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TMI Blog1964 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... a, hereinafter referred to as the assesse, owed a sum of Rs. 8,439,79 on account of the demand of income-tax. The assessee claimed that their father, Sri Shanker Lal, was the karta of the Hindu undivided family, which was carrying on sarafa business at Agra under the name and style of Messrs. Jwala Prasad Shanker Lal; that their late father had deposited with the petitioner in the name of Shanker Lal Ram Prakash the sum of Rs. 18,000 out of the funds of the Hindu undivided family as investments on various hundis at the rate of 1% per mensem; that on October 17, 1963, the balance remaining with the said Bansal & Co. was Rs. 12,000 and out of this a sum of Rs. 2,000 was paid by the petitioner by cheque No. 00495 dated the 7th October, 1963, favouring Messrs. Shanker Lal Ram Prakash and for the balance of Rs. 10,000 the deponent held two hundis of the said Bansal & Co. both dated August 15, 1963. The cheque of Rs. 2,000 and one of the Hundis was not honoured. Further, that a few months earlier the petitioners in their own assessment proceedings before the Income-tax Officer, C-Ward, Agra, when required to prove the nature and source of the sum of Rs. 18,000 deposited with them by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for verification as to the credit balance in favour of the assessee. Apparently, no books of account were produced and by a notice dated the 6th of December, 1963, the petitioner was asked to produce the books on the 13th December, 1963. On the 13th December, 1963, again there was no compliance and after waiting for a month, on the 13th January, 1964, the Income-tax Officer, deeming the petitioner to be an assessee in default under the provisions of section 226(3), forwarded the certificate of recovery to the Tax Recovery Officer in exercise of his powers under section 222 of the Act for recovery as if it were an arrears of tax due from him. On the 25th January, 1964, the Naib Tehsildar, who was the Tax Recovery Officer (hereinafter referred to as the Tax Recovery Officer), admittedly, contacted the petitioners for compliance with the recovery certificate. This is clear from an application made to the Tax Recovery Officer on that very day by the petitioners, which is annexure " CA-1 " to the counter-affidavit of the Naib Tehsildar. In this application it was stated that the Tehsildar had to take recovery proceedings but these proceedings should be stayed till the 30th January, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired by rule 1, sub-clause (2) of Chapter XXII, Volume I of the Rules of this court. The affidavit accompanying was only that of a pairokar and the verification except of paragraph 1, which was only a formal paragraph, was on information received from the petitioner or based on the record which the petitioner believed to be true. The questions that fall to be considered in this petition are : " (1) Whether the petition was properly presented in view of the affidavit not having been sworn by the petitioner himself or by his pairokar from personal knowledge ? (2) Whether the provisions of section 226, clause (3)(vi), had been complied with and, if not, its effect ? (3) If the provisions of section 226(3)(vi) were not complied with and the Income-tax Officer has issued a recovery certificate under the provisions of section 226(3)(x), is the Income-tax Officer upon an affidavit being filed subsequent thereto bound to act under the provisions of section 226(3)(vi) or is such affidavit only to be taken into consideration for purposes of withdrawing or correcting the recovery certificate under the provisions of section 224(2) of the Act ? (4) Whether the provisions of rule 2 of Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey 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 Income-tax Officer either forthwith upon the money becoming due or being held or had or within the time specified in the notice so much of the money as is sufficient to pay the amount due by the assessee in respect of the arrears or the whole of the amount when it is equal to or less than that amount. Sub-clause (vi) of clause (3) of section 226 reads : " 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 account 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 Income-tax Officer to the extent of his own liability to the assessee on the date of the notice, or to the extent of the assessee's liability for any sum due under this Act, whichever is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 226(3) but also all the proceedings thereafter, it cannot be brushed aside, particularly, when the conduct of the petitioner would appear to belive the allegation now made. As already noticed, even in the affidavit dated the 17th March, 1963, which was the first affidavit filed by the petitioner, nor at any stage prior thereto, was any grievance made that his statement on oath was not recorded by the Income-tax Officer. If any such thing had transpired or a right had, in fact, been denied by the Income-tax Officer, the least that one would have expected was a ventilation of that grievance in the correspondence which followed. There is, however, not a whisper about it anywhere till the 17th March, 1964, i.e., more than two months after the recovery certificate had already been sent to the Tax Recovery Officer. This, therefore, clearly is an afterthought in order to salvage the case. In these circumstances, the proper stage having passed, it is a matter of considerable doubt whether the Income-tax Officer was bound to stay his hands under the provisions of sub-clause (vi) of section 226(3) of the Act after the recovery certificate had already been issued to the Tax Recovery Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate. It is true that the Income-tax Officer would in a way be determining the rights of a third party who is not an assessee before him vis-a-vis his creditor who may or may not be an assessee, nevertheless, if no valid objection as required by law is taken at the proper time and such person himself is to blame for the consequences which follow, there is no reason to think that the Income-tax Officer would be bound to stay his hands. The Income-tax Officer would, in such circumstances, be entitled to be satisfied prima facie before directing the withdrawal or modification of the recovery certificate. That is precisely what the Income-tax Officer and the Inspecting Assistant Commissioner have been endeavouring to do in these proceedings. They have been calling upon the petitioner to produce his books in order to satisfy themselves as to whether any amount was in fact owed by the petitioner to the assessee. The result may be unfortunate for the petitioner but he himself is to blame for having allowed the grass to grow under his feet and for not having complied with the provisions of section 226(3) within time or the extended time stipulated in the notice under section 226(3) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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