Law: Income Tax Act, 1922

Section: 46(7)

Section 231 of the Income-tax Act, 1961 [Corresponding to section 46(7) of the Indian income-tax Act, 1922] - Period for commencing recovery proceedings - Assessment year 1950-51 - Whether recovery proceedings under section 46(7) having not been initiated within one year from end of financial year in which demand notice was served, those proceedings prima facie were barred by limitation prescribed therein, and, consequently, impugned notice of demand as well as recovery certificates had to be quashed - Held, yes FACTS For the assessment year 1950-51, the share of profit of the petitioner assessee in a partnership firm including interest was assessed to tax, and the tax payable was accordingly computed. The ITO thereafter issued a notice of demand on 17-3-1955 requiring payment within the period specified therein. According to the petitioner, he had no knowledge of the notice of demand having been served on any one on his behalf till it was on inspection of the file, discovered that the notice of demand was served on one B as on 30-3-1955. On 24-12-1956 the ITO issued a recovery certificate to the Collector, Kanpur, under section 46(2), and thereafter on 25-8-1958, to the Collector, Dehra Dun, in respect of the alleged arrears of demand. However, all efforts made by the petitioner before the various authorities to stall the recovery proceeding, having failed to elicit a positive response, the petitioner pointed out to the Commissioner that the recovery proceedings under section 46(7) having been taken beyond the time-limit prescribed therein, those proceedings were ab initio illegal and without force. On writ petition: HELD The recovery proceedings under section 46(7) had to be initiated within one year from the end of the financial year in which the demand notice was served. The end of the financial year in the instant case was 31-3-1995, and, therefore, the recovery proceedings in order to be effective and to be within the period of limitation had to be initiated by the 31-3-1956. Admittedly, in this case the recovery proceedings were only taken on 24-12-1956, and as such prima facie would be barred by the limitation prescribed in section 46(7). The subsequent…

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