Statutory bar on recovery against sick industrial company bank accounts prevented coercive tax attachment during BIFR proceedings.

Recovery notices under section 226(3) of the Income-tax Act against a sick industrial company's bank accounts were barred by section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 because proceedings before the Board for Industrial and Financial Reconstruction were pending. The company had been treated as a sick industrial company, so coercive recovery steps against its property fell within the statutory suspension on execution and distress-like proceedings. As no consent of the Board had been obtained, the recovery action could not be sustained, and the department was required to seek appropriate relief from the Board before proceeding.

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Issues: Whether recovery notices issued under section 226(3) of the Income-tax Act, 1961 for attaching bank accounts could be sustained when the assessee was a sick industrial company and proceedings before the Board for Industrial and Financial Reconstruction were pending under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 creates a statutory suspension of proceedings for execution, distress or the like against the properties of a sick industrial company while an inquiry, scheme, or appeal is pending before the Board. The assessee was treated as a sick industrial company under section 3(1)(o) of the Act and its proceedings before the Board were pending. The notices sought coercive recovery directly from the assessee's bank accounts, which amounted to recovery action covered by the statutory embargo. No consent of the Board had been obtained before taking such steps. In these circumstances, the recovery action could not be sustained; if the department wished to proceed, it was required to seek appropriate relief from the Board.

Conclusion: The recovery notices were quashed as being hit by the statutory protection under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985.

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