Law:

Section:

Section 231, read with section 201, of the Income-tax Act, 1961 [Corresponding to section 46(7), read with section 18(7), of the Indian Income-tax Act, 1922] – Period for commencing recovery proceedings – Assessment years 1960-61 to 1963-64 – Assessment of an employee of assessee-company was originally completed in March 1963 – Subsequently, Assessing Officer rectified said assessment on 22-11-1964 enhancing amount of tax payable by employee – He thereafter on 26-6-1965 issued letter treating assessee as assessee in default under section 18(7) of 1922 Act and section 201 of 1961 Act for failure to deduct tax and sought to recover additional tax demands – Tribunal held that proceedings initiated by letter dated 26-6-1965 would amount to initiation of recovery proceedings and since said recovery proceedings were initiated after expiry of one year from last day of financial year in which any demand would be made, they were clearly barred by limitation – Whether order of Tribunal was justified – Held, yes FACTS One ‘W' had been employed by the assessee, at the material time. After the personal assessments of ‘W' for the relevant assessment years were completed in March, 1963, he left the employment of the assessee and finally left India permanently. Thereafter the ITO served on the assessee a letter dated 28-7-1964, addressed to ‘W', stating inter alia, that the tax in respect of his income had been under-charged for the said assessment years inasmuch as the commission received by him should have been included for the determination of the value of rent-free quarters allotted to him. Accordingly, the ITO proposed to rectify the said assessments. In spite of objections of the assessee to the proposed rectification the ITO passed orders under section 154 of the 1961 Act, on 22-11-1964, and amended the assessments of ‘W' enhancing the tax payable by him. Thereafter, on 26-6-1965, the ITO issued a letter to the assessee demanding the payment of the enhanced amounts payable by ‘W' for the said assessment years. It was also recorded in the said letter that the assessee was being treated as a defaulter under section 18(7) of the 1922 Act and/or section 201(1) of the 1961…

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