2)(j), notwithstanding the repeal of the Indian  Income-tax  Act, 1922, any stun payable  by  way  of income-tax, super-tax, interest, penalty or otherwise  under the Income-tax Act, 1922, may be recovered under the Act  of 1961, but without prejudice to any action already taken  for the   recovery   of  such  sum  under  the   repealed   Act. Proceedings could therefore be taken for recovery of the tax due for the assessment years 1955-56 to 1959-60 by the Hindu undivided family under the Income-tax Act of 1961.   Section 220 of Act 1961 deals with payment of tax and the conditions in which an assessee may be deemed to’ be in default.  Under the Act tax assessed has to be paid within thirty-five  days of  the service of a notice of demand: if the amount is  not paid within the time limited at the place and to the  person mentioned  in the said notice, the assessee shall be  deemed to  be  in default.  Section 222 provides for the  issue  of certificate to the Tax Recovery Officer.  It provides, in so far as it is material:               "(  1 ) When an assessee is in default  or  is               deemed to be in default in making a payment of               tax, the Income-tax Officer may forward to the               Tax  Recovery Officer a certificate under  his               signature specifying the amount of arrears due               from  the  assessee,  and  the  Tax   Recovery               Officer on receipt of such certificate,  shall               proceed  to  recover from  such  assessee  the               amount specified therein by one or more of the               modes mentioned below, in accordance with  the               rules laid down in the Second Schedule--                    (a) attachment and sale of the assessee’s               movable  property;                    (b) attachment and sale of the assessee’s               immovable                    property;                    (c)  arrest  of  the  assessee  and   his               detention in prison;                    (d)   appointing  a  receiver   for   the               management of                    the  assessee’s  movable  and   immovable               properties". By  r.  1  (b)  of Sch.-II of  the  Income-tax  Act,   1961, "defaulter""   means   the   assessee   mentioned   in   the certificate.  Rule 2 provides 694 that  when  a  certificate  has been  received  by  the  Tax Recovery Officer from the Income-tax Officer for recovery of arrears  under Sch. II, the Tax Recovery Officer shah  cause to  be  served  upon the defaulter a  notice  requiring  the defaulter  to  pay the amount specified in  the  certificate within  fifteen days from the date of service of the  notice and  intimating  that in default steps would  b.e  taken  to

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realise  the  amount under the Schedule.  Rule  16  provides that where a notice has been served on a defaulter under  r. 2, the defaulter shall not be competent to mortgage, charge, lease  or otherwise deal with any property belonging to  him except   with  the permission of the Tax  Recovery  Officer. Rule 73 provides that no order for the arrest and  detention in  civil prison of a defaulter shah be made unless the  Tax Recovery  Officer has, issued and served a notice  upon  the defaulter  calling upon him to appear on the date  specified in  the  notice  and  to show cause why  he  should  not  be committed  to the civil prison, and unless the Tax  Recovery Officer, for reasons to be recorded in writing, is satisfied and  that  the  defaulter  with  the  object  or  effect  of obstructing the execution of the certificate, has, after the receipt of the certificate in the office of the Tax Recovery Officer, dishonestly transferred, concealed, or removed  any part of his property; and (b) that the defaulter has, or has had  since the receipt of the certificate in the  office  of the  Tax Recovery Officer, the means to pay the  arrears  or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same.  Rule 76 provides  for the  issue of an order of detention of the defaulter by  the Tax Recovery Officer. The  scheme  of the Income-tax Act, 1961, is  to  treat  the assessee  failing  to  pay the tax  due  within  the  period prescribed  a defaulter.  The Income-tax Officer may,  where the    assessee   is  found  to  be  in  default,  issue   a certificate for recovery and forward it to the Tax  Recovery Officer  specifying  the  amount of  arrears  due  from  the assessee.  The amount due may be recovered by resort to  any one  or more of the four modes prescribed by s. 222  of  the Act.  If the defaulter fails to comply with a notice  issued by  the Tax Recovery Officer requiring the defaulter to  pay the amount within fifteen days from the date of the  service of the notice, proceedings for recovery may be taken against the assessee for recovery of ’the tax.  But under the scheme of the Act and the Rules, the assessee alone may be  treated in  default.   The Act and the Rules  contemplate  that  the notice for payment of the tax arrears may be issued  against the assessee, and proceedings for recovery of the tax may be taken against the assessee alone. Under the Income-tax  Act, 1961, a Hindu undivided family is a distinct taxable entity. apart  from  the  individual  members  who  constitute  that family.  Section 4 of the Income-tax Act charges tax for any assessment year, the total income of the previous 695 year  of every person and ’person’ is defined in s. 2 (31  ) as  including--(i)  an  individual, (u)  a  Hindu  undivided family,  (iii) a company, (iv ) a firm, (v ) an  association of persons or a body of individuals, whether Incorporated or not,  (vi)  a  local authority and  (vii)  every  artificial juridical  person, not falling within any of  the  preceding sub-clauses.    The  Legislature  having  treated  a   Hindu undivided  family  as  a taxable entity  distinct  from  the individual  members  constituting it,  and  proceedings  for assessment and recovery of tax having been taken against the Hindu undivided family, it was not open to the Tax  Recovery Officer  to initiate proceedings against the manager of  the Hindu undivided family for his arrest and detention.  It  is true that if properties of the family movable and  immovable are  to be attached, proceedings may be started against  the Hindu undivided family and the manager represents the family in proceedings before the Tax Recovery Officer.  But by  the clearest  implication of the statute the assessee alone  may be  deemed  to be in default for  non-payment of   tax,  and

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liability to arrest and detention on failure to pay the  tax due is also incurred by the assessee alone.  The manager  by virtue  of  his status is competent to represent  the  Hindu undivided  family,  but on that account he  cannot  for  the purpose  of  s. 222 of the Act of 1961 be deemed to  be  the assessee  when  the  assessment is made  against  the  Hindu undivided  family  and certificate for  recovery  is  issued against the family. Counsel  for the Revenue invited our attention to s.  140(b) and s. 282(2) of the Income-tax Act, 1961, in support of his contention  that  when  tax is assessed  against  the  Hindu undivided  family  there  is  no  distinction  between   the representative  status of the manager of the family and  his personal  status.  Section 140(b) authorises the manager  in the case of a Hindu undivided farofly to sign and verify the return  of  income, and s. 282(2) provides for the  mode  of service  of  notice  or requisition issued  under  the  Act, amongst  others,  against  a  Hindu  undivided  family.  But because   the  manager  of  a  Hindu  undivided  family   is authorised  to  sign and verify the return of income  and  a notice  under  the Act could be served upon him when  it  is addressed  to a Hindu undivided family and such  service  is treated  as service upon the Hindu undivided family for  the purpose  of the Act, the manager cannot be deemed to be  the assessee where the income assessed is of the Hindu undivided family.   The  expression ’assessee’ under s. 2(7)  means  a person by whom any tax or any other sum of money is  payable under the Act, and includes--(a) every person in respect  of whom  any  proceeding under the Act has been taken  for  the assessment  of  his  income or of the income  of  any  other person in respect of which he is assessable, or of the  loss sustained  by him or by such other person, or of the  amount of  refund  due to him or to such other  person;  (b)  every person who is deemed 696 to be an assessee under any provisions of the Act; (c) every person who is deemed to be an assessee in default under  any provisions  of the Act.  For purposes of cl. (a) the  person against whom any proceeding under the Act has been taken  is deemed an assessee: but that necessarily postulates that the proceeding  should  be  lawfully taken  against  the  person before he could be deemed to be an assessee for the  purpose of  s.. 222.or r. 2 and r.73.  There is no provision in  the Act  which  deems the manager to be the  assessee,  for  the purpose  of assessment and recovery of tax, when the  income of the Hindu undivided family of which he is the manager  is assessed  to tax.  Nor is there any provision  enabling  the Income-tax Officer or the Tax Recovery Officer to treat  the manager  of  the Hindu undivided family as  an  assessee  in default  under  the  provisions of  the  Act.   Section  160 provides for treating a person as a representative  assessee and  s. 161  prescribes  the liability of  a  representative assessee.   Section  179  makes  a  special  provision   for rendering the Directors of private company in liquidation to be jointly and severally liable for the payment of tax which cannot  be recovered from the assets of the private  company in liquidation.  The Legislature has made no such  provision for  recovery of tax by resort to the personal  property  of the manager of the Hindu undivided family, or by his  arrest and  detention for default by the family in paying  the  tax due. Sections 276, 276A, 277 and 278 on which reliance was placed by  counsel for the Revenue in support of his argument  also do  not  assist  him.  These sections  occur  in  a  chapter relating to penalties, and they seek to penalise failure  to

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carry  out  specific provisions mentioned therein.   We  are unable  to  hold  that the expression "person" in  ss.  276, 276A  and 277 is used m the sense in which it is defined  in s.  2  (31  ) of the Act.  For each specific  act  which  is deemed   to  be  an  offence  under  those  provisions,   an individual  who without reasonable cause or excuse fails  to do  the  acts  prescribed by statute or  acts  in  a  manner contrary to the statute or makes a declaration on oath which he  believed to be false or does not believe to be true,  is made  liable  to  be punished.  Section  278  penalises  the abetment  or  inducing  any person to make  and  deliver  an account,  statement  of declaration relating to  any  income chargeable  to tax which is false and which he either  knows to be false or does not believe to. be true.  In the context in  which the expression "person" occurs in ss.  276,  276A, 277 and 278, there can be no doubt that it seeks to penalise only  those individuals who fail to carry out the duty  case by the specific provisions of the statute. or are  otherwise responsible for the acts done.  For the default of the Hindu undivided  family, therefore. in payment of tax.  the  Karta cannot be arrested and detained in prison. 697 The High Court, we think, took a somewhat technical view  in declining to allow the contention raised by the appellant in the first writ petition presented before the High Court that he  was  not liable to be arrested and imprisoned  for  non- payment  of the tax arrears, since he was not  an  assessee. and  then in treating the judgment of the High Court in  the first writ petition operating constructively as res judicata in the second petition. The appeals are allowed and the order of detention passed by the Tax Recovery Officer against the appellant is   declared unauthorized.   No order in Petition No. 103 of  1966.   The appellant will be entitled to his costs in Appeal No..  1320 of 1966 in all the three Courts.  There will be no order  as to  costs in Appeal No. 1319 of 1966 and Writ  Petition  No. 103 of 1966. Y.P.                                       Appeals allowed. 698