Document Fragment View

Matching Fragments

54. There was also a contention that the attachment of debts due to the assessee had been separately dealt with in the other provisions of the Act and that if it was contemplated that such debts could be taken into account for the purpose of Section 132, then there would be a specific provision therefor. Section 226 is a provision relating to collection or recovery of tax. Sub-section (5) thereof enables the ITO, if so authorised by the Commissioner, to recover any arrears of tax due from an assessee by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Act. In the Third Schedule, reference is made to the Second Schedule, and in the Second Schedule attachment and sale of movable property is provided in Pt. II. Clause 26 of the Second Schedule deals with debts and shares. In the case of a debt not secured by a negotiable instrument, the attachment has to be made by a written order prohibiting the creditor from recovering the debt and the debtor from making payment thereof. Similarly, under Section 281B where, during the pendency of any proceeding for the assessment of any income, the ITO was of the opinion that for the purpose of protecting the interests of the revenue, it was necessary to do so, he may, with the previous approval of the Commissioner, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. The contention is that both under Section 226(5) as well as Section 281B there is a specific provision for attachment of a debt, while in the case of Section 132, there was no such provision. It is, therefore, urged that Section 132 did not contemplate any debts being attached or seized. It is unsafe to argue from the existence of a special provision in the case of debts under Section 226 as well as Section 281B that a similar provision should be found under Section 132, and that in its absence there can be no attachment. Section 226 provides for the mode of recovery in respect of a completed assessment or in respect of the situation in which the assessee is deemed to be in default. Section 281B is a power to be exercised during the pendency of any proceeding for assessment, so that the assessee does not fritter away or secrete his resources out of the reach of the department when the assessment is completed. Having regard to the provisions of Sections 226 and 281B, it would be clear that Section 132 is intended to be invoked even in the absence of any pending proceeding. Having regard to the history of this provision, it is clear that it is intended to operate to see that the tax evader does not deal with his assets without making proper provision for the tax that may be due from him. Otherwise, the assessment made later would only remain on paper. If in the context of completed assessment or pending assessment, debts could be attached, it would be unreasonable to expect the Legislature to leave the debts out of account in conferring the powers on the taxing authorities under Section 132, so as to safeguard realisation of the revenue. The whole idea is to see that effective steps are taken for the purpose of getting at the resources of tax evaders, so that their obligations under the Act are discharged, and to search for and seize the assets in whatever shape they may be, and that is why the language in a wide form as " valuable things " has been used in Section 132. We see no reason to hold that debts are intended to be outside the operation of Section 132.

57. Section 226, as already seen, applies to cases where there is an unsatisfied demand and the assessee is in default. Section 281B applies to the cases where the proceedings are pending. If after the completion of the assessment or even during the pendency of the assessment, the assessee, whose assets are subject to attachment, applies, it may be that the ITO may take recourse to Section 226 or 281B, or may think fit to release them if the assessee makes appropriate arrangement for payment of tax. Thus, the provision of Sub-section (3) cannot be utilised so as to continue the attachment indefinitely. If in any case any person whose assets are subject to attachment satisfied the court that Sub-section (3) has been utilised only for the purpose of circumventing the time-limit as specified in Sub-section (5), it would be open to him to approach the court, so that the matter can be examined and appropriate relief granted on proof of such a grievance. The possibility of Sub-section (3) being misused in such a manner cannot justify the importing of the time-limit as specified in Sub-section (5) into Sub-section (3) contrary to what Parliament has done. If Parliament really intended that the procedure contemplated by Sub-section (5) should be attracted to Sub-section (3), it could have so provided, as has been done in Sub-section (7).