2019 (9) TMI 1237 - HC - Income Tax

Recovery proceedings - attachment (Lien) of bank account - No notice u/s 226(3)(iii) to joint account holder - HELD THAT - Revenue fairly submits that no such notice under Section 226(3)(iii) of the Act has been served on the petitioner - Joint Account Holder of the Savings Bank Account, regarding which notice has been issued to the bankers. In view of the aforesaid, it is discernible that no notice issued under sub-section 3 ii was forwarded to the petitioner which is sine qua non for the recovery of tax as provided under Section 226 of the Act. The mandatory requirement is not complied with by the revenue, in terms of Section 226(3)(iii) of the Act. - Notice quashed.

Summary

Issues:
Challenge to notice dated 12.03.2019 regarding tax liability and lien on joint savings bank account under Section 226(3)(iii) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged a notice dated 12.03.2019 regarding tax liability of a company where her husband was a part-time director. The company was assessed and held liable to pay a substantial amount to the tax authority. The petitioner, claiming to be the wife of the director, highlighted that she was the primary account holder of a joint savings bank account with her husband. The tax authority issued a notice to mark the bank account for lien towards the tax arrears without serving a notice on the petitioner, who was a joint account holder. The petitioner's counsel argued that the mandatory requirement of serving notice on the joint holder was not fulfilled as per Section 226(3)(iii) of the Act, thus seeking to set aside the impugned notice.

The counsel for the revenue admitted that no notice under Section 226(3)(iii) was served on the petitioner, the joint account holder. It was acknowledged that the essential requirement for recovery of tax, as outlined in Section 226 of the Act, was not complied with by the revenue. Consequently, the court found that the notice in question deserved to be quashed as it did not meet the mandatory requirement of serving notice on the joint account holder, as per Section 226(3)(iii) of the Act. The court allowed the writ petition, quashing the notice dated 12.03.2019, and reserved liberty to the tax authority to proceed in accordance with the law for tax recovery.

This judgment emphasizes the importance of adhering to procedural requirements, such as serving notices on all relevant parties, particularly joint account holders, in matters related to tax liabilities and lien on bank accounts. Failure to comply with such statutory provisions can lead to the invalidation of notices and subsequent legal challenges.