2014 (7) TMI 646 - HC - Income Tax

Notice u/s 226(3) of the Act Attachment of Bank account - The assessee has failed to pay his income tax dues for AY 1993-94 to1997-98 Held that - In terms of Section-226(3)(vii) of the Act, it is open to the AO or Tax Recovery Officer to revoke the notice issued u/s 226(3) of the Act - no fault can be found with the withdrawal of notice to Reserve Bank of India - the Income Tax Department has not withdrawn the notice dated 22 August 2006 issued u/s 226(3) of the Act on Bank of Baroda seeking to attach the amount belonging to the assessee lying with Bank of Baroda - Thus, the attachment of the account continues - This cannot be done by filing another petition but application for variation of the order granted in Writ Petition has to be done in proceeding in that petition, if the grounds for variation at all exist - prima facie, it appears that all facts which are being urged would have been considered when the order dated 6 Feb. 2008 was passed as all the facts now urged were in existence even on 6 Feb. 2008 when the order was passed Decided against Assessee.

Issues:
1. Petitioner's request for directions to credit the account with a specific amount and to avoid interest and penalty.
2. Background of arrears of tax and penalty from 1993-94 to 1997-98.
3. Actions taken by Income Tax Department regarding Bank of Baroda's account and attachment.
4. Petitioner's argument regarding the amount deposited with Bank of Baroda and subsequent events.
5. Court's analysis of the petitioner's failure to pay income tax dues and the withdrawal of the notice to Reserve Bank of India.
6. Decision of the Court to dismiss the petition.

Issue 1 - Petitioner's Request for Directions:
The petitioner sought directions for the Commissioner of Income Tax and Tax Recovery Officer to credit an amount of Rs. 3.94 crores to their account, part of alleged arrears of tax, and to avoid charging interest and imposing penalties from a specific date. The petitioner argued that if the amount with Bank of Baroda had been handed over to the Income Tax Department, interest and penal proceedings would have ceased.

Issue 2 - Arrears of Tax and Penalty:
The petitioner had outstanding tax and penalty payments from 1993-94 to 1997-98 amounting to over Rs. 7.00 crores, including interest by August 20, 2007. The Income Tax Department took actions due to the petitioner's failure to fulfill tax obligations, including notices to Bank of Baroda for remittance of the petitioner's funds.

Issue 3 - Actions Regarding Bank of Baroda:
The Income Tax Department issued notices to Bank of Baroda under Section 226(3) of the Income Tax Act, leading to an attachment of Bank of Baroda's account with the Reserve Bank of India. Subsequently, the attachment was withdrawn based on Bank of Baroda's assurance to pay the dues.

Issue 4 - Petitioner's Argument:
The petitioner contended that Bank of Baroda did not honor the Income Tax Department's notice, resulting in the attachment of Bank of Baroda's account. The petitioner claimed that the Income Tax Department negligently allowed withdrawal of the attachment and permitted Bank of Baroda to file a writ petition, causing prejudice to the petitioner.

Issue 5 - Court's Analysis:
The Court noted the petitioner's failure to pay income tax dues and addressed the withdrawal of the notice to Reserve Bank of India. While finding no fault in the withdrawal, the Court highlighted that the notice to Bank of Baroda under Section 226(3) remained in effect, keeping the account attachment in place. The Court emphasized that seeking to vary a previous court order required specific legal procedures.

Issue 6 - Court's Decision:
The Court dismissed the petition without any costs, stating that the petitioner's arguments had likely been considered during a previous court order in a related writ petition. The Court clarified that seeking variation of a court order needed to be done within the existing legal proceedings.

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