I-T Defaulters Need Not Apprehend Immediate Arrest On Issuance Of Show Cause Notice: Karnataka HC [Read Order]

‘When a defaulter appears before the Tax Recovery Officer, he shall be given an opportunity of hearing and only thereafter, an order could be passed for detention of the defaulter in the civil prison.’

The Karnataka High Court has observed that there need not be any apprehension of immediate arrest or detention in civil prison on issuance of a show cause notice by the Income Tax authorities.

Justice John Michael Cunha was considering an anticipatory bail petition wherein issue was whether a person issued with a notice under Rule 73 of the Second Schedule of the Income Tax Act 1961 is entitled to invoke Section 438 of CrPC.

The court observed that the proceedings initiated against the petitioner for recovery of the tax dues with the issuance of show cause notice as contemplated in Rule 73 of the Second Schedule which specifically provides that no order for the arrest and detention in a civil prison of a defaulter could be made unless 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 as to why he should not be committed to civil prison.

The court also said the notice under Rule 73 is issued for the recovery of the tax dues determined under Section 222 of the Income Tax Act and it is a recovery proceeding and that the petitioner is not sought to be prosecuted for the alleged offence under Section 276-C of the Act.

“The proceedings initiated against the petitioner are akin to the proceedings for execution of decree under Order XXI Rule 37 of CPC. Rule 4 of the Second Schedule of the Income Tax Act provides for the various modes of recovery. As per the said provision, if the amount mentioned in the notice is not paid within the time specified therein or within such further time as the Tax Recovery Officer may grant in his discretion, the Tax Recovery Officer shall proceed to realize the amount by one or more of the following modes:-(a) by attachment and sale of the defaulter's movable property;(b) by attachment and sale of the defaulter's immovable property;(c) by arrest of the defaulter and his detention in prison;(d) by appointing a receiver for the management of the defaulter's movable and immovable properties,” the court added.

“When a defaulter appears before the Tax Recovery Officer, he shall be given an opportunity of hearing and only thereafter, an order could be passed for detention of the defaulter in the civil prison. Therefore, the apprehension of the petitioner that on issuance of a show cause notice under Rule 73 of the Second Schedule of the Income Tax Act, he has a reason to believe that he would be arrested and detained in prison is wholly misconceived and misplaced,” it said.

Dismissing the plea, the court said as the issuance of notice is under Rule 73 of the Second Schedule of the Income Tax Act, the petitioner is not accused of committing any non-bailable offence and the said notice does not give rise to any apprehension of immediate arrest so as to invoke the jurisdiction of the sessions court or high court under section 438 of CrPC.