Official Liquidator, Palai Central Bank Ltd. (In liquidation) vs Income Tax Officer

Paripoornan, J.—The official liquidator, Palai Central Bank, has filed the above application. For the assessment years 1975-76 and 1976-77, the respondent (income tax Officer) effected assessments.'' Those were finally decided by the Appellate Tribunal. Notices of demand were served in, pursuance thereto. The official liquidator remitted the amounts on April 27, 1981, after obtaining sanction of this court. The amounts due as per the notices of demand were Rs. 20,559 and Rs. 16,963 towards the tax payable for the years 1975-76 and 1976-77.

Thereafter the respondent-ITO issued notices u/s 154 of the Act purporting to correct the mistake apparent on the record in issuing the demand notices. It was alleged that the mistake was in not including the interest on the additional tax for the period from the date of the order of the AAC to the date of the order of the Appellate Tribunal. Objections were invited. The official liquidator objected to the jurisdiction of the ITO to rectify the assessments. The objections were overruled. The respondent-ITO issued fresh demand notices for payment of interest of Rs. 7,790 and Rs. 6,422 for the years 1975-76 and 1976-77, u/s 220(2) of the I.T. Act. Mr. C.M. Devan, advocate for the official liquidator, contended that the above proceedings for levy of interest u/s 220(2) of the I.T. Act are unsustainable. Previous sanction of this court, enjoined by Section 446 of the Companies Act, was not obtained. The banking company is being wound up. There should have been sanction of this court before any order levying interest is passed or steps taken to levy interest. For claiming interest, the requirements of Section 446(2) of the Companies Act have not been followed. That makes the demand unenforceable against the banking company in liquidation. In these circumstances, the official liquidator has prayed for cancellation of the demand notices dated November 26, 1981, levying interest of Rs. 6,422 and Rs. 7,790. The application is to cancel the demand notices and to direct the respondent to obtain Sanction of this court u/s 446(2) of the Companies Act.

I heard counsel for the official liquidator, Mr. C.M. Devan, and also Mr. N.R.K. Nair, counsel for the ITO. The Revenue has not filed any objections in the matter. Counsel for the Revenue was not able to substantiate as to how the orders levying interest can be sustained in the light of the peremptory statutory provision contained in Section 446(2) of the Companies Act. I hold that the levy of interest by the respondent-ITO, without obtaining the sanction of this court u/s 446(2) of the Companies Act, is illegal and unenforceable as against the official liquidator. I hereby declare so.

The application is allowed. No costs.