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PETITIONER: RAJA JAGDISH PRATAP SAHI

       Vs.

RESPONDENT: STATE OF UTTAR PRADESH

DATE OF JUDGMENT13/02/1973

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN HEGDE, K.S. KHANNA, HANS RAJ

CITATION:  1973 AIR 1059            1973 SCR  (3) 528  1973 SCC  (3) 815

ACT: U.P. Agricultural Income-tax Act (3 of 1948), s. 32-Suit for recovery of tax assessed-Maintainability.

HEADNOTE: The appellant was assessed to Agricultural income-tax  under the  U.P.  Agricultural  Income.-tax  Act,  1948,  and   was directed  to  pay  it in four  instalments.   The  appellant defaulted  and,  when  summary proceedings  to  recover  the amounts as arrears of land revenue were taken under s. 32 of the Act, it was found that two of the instalments had become time  barred  under s. 32(2).  In a suit by  the  respondent State for recovery of those amounts, the appellant contended that the only remedy open to the respondent was under s.  32 and  that  the suit was not maintainable.  The  trial  court dismissed the suit, but the High Court in appeal decreed the suit. Dismissing the appeal to this Court, HELD : Where a taxing statute provides for a summary mode of recovery and is not exhaustive, it will be open to the State to  have  recourse to any other mode open to  it  under  the general law. [532D] Once  a  notice  of demand is served  on  the  assessee  for payment  of tax due under the Act, and the assessee makes  a default after the date for payment specified  therein  has expired,  a debt is created in favour of the State; and  the State  has the right to recover it by any of the modes  open to  it under the general law, unless, as a matter of  policy ,only  a  specific  mode to the exclusion of  any  other  is prescribed by the law.  No such prohibition is enacted in s. 32 of the Act. [531C-E] Manickam  Chetiar v. Income-tax Officer, Madurai, [1938]  VI I.T.R. 180, Inder Chand v. Secretary of State, A.I.R. [1942] Patna  87  and  Chaganti Raghava Reddy v.  State  of  Andhra Pradesh, A.I.R. [1959] A.P. 631 applied.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1192  of 1970.

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Appeal by Certificate from the Judgment and order dated  May 20, 1966 of the Allahabad High Court in First Appeal No. 161 of 1960. Yogeshwar  Prasad,  Hajii Iqbal Ahmed, S. K.  Bagga  and  S. Bagga, for the appellant. S. C.  Manchanda and O. P. Rana, for the respondent. The Judgment of the Court was delivered by JAGANMOHAN  REDDY, J. The.  State of Uttar Pradesh  filed  a suit against the. appellant for the recovery of a sum of Rs. 26,548-62 being two instalments of the Agricultural  Income- tax due from him 529 under  the  U.P. Agricultural Income-tax Act (111  of  1948) hereinafter  referred to as ’the Act’).  The  appellant  was assessed to Agricultural Income-tax for the year 1359 Fasli, in  a sum of Rs. 53,097-25 and was directed to pay the  same in  four  instalments  of  Rs.  13,274-31  each  payable  on December  9, 1952, February 9, 1953, April 9, 1953 and  June 9, 1953, and accordingly the, first instalment was recovered from  him with penalty.  Notice to pay the second and  third instalments  by  April 21, 1953 was served on him  but  this amount  was not paid.  Instead, the appellant filed  a  Writ Petition  in  the Allahabad High Court and obtained  a  stay order which was subsequently vacated.  Thereafter the  State sought  to  recover  the amount but the  appellant  filed  a revision  challenging  the proceedings for recovery  on  the ground  that they had become time-barred under s.  32(2)  of the Act.  The Board accepted the contention and held that no proceedings could be commenced for the recovery of third and fourth instalments which fell due on April 9, 1953 and  June 9, 1953, but in respect of the proceedings for the  recovery of the second instalment it was held that those  proceedings could  be-continued.   An application to the Board  for  re- ference to the High Court was dismissed.  The appellant then paid the second instalment. In  view  of the decision of the Board, the State  of  Uttar Pradesh  filed  a  suit  for the  recovery  of  the  amounts aforesaid  in  which the appellant pleaded  that  the  only remedy  open to the State was that permitted under s.  32(2) of  the  Act, and that no regular  suit  was  maintainable. This  plea was sustained, and the suit was dismissed as  not maintainable.   The  High Court, however, in an  appeal  re- versed the judgment of the Trial Court and decreed the suit. Against that judgment, this appeal is by certificate. It is contended before us that the only mode of recovery  of arrears of tax or penalty due under the Act is under s.  32, and  the State cannot recover any such amount by  any  other mode such as by s. suit.  Section 32 is as follows :               "32.  Recovery of penalties-(1) The  Collector               may,  on the motion of  ’assessing  authority,               recover  any  sum imposed by  way  of  penalty               under the provisions of section 17 or  section               3 1, or, where an assessee is in default,  the               amount assessed as agricultural income-tax, an               if it were an arrear of land revenue.               (2)   No  proceedings for the recovery of  any               sum payable under this Act shall be  commenced               after the expiration of one year from the date               on  which  the  last  instalment  fixed  under               section  30 falls due or after the  expiration               of one year from the date on which any  appeal               relating to such sum has been disposed of," 530 Before  we deal with the main contention, it may  be  stated that once a notice of demand is served on the assessee,  for

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payment  of tax due under the Act, and the assessee makes  a default  after the, date for payment specified  therein  has expired,  a debt is, created in favour of the  State.   This debt  the State. can recover by any of the modes open to  it under the general law.  This is also the position under  the Indian  Income-tax  Act, but it is contended that  the  ana- logous  provisions  of  sub-s. (7) of S. 46  of  the  Indian Income-tax Act, 1922, or the corresponding provisions of  S. 232 of the Income-tax Act of 1961 cannot be relied upon  for interpreting S. 32 of the Act. inasmuch as there are special provisions in these Acts which enable the Revenue to file  a suit  for  the  recovery  of arrears of  tax  due  from  the assessee.   It is true that S. 232 of the Income-tax Act  of 1961 provides that the modes of recovery under that Act  are not  exhaustive, but this clarification, which it  is,  does not imply that it is only by virtue of a specific  provision that  the  legislature  has conferred this  right  upon  the Revenue where it did not earlier possess. under s. 46 (2) of the  Act of 1922, the Income-tax Officer may forward to  the Collector  a certificate under his signature specifying  the amount  of arrears due, from an assessee and the  Collector. on  receipt  of such certificate, shall proceed  to  recover from  such  assessee the amount specified therein as  if  it were an arrear of land revenue.  Sub-section (7) of the said section  prescribes a period of limitation of one year  from the  last day of the Financial year in which any  demand  is made  under the Act, and thereafter no proceedings  for  the recovery can be taken.  This section was amended by s. 21 of the  Indian Income-tax (Amendment) Act, 1953, by  which  the following explanation was added :               "Explanation.-A proceeding for the recovery of               any  sum  shall be deemed  to  have  commenced               within  the meaning of this section,  if  some               action  is taken to recover the whole  or  any               part of the sum within the period hereinbefore               referred 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-  Income-tax               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." It  is  manifest that this explanation does not in  any  way confer  a right on the Revenue to recover arrears of tax  by any  mode  other than those provided under that  Act.   That right which the State or the Revenue has recovering  arrears of tax which is    a debt due 531 to  it,  is a general right conferred on it  under  the  law either  by  a  suit  or by some other  method  open  to  it. Section 32, though it does not nave an Explanation analogous to  s. 46 nonetheless does not preclude either  specifically or  by necessary implication a right to recover the  arrears of-tax due by a suit. The method prescribed in this section is  one of the modes of recovery which is a summary  remedy. It  is,  however,  open to the State  to  adopt  any  method available  to it for the recovery of tax in the same way  as it  would be open to it to recover ordinary debt due to  it. It  can  institute  a suit and obtain a  decree  with  costs against  the  assessee or other persons liable to  pay.   It

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could   also  probably,  without  obtaining  a   decree   or attachment,  apply  to a Court for the payment  of  dues  if there  are funds lying to die credit of the assessee in  the Court, or it may perhaps demand payment in the hands of the, receiver  appointed,  in  respect of  any  property  of  the assessee,  if due noticed to aft the parties  interested  in the  funds is given.  On these aspects, however, we  do  not propose  to, express any views.  As already observed,  after an assessment is made upon the, assessee quantifying the tax due from him and a demand for the payment thereof is  issued within  the  period  specified therein, it  creates  a  debt payable by the assessee in favour of the State.  It is  well established  that once a debt is created, the State has  the right to recover it by any of the modes open to it under the general  law, unless as a matter of policy only  a  specific mode to the exclusion of any other is prescribed by the law. No such prohibition is enacted in s. 32 of the Act. Even prior to the, amendment of sub-s. (7) of ’s. 46 of  the 1922 Act, several High Courts in this country had taken this view.    In   Manickam  Chettier  v.   Income-tax   Officer, Madurai(1),  a  Full  Bench of the  Madras  High  Court  was dealing  with  the right of the Crown to obtain  payment  of arrears  of tax due from the assessee’s properties sold  ’in execution  of  a decree where the  question  were,  firstly, whether the Government was entitled to claim a priority, and secondly, whether, as a matter of procedure, the petition by the Income-tax Officer to the Civil Court for payment to him from  the  amounts  to  the  credit  of  the  assessee,  was sustainable.  It was contended before the Full Bench, as  it is  contended  before  us, on the  analogous  provisions  of section  32 of the Income-tax Act of 1922, that inasmuch  as section  46 of that Act provides modes for the, recovery  of income-tax, the Crown is not entitled to adopt any different method.    This  contention  was  repelled.   Leach,   C.J., observed at p. 185 :               "This section, however, does not profess to be               exhaustive and it cannot without express words               to  that effect take away from the Crown  the,               right of enforcing payment by any other method               open to it.  Therefore, I do (1)  (1938) VI I.T.R. 180. 532               not regard section 46 as imposing a bar to  an               application  or the nature of the one  we  are               now concerned with." Varadachariar, J., had expressed a doubt as to the procedure for recovery but he had however no doubt that the Crown  had a  priority  for  the  recovery of  debts  due  to  it,  and consequently  agreed  in  favour of the  View  expressed  by Leach, C.J. Mockett, J., also agreed with this view.   ’This case was considered by Harris, C.J., and Chatterjee, J.,  of the  Patna  High  Court   in Inder  Chand  v.  Secretary  of State(1).  In this case the Patna High Court was considering whether  the Crown as a Creditor has the. ordinary right  of suit  against  the  assessee.   Following  the  Full   Bench judgment  of the Madras High Court, it was held that a  suit was maintainable.  The contention of Mr. P. R. Das,  learned counsel  for  the appellant, that the only method  by  which income-tax may be recovered is that laid down in S. 46,  was repelled  by  Chatterjee, J. In Chaganti  Raghava  Reddy  v. State  of  Andhra Pradesh(), the Andhra Pradesh  High  Court also  took a similar view.  On principle as well as  on  the consistent view of the High Courts, it is beyond doubt  that where  a taxing statute provides for a summary mode  of  re- covery and is not exhaustive,, it will be open to the  State

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to  have  recourse to any other mode open to  it  under  the general law. In  this view, the judgment of the High Court  is  affirmed, and the appeal is dismissed with costs. V.P.S.                             Appeal dismissed. (1) A.I.R. 942 Pat. 87.         (2) A.T.R 1959 A.P. 631. L796SLip.C.1.173-2500-30-8-74-GIPF. 533