The term "Assessee in default" as such is not expounded in the definition and interpretation clause of the Act. Ordinarily and normally, in conformity with section 220(1), the amount specified in the notice of demand issued under section 156 shall be paid by the assessee within 30 days of the date of the service of the notice of demand, subject to the proviso to sub-sections (1) and (3) of section 220 respectively, the former empowering the AO to truncate the stipulated period of 30 days under certain circumstances mentioned therein and the latter authorising the AO to extend the time for payment or allow payment in instalments. As per sub-section (4) of section 220, if the amount of tax is not paid within the time limit under sub-section (1) or time extended under sub-section (3), the assessee shall be deemed to be in default. In the result, under these kind of cases, an assessee cannot be labelled and characterised as "defaulter" and consequently, no forcible recovery proceedings can be effected or attributed unless and until he is served with the mandatory and indispensable notice of demand ordained in section 156 of the Act, notwithstanding that the assessment order from which the demand emanates has been passed in accordance with law. However, on a further survey and conspectus of the various sections of the Act, it is patent and glaring that the words "Assessee in Default" is inter alia engrafted in sections 140A(3), 191, 201, 220(5) and 226(3)(x) for the multiple defaults committed by the assessee under the respective sections. For example, section 140A(3) prescribes that if any assessee fails to pay the whole or any part of the self-assessment tax or interest or both in accordance with the provisions of section 140A(1), he shall be deemed to be an "Assessee in Default" in respect of the tax or interest or both remaining unpaid and all the provisions of the Act shall apply accordingly. To illustrate further, section 201 of the Act inter alia predicates that if the person mentioned in section 200 does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he shall be deemed to be an "Assessee in Default" in respect of the tax. Under the aforementioned sort of cases, the assessee is deemed to be in default immediately on the happening or occurrence of the default contemplated in the respective sections and it is not indispensable to issue and serve a notice of demand as such.

It is significant and crucial to note that if the order passed under section 179 assumes finality, the directors of a company can be treated as "Assessees in Default" under section 220(4) without any necessity to issue fresh notice of demand under section 156 inasmuch as they would step into the shoes of the defaulter company : J. Basant Singh vs. TRO (1998) 233 ITR 508, 514, 515 (P & H) affirming Hardip Singh vs. ITO (1987) 166 ITR 759 (P & H).

What are the powers, duties and jurisdiction of the Tax Recovery Officer ("TRO")?

The powers, duties and jurisdiction of the TRO are enshrined in sections 222, 223, 224 and 225 of the Act. When an assessee is in default or deemed to be in default in making a payment of tax, the TRO may draw up a certificate in Form No. 57 specifying the amount of arrears due from the assessee and shall proceed to recover by one or more modes of recovery mentioned below in conformity with the rules incorporated in Second Schedule to the Act:

attachment and sale of the assessee’s moveable property;

attachment and sale of the assessee’s immoveable property;

arrest of the assessee and his detention in prison; and

appointing a receiver for the management of the assessee’s moveable and immoveable properties.

As regards the jurisdiction of the TRO, it has been elaborately and extensively adverted to in section 223 and no worthwhile purpose would be served by reproducing the same verbatim.

Whether an appeal can be filed against the Certificate/Notice issued by the TRO? If yes, what is the time limit?

There is no provision in the Act for filing an appeal against the issue of certificate and the consequent Notice under Rule 2 of Second Schedule to the Act. The only remedy available to the assessee is to challenge the legality, validity and propriety of the Certificate and the Notice under Rule 2 by way of a writ petition to be filed before the jurisdictional High Court under Article 226 of the Constitution.

Is it mandatory to issue certificate under section 222(1) of the Act in Form No. 57 before initiating recovery proceedings?

Ans. The question of assumption of jurisdiction by quasi-judicial authority always goes to the very root of the matter and is, therefore, very primary and rudimentary and consequently, the conditions precedent which confer such authority ought to be strictly and peremptorily adhered to. The issuance of Certificate is an essential and cardinal prescription to clothe the TRO with the power to recover tax from the assessee. In the context of issue of tax recovery certificate by the AO to the TRO up to 31-3-1989 when this requirement was deleted, it has been consistently held by the judiciary that the issuance of such Certificate is the sine qua non and a mandatory requirement for resorting to recovery proceedings under section 222: Behari Lal Ram Charan Kothi vs. ITO (1972) 84 ITR 113 (All.): Affirmed in 131 ITR 129 (SC); Behari Lal Ram Charan Kothi vs. ITO (1973) 87 ITR 198 (All.); Union of India vs. Ameena Bi (1978) 112 ITR 863 (Mad). Notwithstanding the above, minor defects or errors in Certificate or Notice under Rule 2 merely constitute an irregularity and hence curative in nature, not fatal to arrogation of the power by the AO under section 222.

Can TRO issue Notice for recovery of tax on the basis of protective assessment?

While protective assessment is permissible, recovery in pursuance of such precautionary assessment is unsustainable and untenable: Sunil Kumar vs. CIT (1983) 139 ITR 880 (Bom) following the ratio propounded in Lalji Haridas vs. ITO (1961) 43 ITR 387 (SC); Jagannath Hanumanbux vs. ITO (1957) 31 ITR 603 (Cal).

Does the AO issue the order under section 210(3)/(4) in all cases as a matter of routine or in a few cases in exceptional circumstances only? If only in exceptional circumstances, please specify a few such circumstances?

The written order contemplated under section 210(3) can be framed only in case of a person who has already been assessed to tax in respect of the total income of any previous year, provided the AO is of the opinion that such person is liable to any advance tax for the previous year. Apart from non legal reasons, there is no warrant in law to generally enunciate under what facts and circumstances the AO may invoke the power under section 210(3) de hors the ken of section 210(3).

If the AO invokes the provisions of section 210(3)/(4) and issues Form No. 28 under Rule 38 demanding advance tax on higher income and the assessee fails to pay advance tax, can the AO recover the same treating the assessee as "Assessee in Default" under section 218 of the Act?

Yes, provided the other qualifications ordained in section 218 are fulfilled.

In what circumstances the assessee can object to the demand under section 156 read with section 210(3)/ (4) by filing Form No. 28A under section 210(5)?

If in the estimation of the assessee, the advance tax payable by him on his current income is less than what is demanded by the AO in his order (amended or otherwise) under section 210(3)/(4), the assessee can object to the demand of the AO by filing estimate in Form No. 28A. Nevertheless, the advance tax liability as computed by the assessee would have to be discharged by him on due dates prescribed in section 211.

Where Application for Stay is pending before the Commissioner of Income Tax, can the AO levy penalty for non-payment of tax?

If an Application for Stay is pending disposal under section 220(6), the AO is precluded from exercising his discretion under section 221 of the Act for exacting the assessee with penalty for non-payment of tax:
Om Prakash Agarwal vs. ITO (1967) 66 ITR 175 (All.) following Esthuri Aswathaiah vs. ITO (1959) 37 ITR 518 (Mys).

Where the payer has deducted tax at source but did not deposit the same with the Government, can recovery proceedings be initiated against the payee?

The answer to this poser is completely and totally covered by section 205 of the Act. Section 205 postulates that where tax is deducted at source by the payer, the payee-assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. This construction has been ratified by the Gauhati High Court in CIT vs. Om Prakash Gattani (2000) 242 ITR 638, 644. It has been held in the aforestated judicial ruling that under no circumstances an assessee can be saddled with dual liability in respect of the same income. An assessee cannot be called upon to make payment of the tax to the extent tax has been deducted at source because once tax is deducted at source, it is no more the responsibility or obligation of the assessee to pay any tax amount. Simultaneously, a mere deduction of tax at source would not tantamount to total discharge of the liability, unless and until the amount deducted is deposited in the coffers of the Central Government and consequently, no credit for the tax deducted can be given unless evidence of actual payment by the payer is advanced. In that view of the matter, the net effect of the aforesaid deliberation is that the AO cannot proceed against the assessee for realisation of the tax already deducted but not paid by the deductor, and concurrently, the AO would be vindicated in not giving credit to the assessee of the tax deducted but not paid by the payer with reference to the same income.

When exactly the role of AO ceases and that of TRO commences? Or, are they overlapping to some extent?

Once a certificate conceived in section 222(1) is issued, the TRO’s jurisdiction commences and the AO’s operative realm appertaining to recovery ceases. Section 226(1) read with section 226(1A) buttresses such an interpretation.

An Assessee transfers his property to third party before receipt of the certificate under section 222(1) and third party has already paid full amount for the same and registered in his name. Can the TRO declare this transaction as void and attach the same?

No, inasmuch as Rule 16 to the Second Schedule, which declares private alienation of property after the property is attached to be void under certain circumstances, will be triggered off and come into play only when the Certificate and consequent Notice under Rule 2 is issued. Be that as it may, in the interregnum, section 281 will protect the interest of the revenue inasmuch as before the service of notice under Rule 2, if any assessee creates a charge, etc. on any of its assets in favour of any person, such charge, etc. shall be void against any claim in respect of any tax or any other sum payable by the assessee.

Can TRO initiate recovery of tax when application under section 154 for rectification of errors is pending before AO?

In Sultan Leather Finishes Pvt. Ltd. vs. DCIT (1991) 191 ITR 179 (All.), it has been held that when a Rectification Application lodged under section 154 is pending final disposal, the TRO cannot proceed with the recovery proceedings.

Can TRO charge interest under section 201(1A) and under section 220(2) simultaneously?

No, because both the sections by their very inherent nature and character operate in independent, separate and distinct fields. The foundation inter alia of the interest under section 220(2) is Notice of demand served on the assessee under section 156 of the Act, whereas the pedestal for section 201(A) is a default or failure embedded in section 201 which is bereft of Notice of demand. Moreover, it is a well settled doctrine of interpretation that the more special and specific provision overrides the general class. Section 220 is a general category regarding levy of interest for non-payment of tax, whereas section 201 is en exact and precise classification dealing with defaults concerning deduction of tax at source and consequently, overwhelms section 220. In any event, an assessee cannot be subjected to double jeopardy, unless clearly intended by the legislature. If an order under section 201 is framed and Notice of demand is served to the extent of the sum that ought to be deducted, section 201(A) will cease to run and section 220(2) will be triggered off.

Is successor liable for tax payable by predecessor?

Where a person carrying on any business is succeeded (predecessor) by any other person (successor) who continues to carry on that business, the tax can be recovered from the successor under two circumstances:

(a)

the predecessor is assessed to tax on the income up to the date of succession and the tax thereto cannot be recovered from the predecessor; and

(b)

the predecessor cannot be found, the income of the previous year(s) as mandated in sub-section 3 will be assessed in the hands of the successor and the tax in respect of such assessment shall be recovered from the successor accordingly.

Whether Settlement Commission has any power to waive interest under section 220(2)?

Ans. In CIT vs. Damani Bros. (2003) 259 ITR 475, 485, the Apex Court has resolved the burning controversy in favour of the assessee holding that the Settlement Commission has the power to waive interest under section 220(2) having regard to the hedged conditions contemplated in section 220(2A).

Can a Notice be issued to a tax payer for recovery of tax arrears of the partnership firm in which he is a partner?

Section 188A engrafts that the partner of a firm shall be jointly and severally liable along with the firm for the amount of tax, penalty or any other sum payable by the firm for the assessment year to which such previous year is relevant. In the result, the partner can be issued a Notice for recovery of tax arrears of the partnership firm.

Can the tax authorities recover the income tax dues of a deceased tax-payer from the partnership firm where such deceased was a partner?

With effect from Assessment Year 1993-94, the share of a partner in the total income of the firm is not exigible to tax on account of the exemption granted vide section 10(2A) of the Act. Consequently, Assessment Year 1993-94 onwards, this question is academic insofar as it is concerned with the partner’s share in the firm’s total income. However, for the residuary other income (excluding the deceased partner’s share income from firm), the legal representatives of the deceased partner shall be liable to liquidate the tax arrears of the deceased, but their burden will be limited to the extent the estate is capable of meeting the liability.

Can TRO recover tax of one partner of the firm from any other partner(s) of the same firm? If not, if refund of one partner is adjusted against demand of another partner of the firm, what remedy is available to partner to get his refund from the Department?

In connection with the share income arising to the person by virtue of his being a partner in the firm, the reply adduced to the immediately preceding Question No. 18 will hold good. The remainder income sans the share income of the partner from the firm on which income tax is payable, the other partner(s) will in law not be susceptible to discharge the outstanding tax obligation relating thereto, unless he is a legal representative/executor.

The refund due to any person can be set off against any sum payable by that person under the Act in conformity with the law laid down in section 245. The cumulative conditions precedent necessary to assume jurisdiction under section 245 are stated below:–

(i)

(ii)

the amount of such refund due can be set off against another sum which is payable under the Act by that very same person;

(iii)

the refundable sum can be set off only after intimation in writing to the affected person of such proposed action of adjustment and a reasonable opportunity must be afforded to that person to displace the proposed set off.

In the instant case at the entry stage itself the second ingredient supra would not be satisfied inasmuch as the squaring up relates to two separate distinct and independent assessees when section 245 primarily interdicts that the set off of the impugned amount must appertain to the same assessee. At the outset, the aggrieved partner may lodge his objection with the AO and the concerned CIT (Adm) and if no response is forthcoming as is usually and normally the case, a writ petition may straightaway be instituted in the jurisdictional High Court and the latter may interfere if the purported adjustment is patently and glaringly lacking in competency.