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TMI Blog2014 (6) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Garnishee notice issued u/s 226 (3)(1) by raising an objection as required u/s 226 (3) (vi) and for this precise reason and also for the reason that the assessee-Bank did not dispute the relationship between it and the assessees including Shivaganga Multi-purpose Co-operative Society Limited it enabled the Department to arrive at a conclusion that petitioner is to be treated as an assessee in default and accordingly an order came to be passed u/s 226 (3) (x) - the assessee does not dispute about deposits held by it on behalf of the assessee and the same being payable by the assessee to the assessee and non-compliance of the demand notice raised by the Department u/s 226 (3), revenue have rightly held that assessee is to be treated as an assessee in default - There is no infirmity in the order passed by the revenue calling for exercise of extra-ordinary jurisdiction - whatever the amounts that are held by the assessee either on behalf of the assesee or on behalf of M/s Shivaganga Multi-purpose Co-operative Society Limited ultimately payable to assessees would be the amounts payable by the assessee to the Department – Decided against Assessee. - W.P.Nos.104395-399/2014 & 104 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s received the Garnishee notices immediately after maturity of deposits or on the dates when fixed deposits become due and payable to them and as such, petitioner-Society requested the respondent to treat said representation as an application for rectification of the order passed against it by respondent whereunder petitioners had been held as assessee in default. Said representation was not considered by respondent. A communication has been sent to the petitioner on 24.03.2014 Annexure-K calling upon petitioner to comply with the Garnishee notices Annexures-A to A4. As such, petitioner is before this Court. 2. The grievance of the petitioner as urged by Sri C.V.Angadi, learned counsel appearing for the petitioner-Society in these writ petitions is Fixed Deposits (for short FDRs) in respect of which Garnishee notices have been issued is yet to mature or they have not become due and premature payment would not arise and it is not liable to pay the proceeds of the fixed deposit before the maturity period and as such, petitioner-Society cannot be treated as a creditor of the assessee to enable the Department to issue Garnishee notice. In support of his submission, he has relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson 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 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. vi) Where a person to whom a 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 accoutn of the assessee, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Assessing officer or Tax Recovery Officer to the extent of his own liability to the assessee on the date of the notice, or to the extent of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the assessee and the said assessees having deposited the amount in Shivaganga Multi-purpose Cooperative Society and said Society in turn having invested these amounts in petitioner-Society by way of fixed deposit under Fixed Deposit Receipts (FDRs) which would mature as per the due dates mentioned in the FDRs and also the fact that FDR s having been attached during search proceedings. 5. Records would indicate that search proceedings under Section 132 was conducted on 20.09.2011 in the premises of Shri Ramesh Motilal Chindak and his family members as also the business premises belonging to them. During the search proceedings, an order of prohibition came to be passed by the Authorised Officer in exercise of power under Section 132(3) of the Income Tax Act, directing petitioner herein not to remove, part with or otherwise deal with articles like Bank Accounts, SB, CC, FD, TD etc., and the Bank Lockers held in the names of assessees and all types of lockers and accounts held in the name of M/s. Shivaganga Multipurpose Co-operative Society Limited, Shahapur, Belgaum. Pursuant to search proceedings, block assessment was conducted for the year 2006-07 to 2012-13. In respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot become payable. Petitioner-Society also assured the Department that as and when the fixed deposits would become due, the proceeds of such fixed deposits would be paid to the Department and claimed that it has noted the lien of the Department on those FD s. However, respondent-authorities proceeded to pass order under Section 226 (3) (x) of the Act by treating the petitioner as an assessee in default by order dated 10.03.2014 Annexure-A to A4 on account of reply not having been submitted by the petitioner within stipulated time. Simultaneously, notice of demand under Section 156 of the Income Tax Act also came to be issued as per Annexures-A5 to A9. In reply to the same, petitioner forwarded its reply on 20.03.2014 by forwarding the same under registered post acknowledgement due and copy was also delivered in the office of the 1st respondent as could be seen from the acknowledgement found therein. Since under the said communication petitioner had requested to treat the said reply as an application for rectification of order passed under Section 226 (3) (x) and to treat the same as mistake apparent from the record, same was considered by respondent and rejected as communicated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivity of contract between the Garnishee and the assessee would not arise in the light of the judgment of Hon ble Apex Court in the case of UNIT TRUST OF INDIA VS. B.M.MALANI AND OTHERS [2007 (212) CTR 425 (SC)]. It has to be held that principle enunciated by Their Lordships in the above judgment would not be applicable to the facts and circumstances of the present case for the following reasons: 9. In the said case, Unit Trust of India being the Garnishee was issued with a notice and pursuant to said notice money held on behalf of assessee was paid by the Garnishee to the Department. A plea was taken by the assessee stating that there was a lock-in period and money deposited by the assessee could not have been withdrawn prematurely without the consent of the depositor or the assessee since the interest benefit was being lost and said plea came to be accepted by the Apex Court, by examining the very scheme itself, it was noticed by their Lordships that scheme guaranteed that capital invested in the scheme will be protected on maturity i.e., units will not be redeemed below par. It has been held in the said judgment by Hon ble Apex Court as under: 12. Whether the action o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely to be purchased by the Government at par @ Rs.10/- per Unit in which case I will not suffer loss on sale and the market rate for sale of such units will also go up. The department was good enough to grant time earlier for payment of tax and I have kept my commitments at all the times and accordingly paid the tax. 10. In conclusion, it was held by Their Lordships that Clause-(vi) of sub-section (3) of Section 226 of the Act created a legal fiction to the effect that an amount if not payable by the Garnishee to the assessee it is not required to pay any such amount or part thereof and as such it was held that the Unit Trust of India was required to act in terms and conditions of the contract and held that the respondent-assessee is entitled for restitution namely entitled to the dividend declared during the said period from the date of allotment. In fact, the judgment of this Court had also came up for examination before the Apex Court in the said case and dictum laid down by this Court has been approved. 11. In the instant case, undisputedly, there is no lockin period insofar as fixed deposit of the assessee is concerned. Though the period of fixed deposit is stipulated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson to whom a notice is issued is bound to comply with such notice and with reference to the banking company it is provided that it is not necessary for any deposit receipt to be produced before payment is made notwithstanding any rule, practice or requirement to the contrary. 11.1. In view of the judgment of the Apex Court in Budda Pictures case [1967 (65) ITR 620], there has to be subsisting relationship between the garnishee and the assessee. The words 'money is due or becomes due or any person who holds or may subsequently hold money were interpreted for that subsisting relationship. The relationship of banker and the assessee in default is not in dispute. The bank is holding money for the assessee. The dispute is only that according to the petitioner the amount has not become due. In the case of a tenant and landlord that subsisting relationship exists because of the tenancy agreement and the amounts become due every month. In such a situation the power under section 226(3) of the Act cannot be exercised to demand the rent for the period for which it has not become due. In order to find out as to whether the amount has become due, it has to be seen whether there i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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