Law: Income Tax Act, 1922

Section: 46(2)

Section 222, read with sections 250 and 220, of the Income-tax Act, 1961 [Corresponding to section 46(2), read with sections 31 and 45, of the Indian Income-tax Act, 1922] - Recovery and collection of tax - Certificate proceedings - Assessment years 1953-54 and 1954-55 - Whether on ITO's order being revised in appeal, default based on it and all consequential proceedings must be taken to have been superseded and fresh proceedings have to be started to realise dues as found by revised order - Held, yes FACTS The ITO assessed the assessee to income-tax under section 23(4) of 1922 Act, for the years 1953-54 and 1954-55 on an estimated income and served notices of demand under section 29 of 1922 Act for the tax due under the two orders of assessment. On the assessee failing to comply with the notices of demand within the period specified, the ITO treated the assessee as in default and sent certificates under section 46(2) of 1922 Act to the Deputy Commissioner, for recovery of the tax determined by the orders of assessment. The Deputy Commissioner attached certain properties belonging to the assessee. In appeals filed by the assessee against the orders of assessment the AAC reduced the income assessed for both the years. The ITO did not issue fresh notices of demand pursuant to the modification in the orders of assessment made by the AAC, but by his letter dated 14-2-1956, informed the assessee that he had to pay tax as reduced by the appellate order. The assessee did not pay the amount of tax demanded and applied to the High Court under article 226 of the Constitution for a writ of certiorari quashing the certificates issued by the ITO treating him as in default and a writ of prohibition prohibiting the ITO from enforcing the certificates under section 46(2) of 1922 Act. The High Court relying upon the of the Calcutta High Court in Metropolitan Structural Works Ltd. v. Union of India [1955] 28 ITR 432 held that the ITO could not, without issuing fresh notices of demand, after the AAC of Income-tax reduced the taxable income, setting out the tax payable by him for the two years in question, treat the assessee as a defaulter and that the proceedings of the Collector…

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