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Issues:
Prohibitory order directing the petitioner not to make payment to retired partners and attaching bank accounts. Dispute over the payment of income tax dues by a retired partner. Jurisdiction of Tax Recovery Officer (TRO) to realize tax arrears from the petitioner-firm. Analysis: The judgment deals with a case where the petitioner was directed not to make payments to a retired partner and had their bank accounts attached. The retired partner, D. P. Agarwal, had substantial income tax dues from previous years. The petitioner objected to the prohibitory order and attachment, claiming that they had adjusted the partner's share of profits against his liabilities to the firm. The Tax Recovery Officer (TRO) directed the petitioner to pay the outstanding tax dues and rejected their objection under the Income Tax Act, 1961. The petitioner argued that the TRO had no authority to recover the tax arrears from the firm. However, the revenue contended that the TRO was empowered to investigate and determine the tax dues under the relevant provisions of the Income Tax Act. The Income Tax Officer had also initiated proceedings to recover the tax dues from the firm, making the TRO's investigation redundant. Consequently, the court quashed the TRO's orders except for directing the petitioner to pay the rent owed to the retired partner's wife and instructed the TRO to issue a proper receipt for the payment. In conclusion, the court made the rule absolute, allowing the petitioner to withdraw the deposited amount with the court. The operation of the order was stayed for four weeks, but the petitioner could still withdraw the deposited sum. The judgment clarifies the jurisdictional issues regarding the recovery of tax arrears from a firm and emphasizes the proper legal procedures to be followed in such cases.
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