SHAHUDEEN MUSALIAR v. ITO, QUILON — 1963 DIGILAW 338 (KER)

Judgment :- 1. In this Writ Petition Mr. V. K. K. Menon, learned counsel for the petitioner, challenges the order, passed by the 2nd respondent in these proceedings namely the Tax Recovery Officer the Collector of Quilon, issuing an arrest warrant, as against the petitioner, under R.73(3) of Part V of Schedule II, of the Income-tax Act, 1961. 2. A few facts may be stated. It will be seen that under Ext. P.1 dated 5th July 1963 the 2nd respondent sent a notice to the petitioner, informing him that a certificate has been received from the concerned Income-tax Officer, for recovery of a sum of Rs. 82,849.49 from the petitioner. It was also stated in the said notice, that the petitioner is required to pay the amount mentioned therein within 15 days from date of service of the notice. There was also an information to the effect that in case of default, steps will be taken to realise the amount, in accordance with the second schedule to the Income-tax Act, 1961. 3. The petitioner does not appear to have complied with the requirement under Ext. P.1. And in consequence, the notice dated 27th July 1963 under Ext. P. 2, was issued by the 2nd respondent. In Ext. P. 2, the 2nd respondent states that inasmuch as the petitioner has failed to pay the amount of arrears specified in the certificates referred to therein, it is proposed to execute the said certificate "by arrest and imprisonment of your person". Under Ext. P. 2, the petitioner was also requested to appear before the 2nd respondent on 9th August 1963 at 3 P. M., and show cause as to why he should not be committed to the civil prison, in execution of the said certificates. This notice, as I mentioned earlier, was dated 27th July 1963. 4. In the meanwhile, there were four orders passed by the respondent' granting relief to the petitioner, in respect of the double taxation with reference to the income that the petitioner was having from Ceylon. Those are the orders dated 29th July 1963 and 30th July 1963, taking in the periods in respect of which tax is sought to be collected, and they are covered by Exts. P. 3 to P. 6. There is no controversy that, as a result of the relief granted to the petitioner under those orders, the tax liability demanded under Ext. P. 3 to P. 6. There is no controversy that, as a result of the relief granted to the petitioner under those orders, the tax liability demanded under Ext. P. 2 in the sum of Rs. 82,849.49 got reduced to Rs. 53,136.87. 5. In response to the notice issued by the 2nd respondent, evidenced by Ext. P. 2, calling upon the petitioner to show cause as to why he should not be committed to the civil prison, according to the petitioner, his counsel appeared on 8th August 1963 itself and filed the application evidenced by Ext. P. 7. In Ext. P. 7 the petitioner refers to the service on him of the notice Ext. P. 2, requiring him to appear at 3 P. M. on 9th August 1963. Then he says that he is a tuberculosis and diabetic patient and is under the treatment of the doctor mentioned therein. In particular, the petitioner also states that during the one week before the notice was issued, his illness took a serious turn and he is being treated by a local doctor at Quilon. He also states that he is bed-ridden and the doctor has advised him not to exert or move out for a month at least. For these reasons the petitioner requests the 2nd respondent to grant him a month's time for appearing before him and also encloses along with Ext. P. 7 the certificate issued by the doctor. There is no controversy that the application Ext. P. 7 was presented before the 2nd respondent by the counsel appearing on behalf of the petitioner on 8th August 1963. 6. No doubt, there is a light controversy raised in these proceedings as to how exactly the application put in by the petitioner, namely Ext. P-7 was disposed of. According to the petitioner, his counsel again appeared on 9th August 1963 at 3 p. m. namely, the date fixed for the appearance of the petitioner under Ext. P. 2 and even then the 2nd respondent is stated to have told his counsel that he is reserving orders on Ext. P. 7. On the other hand, the learned Government Pleader has stated before me that it is seen from the records available with him, that the Collector has rejected the application Ext. P. 2 and even then the 2nd respondent is stated to have told his counsel that he is reserving orders on Ext. P. 7. On the other hand, the learned Government Pleader has stated before me that it is seen from the records available with him, that the Collector has rejected the application Ext. P. 7 on 8th August 1963 and had also ordered that the said information was to be given to the petitioner personally. But it will be seen that on 14th August 1963, on the basis of an arrest warrant issued by the 2nd respondent, an attempt was made to arrest the petitioner by the police. According to. the petitioner the warrant had to be returned unexecuted because he was completely bed-ridden; but according to the Collector, the petitioner had gone away to Cochin. 7. Apart from this controversy, that is no doubt raised as to the exact nature of the disposal given to the application Ext. P. 7, filed by the petitioner, the question arises as to whether the 2nd respondent, under these circumstances, had jurisdiction to issue the arrest warrant, by virtue of R.73 (3) of Schedule II of the Income-tax Act, 1961. In fact, the definite stand that has now been taken by the 2nd respondent is, that inasmuch as there has been a default in the appearance of the petitioner on 9th August 1963, in response to the notice issued by him under Ext. P. 2, he took action by way of issuing the arrest warrant under R.73(3). 8. The jurisdiction of the 2nd respondent to take such action, is challenged in these proceedings by Mr. V. K. K. Menon, learned counsel for the petitioner. It may be stated in this connection that two other contentions also have no doubt been taken in this writ petition by the learned counsel for the petitioner. 8. The jurisdiction of the 2nd respondent to take such action, is challenged in these proceedings by Mr. V. K. K. Menon, learned counsel for the petitioner. It may be stated in this connection that two other contentions also have no doubt been taken in this writ petition by the learned counsel for the petitioner. But the learned counsel has stated that those contentions need not be adjudicated upon in these proceedings, namely [1] regarding the attack as against the provisions contained in R.73, and in particular R.73 [3] of Part V of Schedule II of the Income-tax Act, 1961, as being violative of Art.19 and 21 of the Constitution, and secondly, that no further proceedings by way of enforcing the tax liability can be taken against the petitioner unless a fresh certificate has been issued on the basis of the relief granted by the Income-tax Officer concerned under Exts. P. 3 to P. 6. As I mentioned earlier, the learned counsel for the petitioner did not press these contentions during the argument; and therefore it is not necessary for me to express any opinion regarding those contentions. 9. The only other contention that survives and has been pressed by the learned counsel for the petitioner, is regarding the jurisdiction of the Collector to issue the warrant of arrest under R.73 [3] of Schedule II of the Income-tax Act, 1961 on the ground that the petitioner himself has not appeared on 9th August 1963. The contention that has been taken by the learned counsel for the petitioner is that under S.288 of the Act, provision is made enabling parties to appear by counsel or by such other authorised representatives in proceedings before the Income-tax Officers or Tribunal. If that is so, the learned counsel urged that the petitioner cannot certainly be considered to have not appeared on 9th August 1963 in obedience to the notice Ext. P. 2, because, admitteddly, the counsel for the petitioner, apart from appearing before the Collector on 8th August 1963 and presenting the application Ext. P. 7, was also present before the Collector at 3. P. M. on the date when the petitioner was called upon to appear under Ext. P. 2. There is also a minor contention raised by the learned counsel for the petitioner that the Collector has not at all properly considered the application filed by the petitioner, evidenced by Ext. P. 7, was also present before the Collector at 3. P. M. on the date when the petitioner was called upon to appear under Ext. P. 2. There is also a minor contention raised by the learned counsel for the petitioner that the Collector has not at all properly considered the application filed by the petitioner, evidenced by Ext. P. 7, on merits. 10. No doubt, there seems to be a justification for the criticism levelled by the learned counsel for the petitioner regarding the manner of disposal given to the application Ext. P. 7 filed by the petitioner.The fact that the application Ext. P. 7 was filed on 8th August, 1963, is not challenged. There is a statement in the affidavit filed by the petitioner in this Court, that his lawyer again appeared before the Collector, on 9th August 1963, at 3 p. m. and that even then the lawyer was informed that orders on Ext. P. 7 would be pronounced later. This specific averment in the affidavit of the petitioner has not been challenged by the Tax Recovery Officer, namely the 2nd respondent Collector, in the counter affidavit that has been filed on his behalf. No doubt the 2nd respondent has stated that he was not satisfied about the bona fides of the statements contained in Ext. P. 7, and that he was also satisfied on inquiries made by him that the grievance of the petitioner cannot be accepted and that is why the application Ext. P. 7 was rejected by him. 11. In this particular case, it may be that the 2nd respondent was not satisfied about the averments contained in the application Ext. P7. Even then, in my view he could have very well dismissed the application in the presence of the lawyer and informed the lawyer himself on 8th August 1963 that he was not satisfied with the reasons given, for adjournment of the proceedings, and that the party himself should appear, as directed, on 9th August 1963. Even if the 2nd respondent had not adverted to this aspect on 8th August 1963, nevertheless there was also a duty on the part of the officer, to have at least mentioned this to the counsel, who is stated to have appeared before him on 9th August 1963, and informed him that the application for adjournment, evidenced by Ext. Even if the 2nd respondent had not adverted to this aspect on 8th August 1963, nevertheless there was also a duty on the part of the officer, to have at least mentioned this to the counsel, who is stated to have appeared before him on 9th August 1963, and informed him that the application for adjournment, evidenced by Ext. P. 7 has been dismissed and that the party must make his appearance. Not having adopted that procedure, in my view, there has been in this case some hurry in the issue of the arrest warrant. That is on facts. 12. But apart from that the question that arises is regarding the jurisdiction of the 2nd respondent to issue the warrant of arrest under R.73 [3] of Part V, Schedule II of the Income-tax Act, 1961. It is necessary in this connection to refer to one or two sections of the Act, as well as to the scheme of the relevant rules under Schedule II of the Act. 13. S.2 (44) of the Act defines the expression "Tax Recovery Officer." In this case, there is no controversy that the 2nd respondent satisfies that definition. In S.222, it is provided that when an assessee is in default, or is deemed to be in default, in making a payment of tax, the Income-tax Officer may forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the assessee. It is also provided that the Tax Recovery Officer, on receipt of such certificate, can proceed to recover from the assessee, the amount specified therein, in accordance with the rules laid down in the Second Schedule, by one or other of the modes the indicated under clauses (a) to (d) of sub-section (1) of S.222. In particular, it will be seen that one of the modes of recovery that is so provided, is by way of arrest of the assessee and his detention in prison; and that is provided in clause (c) of sub-section [1] of S.222. 14. Schedule II of the Act deals with the procedure for recovery of Tax. R.1 [6] defines "Defaulter". In particular, it will be seen that one of the modes of recovery that is so provided, is by way of arrest of the assessee and his detention in prison; and that is provided in clause (c) of sub-section [1] of S.222. 14. Schedule II of the Act deals with the procedure for recovery of Tax. R.1 [6] defines "Defaulter". It will be seen that under R.2 of Part I [General provisions], when a certificate has been received by the Tax Recovery Officer from the Income-tax Officer concerned, for the recovery of the arrears under the Second Schedule, there is an obligation on the part of the Tax Recovery Officer to serve upon the defaulter a notice, requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice, and also to intimate that in default, steps would be taken to realise the amount under the 2nd Schedule. Ext. P.1, is the notice issued by the 2nd respondent in these proceedings, in terms of R.3. 15. Then again, under R.4 which contains provisions more or less analogous to the provisions contained in clauses (a) to (d) of sub-section (1) of S.222 of the Act, the various modes, by which the tax can be recovered, are specified. That is, under R.4, it is provided that if the amount mentioned in the notice is not paid within the time mentioned therein, or within such further time as the Tax Recovery Officer may grant in his discretion, the Tax Recovery Officer shall proceed to realise the amount by one or more of the modes indicated in clauses (a) to (d) of the said rule. Here again, it will be seen that under R.4 (c) one of the modes of recovery is by arrest of the defaulter and his detention in prison. And that is exactly identical, to what is provided in clause (c) of sub-section (1) of S.222 of the Act itself. 16. Part V of Schedule II of the Act, deals with arrest and detention of the defaulter. In fact, it will be seen that the set of rules, forming R.73 to 81, come under Part V. But we are concerned in these proceedings only to consider the scope of R.73, in the light of R.74 to 76. 16. Part V of Schedule II of the Act, deals with arrest and detention of the defaulter. In fact, it will be seen that the set of rules, forming R.73 to 81, come under Part V. But we are concerned in these proceedings only to consider the scope of R.73, in the light of R.74 to 76. Under R.73, it will be seen that sub-rule (1) provides that no order for arrest and detention in civil prison of a defaulter shall be made unless (a) the Tax Recovery Officer has issued and served a notice upon the defaulter, calling upon him to appear before him on the date specified in the notice and to show cause why he should not be committed to the civil prison, and (b) unless the Tax Recovery Officer is satisfied about the matters mentioned either in clause (a) or clause (b) of sub-rule (1). Therefore it will be seen that before an order for arrest and detention in civil prison of a defaulter can be made, both these conditions are to be satisfied. In fact in respect of the first part of sub-stile (1) of R.73, a notice has been issued under Ext. P. 2, to the petitioner, calling upon him to appear before the Tax Recovery Officer on 9th August 1963 to show cause as to why he should not be committed to civil prison. Under sub-rule (2) of R.73, power is given to the Tax Recovery Officer, if he is satisfied in the manner referred to therein, to issue a warrant for the arrest of the defaulter, if the defaulter with the object or effect of delaying the execution of the certificate, is likely to abscond or leave the local limits of the jurisdiction of the Tax Recovery Officer. And that power is not in any manner controlled by sub-rule R.73. Sub-rule (3) of R.73 states that where appearance is not made in obedience to a notice issued and served under sub-rule (1), the Tax Recovery Officer may issue a warrant for the arrest of the defaulter. The claim made on behalf of the 2nd respondent in this case, when he issued the warrant of arrest against the petitioner, is rested on sub-rule (3) of R.73. Then there are certain other matters provided in sub-rule (4). 17. The claim made on behalf of the 2nd respondent in this case, when he issued the warrant of arrest against the petitioner, is rested on sub-rule (3) of R.73. Then there are certain other matters provided in sub-rule (4). 17. R.74 dealing with "Hearing" provides that when a defaulter appears before the Tax Recovery Officer in obedience to a notice to show cause, or is brought before the Tax Recovery Officer under R.73, the Tax Recovery Officer shall proceed to hear the Income-tax Officer and take all such evidence as may be produced by him in support of the execution by arrest, and shall then give the defaulter an opportunity of showing cause why he should not be committed to the civil prison. R.74 clearly shows that in the presence of the defaulter, who, either voluntarily appears in response to the notice under R.73 (1), or is arrested and brought under R.73 (2) or R.73 (3), the Income-tax Officer will have to be heard in support of execution by arrest and the Tax Recovery Officer is to take evidence; and after that, the defaulter must be given an opportunity of showing cause as to why he should not be committed to civil prison. So an enquiry is to be conducted. If, finally, the Tax Recovery Officer is satisfied about the matters referred to in clause (a) or (b) of R.73 (1), at the conclusion of such inquiry, only then he can, under R.76, make an order for detention of the defaulter in civil prison. 18. Therefore, the scheme of the rules referred to above, clearly shows that the mere issue of a notice under R.73 (1), calling upon the defaulter to appear to show cause as to why he should be committed to the civil prison, alone will not be sufficient for straightway committing a defaulter to the civil prison, because, R.74, referred to above, clearly contemplates an inquiry into the matter, and of giving the party concerned an opportunity to show cause against his detention. I have already referred to that aspect. 19. As I mentioned earlier, the contention of Mr. V. K. K. Menon, learned counsel for the petitioner, is that in this case there has been appearance by the lawyer on behalf of the petitioner, in response to the notice issued under R.73 (1), on 9th August 1963. Such appearance by a lawyer, is according to Mr. 19. As I mentioned earlier, the contention of Mr. V. K. K. Menon, learned counsel for the petitioner, is that in this case there has been appearance by the lawyer on behalf of the petitioner, in response to the notice issued under R.73 (1), on 9th August 1963. Such appearance by a lawyer, is according to Mr. V. K. K. Menon, sufficient, and therefore this is not a case where "appearance is not made in obedience to notice issued and served under R.73 (1)", justifying action being taken under R.73 (3). In other words, according to Mr. V. K. K Menon, personal appearance of a defaulter is not contemplated in R 73(1). The question is whether this contention can be accepted. The learned counsel, no doubt, places considerable reliance upon the provisions of S.288 of the Act, dealing with appearance by authorised representative. In my opinion, the provisions of S.288 will not assist the learned counsel in his contention, that the appearance contemplated in R.73 is not personal appearance of the defaulter himself, and an appearance can be made by a duly authorised counsel on behalf of the defaulter. A reading of the provisions contained in S.288, will clearly show that they have no application to proceedings taken by the Tax Recovery Officer. Even otherwise, it will be seen that the object of issuing the notice under R.73 (1), calling upon the defaulter to appear for the purpose of showing cause why he should not be committed to the civil prison, is really for the purpose of conducting an inquiry in his presence, in the manner referred to in R.74. It will be seen that unless the defaulter appears before the Tax Recovery Officer, no inquiry, as contemplated under R.74, can ever take place. 20. The expression ‘defaulter' is defined in clause (b) of R. (1) of the Second Schedule. Part V deals with arrest and detention of the defaulter. The first part of R.73 (1) clearly shows that the notice to be issued and served on the defaulter, calls "upon him to appear". Therefore, the appearance contemplated, is the personal appearance of the defaulter himself under R.73(1). The provisions of sub-rules (2) and (3) of R.73 also clearly indicate the importance of personal appearance, which can be procured even by arrest. Therefore, the appearance contemplated, is the personal appearance of the defaulter himself under R.73(1). The provisions of sub-rules (2) and (3) of R.73 also clearly indicate the importance of personal appearance, which can be procured even by arrest. That the personal appearance of the defaulter is contemplated under R.73 (1), is made clear by R.74, dealing with "Hearing". That rule refers to (a) the defaulter appearing voluntarily in response to notice under R.73 (1), and (b) to a defaulter who is brought before the Tax Recovery Officer. A defaulter is so brought before the officer, when he is arrested under R.73. That shows that there must be personal appearance voluntarily; if not, personal appearance is secured by arrest of the defaulter, for the purpose of the 'hearing' and for the purpose of the Tax Recovery Officer being satisfied about the matters mentioned in R.73 (1) (a) and (b). 21. This does not mean that a defaulter, who is called upon to appear, cannot have the assistance of a counsel, at the time of the inquiry. What is insisted, in my view, by the issue of the notice under R.73 (1), is that the defaulter himself must appear personally before the Tax Recovery Officer, and there is power in the Tax Recovery Officer to order the arrest and production of the defaulter, if he does not comply with the terms of the notice issued under R.73 (1). No doubt, there may be cases, where the defaulter may have very good and sufficient reasons for not being able to appear in response to the notice, on a particular date. Those are all matters to be considered on merits, on request being made by the defaulter for his inability to attend, and also making a request for having the proceedings being put off to a later date. One can expect the Tax Recovery Officer to give reasonable accommodation in deserving cases. 22. But the point to be noted is that the insistence is regarding the personal appearance of the defaulter himself; and the appearance by a third party, on behalf of the defaulter, without the defaulter appearing, is not a compliance with the notice Ext. P. 2, issued under R.73(3). 22. But the point to be noted is that the insistence is regarding the personal appearance of the defaulter himself; and the appearance by a third party, on behalf of the defaulter, without the defaulter appearing, is not a compliance with the notice Ext. P. 2, issued under R.73(3). In this connection, it may also be noted that R.75 provides for the Tax Recovery Officer ordering the defaulter to be detained in the custody of such officer, as the Tax Recovery Officer may think fit, or release him on his furnishing security pending completion of the inquiry. That provision also, in my view, shows that the requirement under R.73 [1] is the presence of the defaulter himself. 23. Therefore.it follows that the contention of Mr. V. K. K. Menon, learned counsel for the petitioner in this case, that inasmuch as the counsel for the petitioner appeared before the Tax Recovery Officer, both on 8th August 1963 and 9th August 1963, in response to the notice issued under Ext. P. 2, there is no jurisdiction in the 2nd respondent to issue, under R.73 [3], the warrant of arrest, on the ground that appearance has not been made by the petitioner in obedience to the notice Ext. P. 2, cannot be accepted. I must hold that the issue of arrest warrant, on the basis of R.73(3) is legal and valid. 24. Then the question is as to what further directions are to be given in this writ petition. I have already indicated that the merits of the application, Ext. P. 7 filed by the petitioner on medical grounds on 8th August 1963, do not appear to have been satisfactorily considered by the 2nd respondent. No doubt, in the counter affidavit filed on behalf of the 2nd respondent, several applications, either filed by the petitioner himself, or at the instance of the petitioner, to delay the payment of the tax and to thwart the attempt for realising arrears, have been adverted to. Evidently, all those matters have influenced the 2nd respondent to take a view as against the petitioner and to bold that the application for adjournment is not bonafide. But, whatever it is, there was certainly an obligation on the part of the 2nd respondent to give a serious consideration to the matters referred to in Ext. Evidently, all those matters have influenced the 2nd respondent to take a view as against the petitioner and to bold that the application for adjournment is not bonafide. But, whatever it is, there was certainly an obligation on the part of the 2nd respondent to give a serious consideration to the matters referred to in Ext. P. 7, take a proper decision oneway or the other, and communicate the same officially in writing to the party. Or, if the 2nd respondent was not inclined to grant the request of the petitioner under Ext. P-7 he could have straightway informed the counsel of the petitioner regarding the decision, and ask the party himself to appear on the particular date. But these circumstances will not assist the petitioner in this case, as his application for adjournment, namely Ext. P. 7, is stated by the 2nd respondent to have been dismissed on 8th August 1963 itself. Admittedly, the petitioner did not personally appear on 9th August 1963, as required by the notice Ext. P. 2. 25. In the view that I have expressed earlier, it follows that the warrant of arrest issued by the 2nd respondent under R.73(3) of Part V of Schedule II of the Income-tax Act, 1961, is legal, and so it need not be cancelled as such. But the 2nd respondent will give one more opportunity to the petitioner to appear before him for the purpose of conducting an inquiry, as contemplated in R.74, read with R.73, of the rules in the Second Schedule to the Act. A reasonable time may be given to the petitioner for that purpose. Even as per Ext. P. 7, dated 8th August 1963, the request of the petitioner was to grant him one month's time for appearance. That period has expired long ago. If the petitioner appears, in response to the fresh notice, the 2nd respondent will continue the further proceedings in accordance with the rules governing the matter. If, however, the petitioner again wilfully or intentionally defaults in complying with the request of the 2nd respondent to appear, it is open to the officer to enforce the presence of the petitioner, by executing the warrant of arrest already issued. Till that opportunity is given, as I mentioned earlier, the warrant of arrest, now issued for the arrest of the petitioner under R.73(3), will be kept under suspense. Till that opportunity is given, as I mentioned earlier, the warrant of arrest, now issued for the arrest of the petitioner under R.73(3), will be kept under suspense. But it must be emphasised that before a decision is taken to commit the petitioner to civil prison, if it ultimately becomes necessary, the procedure indicated in R.74 will have to be followed, and the satisfaction of the Tax Recovery Officer in respect of the matters indicated in clause (a) or (b) of sub-rule (1) of R.73 will also have to be recorded in writing, with reasons, by the 2nd respondent. 26. Subject to these directions and observations, the writ petition is dismissed. The parties will bear their own costs.