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TMI Blog2019 (4) TMI 1813X X X X Extracts X X X X X X X X Extracts X X X X ..... Where the legislature provides for a scheme of recovery of tax, interest and penalty under Section 39 of 'the Act' and alongside vests the prescribed authority a power to resort to a special mode of recovery in the manner provided under Section 47 of 'the Act' then unless there are reasons available with the prescribed authority for resorting to a special mode of recovery under Section 47 of 'the Act', it cannot be resorted to in a routine manner merely because it conveniences a speedy recovery during the closure stages of a financial year - The creatures under a statute are bound by the statutory prescriptions and in case a statute while providing for the normal course of recovery, also lays down the provision for special mode of recovery, then, unless, there are reasons reserved with the prescribed authority for resorting to the special mode of recovery, it has not to be resorted to in a routine manner. It becomes only a completion of formality to quash the impugned attachment notices issued by the prescribed authority under Section 47 of 'the Act' and accordingly the notices impugned are set aside. Petition allowed. - Civil Writ Jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxes, Danapur Circle, the Assistant Commissioner, State Taxes Bhagalpur Circle and the Joint Commissioner State Taxes, Gaya Circle respectively, the respective Cash Credit Account of the three petitioners herein has been attached and as a consequence the petitioners who are business houses cannot operate these accounts to discharge their financial obligations. The pleadings on record confirm that in each of the cases the assessment proceedings was carried out for the period in question, orders passed, admitted tax amount deposited and for the disputed tax amount, a statutory appeal as provided under 'the Act' is preferred by the petitioner(s) after depositing the statutory fee of 20% of the disputed amount and which are pending consideration for disposal before the statutory authority. Now even before these appeals are disposed that the respective Assessing authorities, in purported exercise of powers so vested under 'the Act' engineered the special process of recovery and taking a short route provided under the provisions of Section 47 of 'the Act' that they have attached the Cash Credit Account of the petitioners but then the object which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it is a facility provided by the bank for obtaining credit/loan from the bank concerned; and (ii) The statutory appeals/proceedings questioning the disputed amount was yet pending final adjudication. Mr. Suraj Samdarshi, learned counsel appearing on behalf of the petitioner-M/s. Digican Solution has submitted that the said petitioner maintains two accounts of which a Cash Credit Account was maintained with the IDBI and Current Account was maintained with the State Bank of India, Anandpuri Branch, Patna. He submits that on notice so issued to the two banks, each of the two accounts has been attached by the IDBI and the State Bank of India respectively bringing the business to a stand still. He submits that consequent upon such notice, the money lying in the current account maintained with the State Bank of India has been transmitted to the Joint Commissioner, Bhagalpur Circle. The arguments advanced by learned counsel for the petitioners have been contested by Mr. Vikash Kumar, S.C.11 who submits that attachment of the Cash Credit Account is due to the fault of the petitioners themselves because it is the disclosure of such account by these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxes Department in the Current Account of the petitioner has been transferred while process has been undertaken by the bank to transfer the money lying in the fixed deposits of the Bank. We have heard learned counsel for the parties and we have perused the records. Of the two issues that we have noted at the outset and reproduced hereinabove, in the nature of the contest so put up, we are persuaded to keep the issue regarding a resort to the provisions of Section 47 of the 'the Act' to overreach a statutory recourse available to an aggrieved assessee, open for discussion in an appropriate matter and would concentrate on the issue whether or not, while taking recourse to the special mode of recovery provided under Section 47 of 'the Act', the respondent department through their Assessing authority can attach the Cash Credit Account of an assessee. Section 39 of 'the Act' provides for payment and recovery of tax and sub section 2 obliges the dealer or the person concerned to deposit his taxes in three modes i.e (i) in advance; or (ii) the tax due in accordance with returns; or (iii) the tax as assessed by the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) any person from whom any money is due or may become due to a dealer who has failed to comply with a notice of demand served under section39; or (b) any person who holds or may subsequently hold any money for or on account of such dealer, to pay into Government treasury, in the manner specified in the notice issued under this sub-section, either forthwith or upon the money becoming due or being held, or within the time specified in the notice (not being before the money becomes due or it is held) so much of the money as is sufficient to pay the amount of tax due from the dealer, together with interest and penalty, if any, under this Act or the whole of the money when it is equal to or less than that amount. The Legislative intent reflecting from the language used in Section 47 of 'the Act' providing for a special mode of recovery leaves no room for confusion that it is only where any money of the dealer is due to be paid by any person or any person holds money for or on account of such dealer which includes banks or other financial institutions, the prescribed authority shall direct such person or the banking company to remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 47 of 'the Act' then unless there are reasons available with the prescribed authority for resorting to a special mode of recovery under Section 47 of 'the Act', it cannot be resorted to in a routine manner merely because it conveniences a speedy recovery during the closure stages of a financial year. The creatures under a statute are bound by the statutory prescriptions and in case a statute while providing for the normal course of recovery, also lays down the provision for special mode of recovery, then in our opinion, unless, there are reasons reserved with the prescribed authority for resorting to the special mode of recovery, it has not to be resorted to in a routine manner. Having discussed the legislative intent of a special mode of recovery under Section 47 of 'the Act', we now turn to the futility of the exercise, in so far as the present set of cases, are concerned. Acting in purported exercise under Section 47 of 'the Act', a prescribed authority is well within its power to direct a person from whom any money is due to be paid to the dealer or any other person who holds money for or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be. Here we are persuaded to reproduce one paragraph of the counter affidavit filed on behalf of the IDBI in C.W.J.C. No.3321 of 2019 which would explain the position: 12. That however, as has been stated earlier, the account balance is in negative and the total amount which is due towards the Cash Credit Account of the Petitioner is over ₹ 35.00 lacs as on date and hence, the Respondent Bank is unable to transfer any money to the Commercial Taxes Department as the nature of the Cash Credit Account is actually a loan account as stated by the Petitioner in its Writ Petition and hence there are no deposits which can be transferred to the Commercial Taxes Department as claimed in the impugned notice. Alongside we are also persuaded to reproduce 2 paragraphs of the counter affidavit of the respondent State Bank of India as present in the counter affidavit filed by them in the same writ petition i.e C.W.J.C. No. 3321 of 2019 which would clarify the distinction between a money held in current account and fixed deposits by a dealer in contradistinction to a cash credit facility provided by them. Be it noted that the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter 30 of the Tannan's Banker's Manual contains discussions on interference by third parties - injunctions, garnishee or an attachment order etc and while explaining a 'garnishee order' of the kind as issued in purported exercise of jurisdiction by the prescribed authority under Section 47 of 'the Act', it explains that such order is an attachment by a judgment creditor of the money belonging to a judgment debtor in the hands of a third party for example banks. The materials on record confirm that a Cash Credit Account is a facility provided by banking companies to the business houses and other customers which enables them to obtain credit from the bank to the extent it is permissible in the Cash Credit Account but subject to the stipulations and conditions present for discharging the debt. In other words, if a customer is provided with the Cash Credit Account facility of 20 crores by a bank, he is entitled to issue cheque to his creditors upto an extent of 20 crores which liability on behalf of the dealer would be discharged by the bank but subject to the conditions that are put up by the bank to such customer while affording suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be served are two: (i) any person from whom money is due or may become due to the assessee; and (2) any person who holds or may subsequently hold money for or on account of the assessee. The question which arises for consideration in the present case is, as to whether a bank, which has afforded overdraft facilities to its customer, holds the amount, specified as that up to which the customer may draw as either a debtor of the customer or holds that money on behalf of or on account of the customer. 8. This decision was followed by the learned Single Judge of Bombay High Court in reported judgement of Calcutta High Court in case of Jugal Kishore Das dated 08.10.2013. In the said case, the Assessing Officer had tried to recover the tax dues of the assessee in exercise of powers under Section 226(3) of the Act by attaching the Cash Credit Account of the assessee. Following the decision of Madras High Court in case of K.M.Adam vs. Income Tax Officer, II Additional II Circle,Madra(supra), it was observed as under: In view of the above, this Court does not find that the action on the part of the respondents in passing the order of attachment of C ..... 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