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TMI Blog2014 (5) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the debt is not susceptible to being cancelled - The Court differs from the TRO on the limited ground because it would neither be appropriate nor possible for the Court to predict the outcome of any litigation - any number of outcomes could ensue from the litigation through several contractual and other possibilities – the Court reiterates that any potential effect that the litigation may have on the debts in existence, is too distant a contingency to account for, given the need to only decide the existence of an admitted or indisputable liability - the TRO’s own observations, that the consequence of APIIC revoking consent could very well be considered “force majeure”, thus resulting in the EMGF debt continuing to be owed to EHTPL, is consistent with this line of reasoning – Decided against Assessee. - W.P.(C) 2774/2014, C.M. NO. 5741/2014 - - - Dated:- 23-5-2014 - S. Ravindra Bhat And Vibhu Bakhru,JJ. For the Petitioner : Mr. Parag. P. Tripathi, Sr. Advocate with Mr. Satyen Sethi, Mr. Kunal Bahri and Mr. Arta Trana Panda, Advocates. For the Respondents : Mr. Balbir Singh, Sr. Standing Counsel. ORDER Mr. Justice S. Ravindra Bhat 1. The petitioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice to Emaar, Dubai to terminate the collaboration agreement. The move to terminate the agreement with Emaar led to a series of litigation in the Andhra Pradesh High Court at the instance of Emaar, Dubai as well as the Association of Allottees of Properties in the integrated project, and appeal proceedings in respect of some of the matters are pending. Resultantly, registration of the properties in the integrated project has come to a stand-still. APIIC also filed a civil suit against EHTPL and EMGF seeking rendition of accounts and a permanent injunction on the transfer of properties to third parties, in which status quo was ordered on 15-12-2010. In respect of revision proceedings moved at the instance of the petitioner to reject the plaint in the original suit, a further stay was granted on 16-12-2010 by the Andhra Pradesh High Court. Finally, public interest litigation was taken up by the said High Court, in which the CBI was directed to conduct inquiry into allegations of irregularity in the development agreement of July 2007. 4. On 13-06-2013 and 01-07-2013, the TRO, Hyderabad issued notice under Section 226(3) of the Act requiring the Petitioner, EMGF to pay the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., the TRO, Hyderabad issued the impugned order dated 21.4.2014 directing MGF to pay Rs. 32,82,79,787/- towards the outstanding demand of EHTPL, while rejecting EMGF s objections on the affidavit. The impugned order of the TRO, in relevant part, reads as follows: In light of the above, it is clear that the affidavit filed by EMGF is false because a) the money shown as due from EMGF to EHTPL in its books of account is crystallized and tax suffered amount belonging to EHTPL, b) There is no contractual sanction for retaining the amounts to adjust against the future losses of EMGF, if any, nor there is any dispute between the two parties as on the date of notice u/s 226(3), c) The claim of more expenditure vis-a-vis the receipts on projects related to EHTPL is contrary to the facts recorded in Notes to the accounts of EMGF, d) the conduct of EMGF has been evasive throughout and it is only an afterthought to deny the liability with a view to avoid payment of tax to suit the convenience of the Emaar group, e) the versions presented to share holders and the Department are contradictory and f) the litigation relied upon by EMGF is not related to and does not alter the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is misguided as neither crystallisation of the amount nor the payment of tax should be the criteria to decide if there is a debt due from petitioner to fourth respondent since the source of revenue sharing i.e. the Development Agreement-cum- GPA between EMGF and EHTPL is itself contested in the ongoing litigation. EMGF has, since the financial year 2010-11, in the note in its accounts maintained that the liability is under serious dispute and consequently will need to be computed on a cumulative basis and not annually; presently, nothing was due and payable. (ii) Ground (b) is untenable because the absence of contractual sanction to withhold payments to adjust against possible future loss is irrelevant, in the face of EMGF s argument that the ramifications of the dispute are too diverse for the TRO, Hyderabad to assume that a liability will continue to exist even after the litigation ends. (iii) Grounds (c) and (e) were mistaken since the amount incurred as expense was greater than the amount collected, in fact, when marketing, sales and other expenses are computed. Status quo on the project and prohibition on execution and registration of sale deeds translates to EMGF being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 226(3) of the Act state as follows: 226. - Other modes of recovery. xxxxxxxxxxxxxxxxxxxx (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 or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the assessee at his last address known to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any but those of its shareholders. The assessee company is neither a party to the Share Purchase Agreement or the Escrow Agreement nor can claim any sum from the parties to the Escrow Agreement. No money is due to the assessee company by respondent No.2 or is held by or may subsequently be held by Respondent no. 2 on account of the assessee company. The conclusion of the Assessing Officer that the amount of money kept with respondent no. 2 in escrow is available to the assessee for meeting its income-tax demand is thus erroneous. 17. In that context, the Court preliminarily, had found that Section 226(3) does not confer any jurisdiction to adjudicate the indebtedness of a third party to the assessee and was only was confined to first, cases where the third party admits to owing money or holding money on account of the assessee and second, cases where it is indisputable that the third party owes money or holds money on the account of the assessee . The Court held in para 19: 19. It is well settled that even in cases of garnishee proceeding under Order 21 Rule 46 of the Code of Civil Procedure (hereinafter referred to as the CPC ), the Court may pass a garnishee order ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and satisfy himself that the garnishee's assertion is not false. Therefore, if there is facial invalidity of or falsity in the assertion of the garnishee as to absence of its liability to the assessee, the AO is entitled to disregard the affidavit. Any inquiry which requires elaborate reasoning, application of law, or the taking evidence, cannot be an exercise of facial determination of falsity. It may be profitable here to draw inspiration from the ruling in Hari Vishnu Kamath v. Syed Ahmad Ishaque, (1955) (1) SCR 1104, where a Constitution Bench of the Supreme Court quoted the observations of Chagla, C.J. in Batuk K. Vyas v. Surat Municipality (AIR 1953 Bom 133) that no error can be said to be apparent on the face of the record if it is not manifest or self-evident and requires an examination or argument to establish it. The language of the statute and the structure of the provision is unique in the sense that whilst acceptance of the garnishee's word, on the basis of a sworn statement is generally the rule, there is no preclusion of the AO's authority to scrutinize that statement to see whether it is false and take the proceeding to another direction, if it is fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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