Law:

Section:

Section 226, read with section 297, of the Income-tax Act, 1961 - Collection and recovery of tax - Other modes of recovery - Assessment years 1960-61 and 1961-62 - Whether under section 226(3) it is not necessary that assessee should be in default or should be deemed to be in default and no such condition or limitation is imposed by language of that sub-section and, therefore, ITO was authority to issue a notice under section 156 with respect to tax liability incurred under old Act - Held, yes FACTS For the assessment years 1960-61 and 1961-62, the assessments of the assessee were completed under the old Act. On appeal the AAC reduced the tax liability. Thereupon the ITO issued a notice to the respondent, purporting to be under section 156 of the new Act. The impugned notice under section 226(3) was issued nearly two years thereafter on 23-4-1965. The argument on behalf of the respondent was that both the assessment order as well as the appellate order having been made under the old Act, the provisions of section 226 of the new Act were not applicable. The High Court had accepted this contention of the respondent and had held that the notice was invalid to the extent it included the tax for the assessment year 1961-62. On appeal to the Supreme Court : HELD Under section 226(3), it is not necessary that the assessee should be in default or should be deemed to be in default and no such condition or limitation is imposed by the language of that sub-section. The ITO had authority to issue the notice, under section 156 of the new Act with respect to the tax liability incurred by the respondent under the old Act. The reasoning adopted by the High Court and the conclusion reached by it was not correct in law. The effect of the of the High Court on this point was that the provisions of section 297(2)(j) of the new Act are nullified and declared to be of no consequence. An interpretation of section 226(3) of the new Act which leads to such a startling result should be avoided as it is opposed to all sound canons of interpretation. There is nothing in the language of section 226(3) of the new Act to warrant the conclusion that the assessee should be in default or should…

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