Law:

Section:

Section 230A of the Income-tax Act, 1961 Tax clearance certificate - ITO refused to issue certificate, on registration of transfer of immovable properties, on grounds of pending assessments, lack of assessee's co-operation and its issue may affect tax recovery - Whether ITO's action valid and legal Held, no Words "existing liabilities" used in section 230A(1)(a) Meaning of Facts The assessee entered into an agreement on 18-1-1975 to purchase certain plots of land from the seller. For purposes of registration of sale deed, the seller applied on 28-08-1975 to the ITO for issue of certificate under section 230A. The ITO refused to grant the same on 8-10-1975 on the grounds (i ) that several assessments of the seller were pending ; (ii) that the seller had not co-operated in the assessment proceedings ; and (iii) that registration of the documents was likely to affect the tax recovery. In the meantime, a petition for winding up of the seller-company was filed on 9-10-1975 in the High Court which appointed on 21-10-1975 a provisional liquidator. However, on 9-10-1975, by taking recourse to section 281B [inserted by the Taxation Laws (Amendment) Act, 1975 with effect from 1-10-1975], the ITO passed provisional attachment orders of the seller's property but, for want of renewal after six months, the attachment orders automatically lapsed. The purchasers challenged the validity of the ITO's refusal to issue a certificate in special civil application. One of the arguments taken up by the revenue was that the words "existing liabilities" in section 230A must be interpreted to mean liability to pay income-tax without any reference to the assessment order that might be passed subsequently in regular assessment proceedings. Held 1. The words occurring in a particular provision of law take colour from the context in which they occur. Section 230A occurs in the group of sections dealing with collection and recovery of. taxes and it is an aid to the recovery of taxes when they become due, in the sense of assessment orders having been passed and the exact amount of tax due from a particular assessee in respect of a particular year having been determined. Section 230A(1)(b)…

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