2018 (10) TMI 1402 - HC - Income Tax

Recovery proceedings - attachment orders - garnishee order on the bank - use of petitioner s account for causing the recovery of the tax dues of DPS Commodities - Held that - The situation as it stood on that date was that the petitioner had a balance in excess of ₹ 1 crore in the said account; that the department had already issued a garnishee order on the bank asking the bank to pay to the department any sum to the ceiling of ₹ 2 crores which the petitioner owed to DPS Commodities. If therefore, the bank had carried out such instructions, sum of ₹ 75 lacs had to be paid over from such account to the department which was a sum which the petitioner still owed to DPS Commodities when the impugned communication was issued by the department to the bank. By combination of bank not carrying out such instructions forthwith, the petitioner repaying sum of ₹ 75 lacs after such order was passed utilising some other bank account, this Court thereafter passing interim order dated 25.9.2018 allowing the petitioner to operate the bank account lifting the rigors of attachment and the petitioner making false declaration on oath stating that on 22.9.2018, the petitioner owed no sum to DPS Commodities, the situation has come about where such sum of ₹ 75 lacs which the department could have accessed from the petitioner s balance to recover part of the tax dues of DPS Commodities, was thwarted. If such amount had been paid by the petitioner to the incometax department, its dues of DPS Commodities to that extent would have been squared up. In any case, the petitioner cannot take a stand that he utilised another bank account which was unattached by the department. The stand flies on the face of the record particularly when the petitioner was fully aware about order of attachment and had made a specific wrong declaration on oath stating that he owed no money to DPS Commodities. The petitioner however submitted that this would amount to double payment of ₹ 75 lacs by the petitioner to DPS Commodities. This would be for the petitioner to sought out with the said entity. Under the circumstances, respondent no.2 bank shall release sum of ₹ 75 lacs in favour of respondent no.1 Tax Recovery Officer towards the dues of DPS Commodities and its proprietor Mahesh Gandhi. For the rest obviously, the department cannot chase the petitioner. Subject to payment of said sum, attachment order would be lifted.

Summary

Issues:
Challenge to notice issued by Tax Recovery Officer under section 226(3) of the Income Tax Act.
Dispute regarding the amount due from the petitioner to a creditor for income tax dues.
Validity of the attachment order on the petitioner's bank account.
False declaration made by the petitioner regarding the amount owed to the creditor.
Resolution of the matter and lifting of the attachment order.

Analysis:

1. The petitioner challenged a notice issued by the Tax Recovery Officer under section 226(3) of the Income Tax Act, claiming that they were not served with the notice initially and only became aware of it when one of their cheques was returned due to the attachment of their bank account. The petitioner denied owing any money to the creditor mentioned in the notice, DPS Commodities.

2. The High Court, in an interim order, noted the petitioner's contentions and grievances, stating that the petitioner had no substantial connection with DPS Commodities beyond normal business relations. The attachment order on the petitioner's bank account was stayed temporarily.

3. The department contended that the petitioner had borrowed and repaid a total of ?2 crores from DPS Commodities, with the last installment of ?75 lakhs being repaid after the attachment order. The High Court expressed displeasure at the petitioner's false declaration in an affidavit that no money was owed to DPS Commodities when in fact ?75 lakhs was due and was only repaid after the order.

4. Despite the petitioner's repayment from another unattached account, the High Court emphasized that the petitioner was fully aware of the attachment order and the amount owed. The Court highlighted the petitioner's false declaration and the fact that the department could not recover the amount due to the repayment from a different account.

5. The High Court ordered the petitioner to pay the outstanding amount of ?75 lakhs to the Tax Recovery Officer towards the dues of DPS Commodities. The attachment order was to be lifted upon payment of this sum, and the department was barred from pursuing the petitioner for any further dues. The petition was disposed of, resolving the matter conclusively.