Challenge to Income Tax Recovery Notice under Section 226(3) Allowed with Stay Order

The High Court of Calcutta considered a challenge to a notice under Section 226(3) of the Income Tax Act, 1961, regarding a recovery notice for an amount due for the assessment year. The petitioner argued against the validity of the notice, citing errors in the proceeding. The Court allowed the writ petition and directed the petitioner to pursue an appeal by depositing 20% of the assessed amount. During the appeal process, the demand notice and bank notices were stayed. The judgment emphasized that observations on the bank notice were for the writ petition only, instructing the appellate authority to decide the appeal independently. The writ petition was disposed of without costs.

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Issues: Challenge to notice under Section 226(3) of the Income Tax Act, 1961; Error apparent on the face of record and perversity in the proceeding; Validity of the recovery notice; Appeal against assessment order and demand notice; Stay on demand notice and notices issued under Section 226(3) of the Income Tax Act; Disposal of the writ petition.

The judgment by the High Court of Calcutta involved a challenge to a notice under Section 226(3) of the Income Tax Act, 1961. The petitioner contested a recovery notice issued by the Assistant Commissioner of Income Tax for an amount due and payable for the assessment year 2017-2018. The petitioner argued that the recovery notice could not precede the demand, pointing out an error apparent on the face of the record and perversity in the proceeding. The Court entertained the writ petition to consider the validity of the notice under Section 226(3) of the Income Tax Act, 1961.

Furthermore, it was revealed that the petitioner had also filed an appeal against the assessment order and the demand notice. The Court directed the petitioner to pursue the appeal by depositing 20% of the assessed amount. The appeal was to be disposed of within one month from the date of deposit, and during this period, the demand notice and notices issued to the banks were stayed, subject to the result of the appeal.

The judgment clarified that the observations made regarding the notice issued to the bank were solely for the purpose of disposing of the writ petition. The appellate authority was instructed not to be influenced by these observations and to proceed with the appeal based on its own merit and the available documents, in accordance with the law. Ultimately, the writ petition was disposed of without any order as to costs, and the parties were to receive an urgent certified copy of the order if requested.

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