Court sets aside garnishee notice, requires 20% tax payment within 5 weeks to prevent recovery action.

The Court allowed one writ petition, setting aside the garnishee notice subject to the condition that the petitioners pay 20% of the disputed tax within five weeks. Failure to comply would allow the Income Tax Department to initiate recovery proceedings. The Court aimed to balance Revenue interests with providing relief to the assessees during the pending appeal process, considering the progress in land acquisition proceedings and the connection between tax recovery and land acquisition.

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Issues:
1. Impugned notice issued by the Income Tax Department under Section 226(3) of the Income Tax Act, 1961.
2. Appeal for direction to State Officials to pay 15% of disputed demand directly to Income Tax Department.
3. Stay of coercive recovery steps by Income Tax Department pending appeal disposal.
4. Garnishee notice sent by Assessing Officer to Special Tahsildar.
5. Interest of Revenue vs. granting reprieve to assessees.
6. Payment of compensation in land acquisition proceedings.
7. Setting aside garnishee notice subject to payment condition.

Analysis:
The petitioners, a company and its Managing Director, challenged the notice issued by the Income Tax Department demanding arrears of tax for assessment years 2008-09, 2011-12, 2012-13, and 2013-14. The company sought a direction for State Officials to pay 15% of the disputed demand directly to the Income Tax Department, while the Managing Director requested the same for assessment years 2008-09 to 2014-15. The petitioners had filed appeals against the assessment orders, and while seeking a stay on the balance tax amount, a garnishee notice was sent to the Special Tahsildar by the Assessing Officer, without deciding on the stay petitions. The Revenue argued that they were only concerned with tax recovery, not land acquisition proceedings, but the Court noted the connection due to the garnishee notice. The Court aimed to protect Revenue interests while granting relief to the assessees to ensure their appeals were not affected.

The Court acknowledged the progress in land acquisition proceedings and the pending payment of compensation, indicating that the lands owned by the petitioners were part of the area proposed for retention in the acquisition. Consequently, the Court allowed one writ petition, setting aside the garnishee notice subject to the condition that the petitioners pay 20% of the disputed tax within five weeks. Failure to comply would allow the Income Tax Department to initiate recovery proceedings. The Court also addressed a request to substitute security given to the Income Tax Department with the Assessing Officer's satisfaction, which would be considered in accordance with the law.

In conclusion, the Court's judgment focused on balancing the interests of the Revenue with providing relief to the assessees during the pending appeal process. By setting conditions for payment and considering the progress in land acquisition proceedings, the Court aimed to ensure a fair resolution for both parties involved.

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