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TMI Blog2003 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners was rejected. Against this order the petitioners had moved the present writ petition since dismissed by the learned single judge. Out of the said order, the present appeal arises. It is contended on behalf of the appellants that the income-tax authority in a proceeding against the petitioners had held that the transaction between the petitioners and one Visisth Chay Vyapar Limited (hereinafter termed as "VCVL") was an non-genuine transaction and, therefore, disallowed the deduction of interest on borrowed capital and then directed addition of the amount under section 68A of the Income-tax Act. The Commissioner (Appeals) had affirmed the order of the Assessing Officer and had held that the explanation was not satisfactory and despite opportunity being given, the petitioners did not avail of the same to satisfactorily prove their contention. On the other hand, VCVL had obtained a decree, though ex parte, under Chapter 13 of the Original Side Rules from this court in respect of the selfsame transaction as against the petitioners in December, 1997. Admittedly, till the writ petition was dismissed by the learned single judge out of which the present appeal arises, the decr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenging the garnishee proceedings either on the ground of finality of the decree or on any other ground. He further contended that the question cannot be raised by the petitioners in this case since they themselves know that the amount is due under the decree since they are claiming the transaction to be a genuine one and did not challenge the decree till then, and as such they cannot take resort to clause (vi) of section 226(3) of the Act. Mr. Ghosh had further contended that the petitioners did not come with clean hands. The petitioners had suppressed material facts, as was apparent on the face of the record. Therefore, they were not entitled to invoke the writ jurisdiction. In reply on behalf of the appellants, it is contended that there was certain proceedings under the Companies Act, 1956, for winding up of the petitioner-company for which a scheme was formulated, which was approved but ultimately on being challenged, the said scheme was revoked. This order of revocation was affirmed by the apex court. Thereafter, a subsequent scheme was formulated during the pendency of this proceeding, which was representative in character, and was a proceeding in rem. There was an interi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as garnishee by virtue of the decree obtained by VCVL against the garnishee. Clause (vi) entitles the petitioners to raise an objection. Once an objection is raised, the Tax Recovery Officer is not supposed to recover tax until the claim is found to be false. There was no material placed before the Tax Recovery Officer with regard to the proceedings pending before the company forum and the scheme formulated. Therefore, the Tax Recovery Officer had no material before him to find out that the objection raised was correct. Therefore, he had discovered the claim raised by the petitioners to be false and proceeded to recover the same. But the question remains that one of his counterparts had held the transaction to be non-genuine, which is pending determination in appeal before the learned Tribunal at Calcutta. Therefore, it would mean that the subject matter of a judicial proceeding had not reached its finality. But till then, such order was staring on its face. The Tax Recovery Officer ("the TRO") cannot blow hot and cold in order to exercise jurisdiction under the provision of section 226(3) of the Act when he had some other device or mode of recovery available to him for recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection is altogether false and it is so apparent and is so discovered that the Tax Recovery Officer can proceed against the garnishee under section 226(3) of the Act. It is only the part, which cannot be objected to would come within its purview. At the same time, it cannot be lost sight of that though not brought before the authority concerned but yet there was a proceeding before the company forum and that there was an interim order, which restrained execution of the decree by VCVL during the pendency of the proceedings and it was also subject to a proceeding before the company forum which is a judgment in rem and is binding on VCVL and, therefore, no amount, except as is permissible under the scheme, can be claimed by VCVL and as such the dues available under the decree are yet to be determined so as to attract the provision of section 226(3) of the Act. We must also remember that the petitioners had taken one stand before the income-tax authority, viz., that the transaction was genuine whereas it had denied its liability under the decree by raising an objection. However, all learned counsel representing the appellants before us, namely, Mr. Sarkar, Mr. J.P. Khaitan and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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