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TMI Blog1967 (8) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961, took coercive proceedings. The petitioner says that the first respondent acted without jurisdiction in issuing the notice. This is on the ground that, though the petitioner admitted the debt to the second respondent, he disputed that the principal was payable on demand and before the expiry of 10 years from the date of borrowing and that, in any case, without issuing a certificate in the first instance against the assessee for recovery under section 222, he has no power to proceed against the petitioner straightaway. The second ground has not been actually taken in the affidavits in support of the petitions. Nevertheless, we heard arguments on that too. The first ground turns purely on a factual matter, whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 to enable him to discharge his income-tax arrears. The petitioner in reply on April 5, 1966, acknowledged its liability to pay and expressed its readiness to pay over the money to the income-tax department in discharge of the second respondent's tax arrears. But at the same time, the petitioner regretted that its funds having been locked up in business, it was not just then in a position to make the payment forthwith. It, however, indicated its willingness to offer its properties charged for its own tax arrears as security for the second respondent's arrears as well. On May 18, 1966, relying on the disclosure by the second respondent, the Income-tax Officer, first respondent, issued a notice to the petitioner under section 226(3) tell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by monthly instalments of Rs. 5,000, and subsequently the question of payment of the arrears by the petitioner was discussed by its representative with the Inspecting Assistant Commissioner of Income-tax (Central Range), Madras. The Income-tax Officer in his counter-affidavit says that on September 6, 1966, the petitioner agreed in writing to pay a sum of Rs. 25,000 on or before September 25, 1966, and also gave an undertaking to pay the balance in monthly instalments of Rs. 25,000 each, in every succeeding month till the arrears were cleared in full. We ourselves looked into the original and the averment of the Income-tax Officer in this regard appears to be correct. Following this undertaking, the Income-tax Officer asked the Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough there was an obligation to pay the principal, the actual payment would be due only after the expiry of 10 years. Under section 226(3) of the Income-tax Act, it is open to the Income-tax Officer to proceed against a third party for recovery of his creditor's tax arrears from moneys which are admittedly due to such assessee from him. Where the third party does not admit or denies that the debt is owing to the assessee, the Income-tax Officer will be powerless to proceed under section 226(3). It will not then be open to him to sit in judgment over the denial and come to his own conclusion. But, to start with, he may assume that the debt is owing and initiate proceedings under section 226(3). With respect, we are inclined to accept the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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