2007 (6) TMI 178 - HC - Income Tax

Appellate Court Ruling on Attachment Order and Garnishee Notice Legality

Assistant Commissioner of Income-Tax And Another Versus JC. Augustine And Another.

Assistant Commissioner of Income-Tax And Another Versus JC. Augustine And Another. - [2007] 293 ITR 26, 211 CTR 377, 163 TAXMANN 305 Issues Involved:1. Jurisdiction of the Assessing Officer during the pendency of an application before the Settlement Commission.2. Legality of the attachment order issued by the Tax Recovery Officer.3. Legality of the garnishee notice issued by the Assessing Officer.4. Cancellation of instalment facility by the Settlement Commission.Issue-wise Detailed Analysis:1. Jurisdiction of the Assessing Officer during the pendency of an application before the Settlement Commission:The learned single judge held that under section 245F of the Income-tax Act, once an application is filed and admitted by the Settlement Commission, the Assessing Officer cannot proceed to recover any amount ordered to be paid by the Settlement Commission. The judge concluded that the jurisdiction of the Assessing Officer is ousted once an application is pending before the Settlement Commission. This conclusion was reached by relying on section 245F, which grants exclusive jurisdiction to the Settlement Commission to perform the functions of an income-tax authority in relation to the case until an order is passed under section 245D(4).However, the appellate court disagreed, stating that section 245D(2D) allows the Assessing Officer to recover unpaid tax and interest if the assessee defaults on payments directed by the Settlement Commission. The appellate court emphasized that the learned single judge did not consider section 245D(2D) while making the decision.2. Legality of the attachment order issued by the Tax Recovery Officer:The Tax Recovery Officer issued an attachment order dated December 30, 1999, due to the assessee's default in paying the instalments as per the Settlement Commission's order. The single judge quashed this order, deeming it illegal based on the exclusive jurisdiction of the Settlement Commission under section 245F.The appellate court noted that the attachment order was issued in accordance with section 245D(2D), which permits the Assessing Officer to recover unpaid amounts. Consequently, the appellate court set aside the single judge's order and remitted the matter back for reconsideration of the attachment order's legality.3. Legality of the garnishee notice issued by the Assessing Officer:The Assessing Officer issued a garnishee notice dated March 18, 2003, to the branch manager of LIC of India, requesting payment of any amount due to the assessee. The single judge quashed this notice, again relying on the exclusive jurisdiction of the Settlement Commission under section 245F.The appellate court reiterated that section 245D(2D) allows the Assessing Officer to recover unpaid amounts during the pendency of the application before the Settlement Commission. Therefore, the appellate court set aside the single judge's order and remitted the matter back for reconsideration of the garnishee notice's legality.4. Cancellation of instalment facility by the Settlement Commission:The Settlement Commission cancelled the instalment facility granted to the assessee by an order dated February 9, 2004, due to the assessee's default in payment. The single judge quashed this order based on the exclusive jurisdiction of the Settlement Commission under section 245F.The appellate court clarified that the Settlement Commission has the authority under sections 245D(2A) and 245D(2B) to direct payment of additional tax and to allow instalments. If the assessee defaults, section 245D(2D) permits the Assessing Officer to recover the unpaid amounts. The appellate court found the single judge's decision to be incorrect and set aside the order, allowing the Assessing Officer to take action as per section 245D(2D).Conclusion:The appellate court set aside the orders passed by the learned single judge in O. P. No. 1798 of 2000 and O. P. No. 12979 of 2003, remitting the matters back for reconsideration of the legality of the attachment order and the garnishee notice. The appellate court emphasized the applicability of section 245D(2D) in allowing the Assessing Officer to recover unpaid amounts during the pendency of an application before the Settlement Commission. The appeal was disposed of with directions for the parties to bear their own costs.