Third-party tax recovery notice under section 226(3) fails where no attachable money is shown in the petitioner's hands.

A recovery notice under section 226(3) of the Income-tax Act for a third party's tax dues was found unenforceable where the petitioner did not hold any amount of the defaulting concern and the Revenue had not established that any commission or other sum was actually payable or lying in deposit. The Court also noted that, under the applicable acquisition framework, the liability could not be pursued against the petitioner in that manner, and that the petitioner had not received the notice it was entitled to before coercive recovery action was taken. The notice was therefore held invalid and liable to be quashed.

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Issues: Whether the notice issued under section 226(3) of the Income-tax Act for recovery of tax dues of a third party could validly be enforced against the petitioner, and whether the petitioner had any amount in its hands liable to be attached or recovered by the Revenue.

Analysis: The petitioner challenged the recovery notice on the footing that no money of the defaulting concern was in its possession and that, upon the acquisition regime applicable to the undertaking, the liability stood suspended. The Court found that the demand could not be realised from the petitioner, that the proper course lay elsewhere under the applicable acquisition framework, and that the Revenue had not addressed the real question whether any commission or amount was actually payable or lying in deposit. The Court also held that the petitioner had not been given the notice to which it was entitled, rendering the recovery action invalid.

Conclusion: The notice under section 226(3) of the Income-tax Act was invalid and liable to be quashed.

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