Curtailed demand period and pre-notice garnishee recovery are unlawful when statutory safeguards and fair procedure are not met.

A statutory demand period under section 220(1) may be curtailed only on relevant grounds where the Assessing Officer reasonably believes that allowing the full period would prejudice the Revenue; reduction to one day was therefore invalid because the stated reasons did not show such detriment. Garnishee recovery under section 226(3) cannot be enforced before fair service of notice, and bank account attachment and debit without prior notice was treated as unlawful and arbitrary. Where the demand and recovery are quashed, the amount recovered must be restored, and compensatory interest may be awarded for wrongful deprivation of funds.

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Issues: (i) Whether the writ petition was maintainable despite the pendency of the statutory appeal and stay application; (ii) whether the period of thirty days prescribed for payment under the notice of demand could validly be reduced to one day; (iii) whether the recovery from the petitioner's bank accounts under section 226(3) was valid in the absence of prior service of notice; and (iv) whether the petitioner was entitled to refund with interest.

Issue (i): Whether the writ petition was maintainable despite the pendency of the statutory appeal and stay application.

Analysis: The availability of an appellate remedy did not bar interference where the grievance was not against the assessment on merits but against coercive and allegedly hasty recovery action that had the effect of defeating the statutory remedy. The exceptional facts disclosed arbitrary action and justified judicial intervention.

Conclusion: The writ petition was maintainable.

Issue (ii): Whether the period of thirty days prescribed for payment under the notice of demand could validly be reduced to one day.

Analysis: Under section 220(1), reduction of the statutory period is permissible only when the Assessing Officer has reason to believe that allowing the full period would be detrimental to the Revenue and the power is exercised on relevant grounds. The reasons relied upon were found to be irrelevant, since the assessee's resort to statutory remedies and its financial position did not establish detriment to the Revenue. The reduction was therefore not supported by the statutory precondition of a relevant belief.

Conclusion: The reduction of time to one day was invalid and liable to be quashed.

Issue (iii): Whether the recovery from the petitioner's bank accounts under section 226(3) was valid in the absence of prior service of notice.

Analysis: Garnishee recovery was initiated and effected before service of the notice upon the petitioner, and the bank accounts were attached and debited in a manner found to be hasty and arbitrary. Such action was inconsistent with fair procedure and the statutory scheme governing recovery.

Conclusion: The recovery under section 226(3) was unlawful.

Issue (iv): Whether the petitioner was entitled to refund with interest.

Analysis: Once the demand notice was quashed, the recovery made pursuant to it could not survive. The amount collected had to be restored, and compensation for loss of use of money was warranted in view of the banking nature of the petitioner's business.

Conclusion: The petitioner was entitled to refund of the recovered amount with interest at 12% per annum.

Final Conclusion: The coercive recovery was set aside, the demand notice reducing the payment period was quashed, and the revenue was directed to return the recovered sum with compensatory interest and costs.

Ratio Decidendi: A statutory power to curtail the time for payment of a demand must be exercised only on relevant grounds showing detriment to the Revenue, and recovery by garnishee proceedings cannot be sustained when effected before fair notice and in abuse of the recovery process.

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