1970 (5) TMI 16 - HC - Income Tax

Garnishee Proceedings - recovery of tax - tax recovery certificate - notice is issued to the debtor of defaulter for making payments to the Government - validity of notice

Issues Involved:
1. Validity of the tax recovery certificate dated August 25, 1965.
2. Validity of the warrant of attachment dated September 16, 1965.
3. Validity of the notice dated October 11, 1965, calling upon the appellant to show cause why he should not be arrested.
4. Timeliness and adequacy of the appellant's denial of liability.
5. Jurisdiction and authority of the Income-tax Officer in issuing the recovery certificate.

Issue-wise Detailed Analysis:

1. Validity of the Tax Recovery Certificate Dated August 25, 1965:
The appellant challenged the tax recovery certificate issued by the Income-tax Officer on August 25, 1965, claiming it was issued without jurisdiction and authority of law. The court noted that the notice dated May 24, 1965, did not specify the amount alleged to be due from the appellant to Shri Surinder Singh Kairon nor fixed any time limit for payment. The court held that the tax recovery certificate was issued without jurisdiction and authority of law, rendering it null and void.

2. Validity of the Warrant of Attachment Dated September 16, 1965:
The court found that the warrant of attachment issued on September 16, 1965, was based on the invalid tax recovery certificate. Since the certificate itself was deemed without jurisdiction, the subsequent warrant of attachment was also declared null and void.

3. Validity of the Notice Dated October 11, 1965, Calling Upon the Appellant to Show Cause Why He Should Not Be Arrested:
The notice issued on October 11, 1965, was similarly based on the invalid tax recovery certificate. The court concluded that all proceedings, including the notice calling upon the appellant to show cause for his arrest, were without jurisdiction and hence null and void.

4. Timeliness and Adequacy of the Appellant's Denial of Liability:
The respondents argued that the appellant should have denied his liability on oath upon receiving the notice dated May 24, 1965, and not waited until October 27, 1965. The court distinguished this case from the Allahabad High Court case cited by the respondents, noting that the initial notice did not specify the amount due nor set a time for payment. Consequently, the court held that the appellant's denial of liability on October 27, 1965, was in accordance with clause (vi) of sub-section (3) of section 226 of the Income-tax Act, 1961.

5. Jurisdiction and Authority of the Income-tax Officer in Issuing the Recovery Certificate:
The court emphasized that the Income-tax Officer did not follow the proper procedure under section 226(3) of the Income-tax Act, 1961. The officer failed to issue a specific demand notice with the amount due and a time limit for payment. The court concluded that the recovery certificate was issued without jurisdiction and authority of law, making all subsequent proceedings null and void.

Conclusion:
The court accepted the appeal, allowed the writ petition, and quashed the tax recovery certificate dated August 25, 1965, the warrant of attachment dated September 16, 1965, and the notice dated October 11, 1965. The appellant was entitled to costs for both the writ petition and the appeal, with counsel's fee set at Rs. 250 for each case.

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