M/S San Finance Corporation v. Income Tax Officer And Others

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH, NAGPUR Writ Petition No.5710/2013 M/s San Finance Corporation Vs. Income Tax Officer and others. ------------------------------------------------------------------------------------ Notes, Office Memoranda ofCoram, appearances, Court's orders Court's or Judge'sor directions and Registrar's orders. Orders. Mr. S.N. Bhattad, Advocate for petitioner. Mr. Anand Parchure, Adv. for respondent no.1. Mr. Bansod, Advocate for respondent no.2.Mr. Bhutada, Advocate for respondent no.3. CORAM : B.P. DHARMADHIKARI & Z.A. HAQ, JJ DATE : FEBRUARY 28, 2014. The submission of petitioner is that the petitioner is not Garnishee at all and it has to recover loan amount extended to respondent no.3 assessee. In this situation, action under Section 226(3) read with Section 222 of Income Tax Act against it is uncalled for. Advocate Bhattad submits that no notice as contemplated by Section 226(3) in relation to disputed demand was served upon petitioner. He points out that after receipt of communication demanding amount of Rs.23,79,450/- on 25.6.2013, the petitioner has raised an objection and that objection is still not decided. He points out that amount in bank account to the extent of Rs. 33,96,316/- is already attached by respondent no.1 towards their claim against respondent no.3. Advocate Bansod for respondent no.2 submits that bank accordingly has noted attachment to the extent of Rs. 33,96,316/- on account of petitioner. Advocate Bhutada for respondent no.3 states that Assessing Officer has finalized assessment and against that order respondent no.3 has filed further appeal. He denies respondent no.3 is keeping himself away from assessment proceedings. Facts show that, according to the petitioner, they have advanced some loan to respondent no.3. Accounts of petitioner accordingly show that advance as loan given to respondent no.3. The department is attempting recovery of income tax from respondent no.3. In this situation, it is obvious that without serving notice under Section 226(3) (i), further steps to attach petitioner's bank account could not have been taken. Prima facie, it appears that on 31.05.2013, a notice under Section 226(3) of Income Tax Act has been issued to petitioner for sum of Rs.23,79,450/- plus interest. The notice also mentions that amount is to be recovered from respondent no.3. This is followed by communication dated 25.06.2013 addressed to the petitioner where in subject, very same amount and a communication dated 27.5.2013 has been mentioned. However, in the body of notice amount claimed is stated to be out of total amount of Rs. 67,24,505/- lying to the credit of respondent no.3 allegedly with the petitioner. Petitioner has then raised objection on 26.07.2013. In this situation, question is whether the petitioner can be said to be holding any amount on account of respondent no.3? As the objection of the petitioner is still not decided, we direct the petitioner and respondent no.3 to appear before respondent no.1 on 6[th] March, 2014. The Competent Authority shall thereafter attempt to decide the objection raised by the petitioner in accordance with law i.e. under Section 226(3) (vi) within further period of three weeks. The attachment to the extent of Rs. 33,96,316/-shall continue till respondent no.1/Competent Authority takes suitable decision on the objection of the petitioner. If the decision is adverse, petitioner shall be free to challenge it within further period of one week before the Competent Authority. Till then, additional burden casts upon petitioner would not be given effect to and attachment to the extent of Rs. 33,96,316/- shall continue. Writ Petition is thus partly allowed and disposed of. No costs. JUDGE JUDGE Ambulkar