2007 (3) TMI 241 - HC - Income Tax

Validity of Tax Notice under Income-tax Act Section 226(3) Upheld

The court upheld the validity of the notice issued under section 226(3) of the Income-tax Act, requiring the petitioner to pay the tax due from another ... Petitioner purchased goods from a company M/s. DXN, who is having some dispute in respect of income-tax payable by them - authorities are taking action against assessee to recover the tax due from M/s. DXN - garnishee notice u/s 226 has also been marked to the petitioner’s bankers, who has paid the impugned amount due form DXN - If the petitioner is having any grievance in making the payment by his bankers, it is for him to agitate the matter separately against the bankers – notice is valid Issues:1. Validity of notice issued under section 226(3) of the Income-tax Act.2. Liability of the petitioner to pay the tax due from another company.3. Compliance with statutory provisions in issuing the notice.Analysis:Issue 1: Validity of notice under section 226(3) of the Income-tax ActThe petitioner sought a writ of certiorari to challenge the notice issued under section 226(3) of the Income-tax Act, which required the petitioner to pay the tax due from another company, M/s. DXN Herbal Manufacturing (India) P. Ltd. The petitioner argued that the notice was whimsical and not authorized by law. However, the court examined the provisions of section 226(3) of the Income-tax Act, which empower the Assessing Officer to recover tax dues by issuing notices to third parties who owe money to the assessee. The court found that the notice issued to the petitioner was in accordance with the law, and there was no illegality or irregularity in its issuance.Issue 2: Liability of the petitioner to pay the tax due from another companyThe petitioner contended that the notice caused their bankers to pay a sum towards the tax due from M/s. DXN Herbal Manufacturing (India) P. Ltd. without their consent. The court noted that the statutory provisions under section 226(3) impose an obligation on the person served with the notice to comply with it. The court held that if the petitioner had any grievance regarding the payment made by their bankers, they should address it separately with the bankers. The court emphasized that the notice was valid and binding on the petitioner as per the provisions of the Income-tax Act.Issue 3: Compliance with statutory provisions in issuing the noticeThe court thoroughly examined the provisions of section 226(3) of the Income-tax Act, which outline the procedure for recovery of tax dues from third parties. The court observed that the notice in question was issued in strict compliance with the statutory requirements, including informing the assessee and forwarding a copy of the notice to them. The court concluded that since the notice was issued in accordance with the law and the petitioner did not challenge its validity, there was no basis to find fault with the issuance of the notice.In conclusion, the court dismissed the writ petition challenging the notice issued under section 226(3) of the Income-tax Act, along with associated motions, emphasizing the validity and legality of the notice in recovering tax dues from the petitioner as per the statutory provisions.