Case Note & Summary
The dispute arose from a suit filed by the Union of India against Kalyan Mills Ltd. and others for recovery of tax dues amounting to Rs 1,32,400.87. The Union of India sought to recover these dues from the appellant company based on a letter from the assessee company, which stated that the tax dues could be recovered from the amounts owed by the appellant. The appellant acknowledged its liability to the assessee company and promised to pay the tax dues. Notices under Sections 46(2) and 46(5A) of the Income Tax Act were issued for recovery. The trial court decreed the suit in favor of the Union of India, which was upheld by the Gujarat High Court. The appellant contended that the decree was not permissible as it was based on a counter-claim against the assessee company. The Supreme Court dismissed the appeal, affirming that the appellant's counter-claim was a false theory aimed at delaying payment. The court noted that the prohibitory order under Section 46(2) was effective, and the appointment of a receiver was justified to recover the dues. The court found no error in the High Court's judgment and dismissed the appeal with costs.
Headnote
A) Income Tax - Recovery of Tax Dues - Validity of Claim - Income Tax Act, 1961, Sections 46(2), 46(5A) - The Union of India sought to recover tax dues from the appellant company based on the acknowledgment of debt by the appellant to the assessee company. The court held that the appellant's counter-claim was a sham to delay payment, thus validating the recovery suit. (Paras 1-2).
Issue of Consideration
Whether the suit filed by the Union of India for recovery of tax dues from the appellant company was permissible in law.
Final Decision
The Supreme Court dismissed the appeal, affirming the High Court's decree in favor of the Union of India for recovery of tax dues.
Law Points
- Income Tax Recovery
- Prohibitory Orders
- Counter-Claims
- Appointment of Receiver
- Civil Suit
