Garnishee recovery after appellate confirmation was upheld; no fresh demand notice or refund was available at that stage.

Where an assessment demand had already been raised and first appeals were dismissed, the original notice of demand continued to operate and no fresh notice was required for recovery. The High Court held that Section 226(3) permitted immediate garnishee recovery after appellate confirmation of the assessment, subject to the assessee's statutory remedies before the Tribunal. Although same-day recovery without breathing time was described as over-enthusiastic, it was not found illegal on the facts. Refund was also denied because no excess payment or appellate refund entitlement had arisen under Sections 237 and 240. The writ petitions therefore failed, with liberty preserved to seek stay and other relief before the Tribunal.

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Issues: (i) Whether the Assessing Officer validly invoked Section 226(3) of the Income-tax Act, 1961 to recover the demand immediately after dismissal of the first appeals; (ii) Whether the petitioners were entitled to refund of the amounts recovered at that stage.

Issue (i): Whether the Assessing Officer validly invoked Section 226(3) of the Income-tax Act, 1961 to recover the demand immediately after dismissal of the first appeals.

Analysis: The demand had already been raised pursuant to assessment orders and notices under Section 156. After dismissal of the first appeals, the original notice of demand continued to remain valid under Section 220(1A), and no fresh notice was required when the appellate authority merely confirmed the assessment. The Court held that Section 226(3) empowered the Assessing Officer to require a garnishee to pay the amount due forthwith, and that there was no statutory bar to recovery after appellate dismissal. However, the Court found the same-day recovery without giving any breathing time to the assessee or garnishee to be an improper and over-enthusiastic exercise of power, though not illegal in the facts of the case.

Conclusion: The invocation of Section 226(3) was held valid, and the recovery was not interfered with.

Issue (ii): Whether the petitioners were entitled to refund of the amounts recovered at that stage.

Analysis: Refund under Sections 237 and 240 arises only where excess tax has been paid or where refund becomes due as a result of an appellate or other proceeding. At the stage of recovery in these cases, the assessed demands stood confirmed and no situation had arisen attracting either provision. The Court also noted that the petitioners had an effective statutory remedy before the Income Tax Appellate Tribunal, including a prayer for stay, and the recovery would remain subject to the result of those proceedings.

Conclusion: The petitioners were not entitled to refund at that stage.

Final Conclusion: The writ petitions failed because the recovery was held to be legally sustainable, though the Court granted liberty to the petitioners to pursue interim and final relief before the Income Tax Appellate Tribunal.

Ratio Decidendi: Where an assessment demand has already been confirmed in appeal, the original notice of demand continues to operate, and recovery under Section 226(3) may be made without a fresh notice, subject to the assessee's statutory appellate remedies.

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