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TMI Blog2013 (12) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Civil misc. Writ petition (Tax) No. 1767 of 2011 - - - Dated:- 2-4-2012 - Hon'ble Ashok Bhushan And Hon'ble Prakash Krishna,JJ. ORDER Heard learned counsel for the petitioner, Sri R.K. Upadhyay appearing for respondents no. 2 to 4 and Sri Siddharth Khare appearing for respondent no. 5. Counter and rejoinder affidavits have been exchanged between the parties and with the consent of the parties the petition is being disposed of finally. By this writ petition the petitioner has prayed for quashing the notice dated 15.2.2011 and subsequent notices and summons as well as attachment order dated 25.4.2011. The brief facts, which emerged from the pleadings of the parties are; that a notice dated 15.2.2011 was issued by the Tax Recovery Officer to the petitioner stating that a sum of Rs. 5,50,000/- is due from Ms. Vejenti, Kanpur, on account of income tax/penalty/interest/fine and the petitioner was required to make payment of the aforesaid amount under Section 226 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings pursuant to the notice dated 15.02.2011 shall remain stayed." In the counter affidavit, filed by respondents no. 1 to 4, it has been stated that one Smt. Vaijanti Gupta, the assessee, is in default of Rs. 5,50,000/- to the Department. The recovery certificate pertaining to assessment year 2001-02 was transferred to the Tax Recovery Officer-3 by letter dated 30.9.2011. However, in the counter affidavit, no documents have been brought on record by the respondents to indicate that under which proceeding and by which order the amount was due against Smt. Vaijanti Gupta. However, for purposes of this case, we proceed on the assumption that an amount of Rs. 5,50,000/- is due against Smt. Vaijanti Gupta. The respondents have further relied on a letter dated 18.12.2008 of Smt. Vaijanti Gupta, which is addressed to the Tax Recovery Officer-4, filed as Annexure 'CA-3' at page 21 of the counter affidavit, informing the Tax Recovery Officer that she has given Rs. 5,50,000/- to the petitioner for purchase of a truck. The petitioner, however, neither purchased the truck nor has returned the amount to her (Smt. Vaijanti Gupta). She, therefore, requested that the amount of Rs. 5,50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the petitioner on 21-5-2008 from his client residing at Raichur, State of Karnataka which is evident from the Code number of the bank given in the said entry. A photostat copy of the aforesaid statement of account of the petitioner showing said entry is being filed herewith and marked as Annexure No. RA-2 to this affidavit." The petitioner's case is that he never received any amount of Rs. 5,50,000/-, as alleged and the alleged Annexure 'CA-3' is nothing but a forged document. On the facts, which have come on record, the issue to be considered by this Court is as to whether the Tax Recovery Officer was justified in the facts of the present case to proceed under Section 226(3) of the Act for effecting recovery against the petitioner. Section 226(3) of the Act, which is relevant, is as follows : "(3)(i) The Assessing Officer or Tax Recovery Officer may, at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Assessing Officer or Tax Recovery Officer either forthwith upon the money becoming due o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned, which has to be recovered from the petitioner. It was mentioned that the amount of Rs. 5,50,000/- was deposited in the bank in the amount of Modi Enterprises. Reference of advance receipt dated 21.5.2008, issued by the proprietor of Modi Enterprises, has also been attached to the letter dated 18.12.2008. The petitioner, who was unaware of the nature of allegations against him, after coming to know of the allegations against him by Smt. Vaijanti Gupta, has in the writ petition denied taking of any amount from Smt. Vaijanti Gupta. The advance receipt dated 21.5.2008 has also been termed as forged document. The averments of the petitioner in paragraph 11 of the rejoinder affidavit has already been noted above. Thus, the petitioner's categorical case is that he does not owe any amount to Smt. Vaijanti Gupta nor Smt. Vaijanti Gupta paid any amount to the petitioner at any point of time. The question to be considered in the present case is as to whether, in the facts of the present case, the Tax Recovery Officer had jurisdiction to issue notice to the petitioner. Section 226(3) of the Act, as noticed above, empowers the Tax Recovery Officer to require any person from whom mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avit, it is, at best, be termed as a dispute between the petitioner and Smt. Vaijanti Gupta. 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. In [1960] 39 ITR 654 (P. Rajeswaramma v. Income-Tax Officer) the Andhra Pradesh High Court had occasion to consider the similar provision of the Income Tax Act, 1922. The Andhra Pradesh High Court has clearly laid down that 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 following was laid down by the Andhra Pradesh High Court : "Mr. Kondaiah, for the Department, argues that the whole object and purpose of enacting sub-section (5A) would be nullified if it is to be held that a mere objection by the person upon whom a notice is served entitled him to plead immunity from coercive proceedings which the Income-tax Officer is expressly authoriz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the existence and quantum of such liability - matters which are normally within the purview of civil courts." The interpretation which was put by the Andhra Pradesh High Court on the similar provision under the Income Tax Act, 1922 are fully applicable to Section 226 of the Act. 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. Subsistence of the relationship of a debtor or creditor is sign qua none for the exercise of power under Section 226 of the Section. Section 226(3)(vi) itself contain a provision to the effect that "where a person to whom notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then nothing contained in this sub-section shall be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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