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2013 (12) TMI 421 - HC - Income TaxRecovery proceedings without jurisdiction - Held that - The power under Section 226(3) of the Act cannot be invoked for effecting recovery of a claim which is disputed, the letter written by Smt. Vaijanti Gupta to the Department on 18.12.2008 is nothing but making allegations against the petitioner and merely on an allegation made by an assessee, the proceeding under Section 226(3) of the Act cannot be initiated - Following P. Rajeswaramma v. Income-Tax Officer 1960 (1) TMI 30 - ANDHRA PRADESH HIGH COURT - If a person to whom notice is sent denies that any money is due from him then the Income Tax Officer cannot take any further proceeding - The powers under Section 226 of the Act have not been given to the Assessing Officer or Tax Recovery Officer to adjudicate upon private disputes or to issue notices when there are no admission of liability to pay any amount to assessee - Section 226 of the Act is only a mode of recovery and sub-section (3) of Section 226 of the Act contains provision regarding collection from persons who owe money to assessee - The notices issued to the petitioner were wholly without jurisdiction and clearly indicate exercise of unauthorised and illegal power by the Tax Recovery Officer to harass the petitioner - Decided in favour of petitioner.
Issues Involved:
1. Legitimacy of the notice dated 15.2.2011 and subsequent notices, summons, and attachment order dated 25.4.2011. 2. Jurisdiction of the Tax Recovery Officer under Section 226(3) of the Income Tax Act, 1961. 3. Allegations of malafide and harassment by the Tax Recovery Officer. 4. Dispute regarding the alleged debt of Rs. 5,50,000/- from the petitioner to Smt. Vaijanti Gupta. Detailed Analysis: 1. Legitimacy of the Notice and Subsequent Actions: The petitioner sought to quash the notice dated 15.2.2011 and subsequent notices, summons, and the attachment order dated 25.4.2011. The Tax Recovery Officer issued these notices under Section 226(3) of the Income Tax Act, 1961, claiming that Rs. 5,50,000/- was due from the petitioner on behalf of Smt. Vaijanti Gupta. The petitioner objected, stating no knowledge of the reason for the notice and denied any transaction with Smt. Vaijanti Gupta. The court found that the notices lacked detailed justification for the claimed amount and were issued without proper jurisdiction, making them illegitimate. 2. Jurisdiction of the Tax Recovery Officer: The core issue was whether the Tax Recovery Officer had the authority to invoke Section 226(3) of the Act against the petitioner. Section 226(3) empowers the officer to require payment from any person holding money due to the assessee. However, the court noted that the petitioner categorically denied any debt to Smt. Vaijanti Gupta. The court emphasized that the power under Section 226(3) is contingent upon the existence of an admitted liability, which was not present in this case. The court concluded that the Tax Recovery Officer overstepped his jurisdiction by issuing the notices and attachment order. 3. Allegations of Malafide and Harassment: The petitioner alleged harassment by the Tax Recovery Officer, claiming that the officer's actions were baseless and intended to harass. The court observed that the officer's actions, including the issuance of notices without proper basis and jurisdiction, supported the petitioner's allegations. The court found the officer's conduct to be unauthorized and indicative of malafide intent, leading to undue harassment of the petitioner. 4. Dispute Regarding the Alleged Debt: The dispute centered on whether the petitioner owed Rs. 5,50,000/- to Smt. Vaijanti Gupta. The petitioner denied receiving any such amount, and the court noted the absence of any adjudication by a competent authority confirming the petitioner's liability. The court highlighted that the allegations made by Smt. Vaijanti Gupta in her letter were serious and amounted to a private dispute, not within the purview of the Tax Recovery Officer's jurisdiction under Section 226(3). The court underscored that the officer cannot adjudicate private disputes or issue notices based on unverified allegations. Conclusion: The court concluded that the entire proceedings initiated against the petitioner were without jurisdiction and constituted an unauthorized exercise of power by the Tax Recovery Officer. The notices and attachment order were set aside, and the respondents were restrained from proceeding against the petitioner under Section 226 of the Act. The court allowed the writ petition with costs, emphasizing that the respondents could pursue recovery against Smt. Vaijanti Gupta, if any, in accordance with the law.
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