Roshan Commercial Traders (P) Ltd. vs Tax Recovery Officer and Others

K. Raviraja Pandian, J.—The prayer in the writ petition is for the issuance of a writ of cartiorari to call for the records of the case on the file of the first respondent in respect of the notice issued u/s 226(3) of the IT Act, dt. 8th March, 2007 received by the petitioner on the same day evening and quash the same.

The relief has been sought for in the following premise that the petitioner is a registered company carrying on business of trading of Ayurvedic medicines and healthcare products as a wholesale distributor and is maintaining regular accounts. The petitioner has been regularly assessed to Income Tax and sales-tax.

The petitioner purchased goods from a company by name M/s DXN Herbal Manufacturing (India) (P) Ltd. It appears that M/s DXN Herbal Manufacturing (India) (P) Ltd. is having some dispute in respect of Income Tax payable by them and the respondent authorities are taking action to recover the tax due from M/s DXN Herbal Manufacturing (India) (P) Ltd. which is in a sum of Rs. 3,88,85,000. In the course of recovery of the amount from the assessee, M/s DXN Herbal Manufacturing (India) (P) Ltd., the first respondent issued notice u/s 226(3) of the IT Act, a garnishee notice to the petitioner requiring the petitioner to pay the amount if any due from the petitioner to the defaulting assessee, M/s DXN Herbal Manufacturing (India) (P) Ltd., to the respondent Department towards tax due from the abovesaid assessee. A copy of the notice has also been marked to the petitioner''s bankers. Now, in this writ petition, issuance of notice u/s 226(3) of the IT Act has been put in issue on the premise that in view of the notice issued to the bankers of the petitioner, the bankers have paid a sum of Rs. 45,000 towards the tax due from M/s DXN Herbal Manufacturing (India) (P) Ltd. which is permissible (impermissible) in law and the respondents have acted in a whimsical manner, not being authorised by law and on that basis, the present writ petition has been filed.

Heard the learned Counsel for the petitioner as well as learned Counsel appearing for the respondent Department and perused the materials available on record, particularly notice issued u/s 226(3) of the IT Act and the subsequent letter of the petitioner''s bankers informing payment of tax in a sum of Rs. 3,88,85,000 to the respondents as requested by them in their notice which is the cause of action for the petitioner to file a writ petition.

Section 226(3) of the IT Act reads as Mows:

(3)(i) The AO or TRO may at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the AO or TRO either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount.

(ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal.

(iii) A copy of the notice shall be forwarded to the assessee at his last address known to the AO or TRO, and in the case of a joint account, to all the joint holders at their last addresses known to the AO or TRO.

(iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary.

(v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.

(vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the AO or TRO to the extent of his own liability to the assessee on the date of the notice or to the extent of the assessee''s liability for any sum due under this Act, whichever is less.

(vii) The AO or TRO may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment in pursuance of such notice.

(viii) The AO or TRO shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section and the person so paying shall be fully discharged from his liability to the assessee to the extent of the amount so paid.

(ix) Any person discharging any liability to the assessee after receipt of a notice under this sub-section shall be personally liable to the AO or TRO to the extent of his own liability to the assessee so discharged or to the extent of the assessee''s liability for any sum due under this Act, whichever is less.

(x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the AO or TRO, he shall be deemed to be as assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear of tax due from him, in the manner provided in Sections 222 to 225 and the notice shall have the same effect as an attachment of a debt by the TRO in exercise of his powers u/s 222.

Hence, notice issued which is impugned in this writ petition to the writ petitioner is strictly in accordance with law. Hence, the issuance of notice u/s 226(3) of IT Act cannot be found fault with. If the petitioner is having any grievance in making the payment, without his knowledge, it is for him to agitate the matter separately against the bankers. As the notice has been issued strictly in accordance with the statutory provisions and in the absence of challenging the impugned order, I do not find any illegality or irregularity in the issuance of notice.

With the above observation, the writ petition is dismissed. No costs. Consequently, MP Nos. 1 and 2 are also dismissed.