1987 (9) TMI 1

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....ge, Cuttack, the judgment-debtor deposited a sum of Rs. 3,08,533.10 to the credit of the decree obtained by the decreeholders who are the petitioners before us. The Income-tax Officer filed an application on November 20, 1985, before that court under section 226(4) of the Income-tax Act, 1961, for adjustment of the aforesaid amount, namely, Rs. 3,08,533.10, against alleged income-tax dues of the decreeholders (appellants herein) amounting to Rs. 6,88,244. The decreeholders objected on the ground that no notice of demand as required under section 156 of the Income-tax Act had been served on them for this amount. On February 10, 1986, another application was filed by the Income-tax Officer disclosing the break-up of the said sum of Rs. 6,88,2....

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....ision petition took the view that a civil court to which a petition or application has been made under section 226(4) of the Income-tax Act had no jurisdiction to decide the questions of fact, such as absence of service of a notice of demand for arrears of tax. It was held by him that once an application was made by the Income-tax Officer under subsection (4) of section 226, no discretion was given to the civil court at all to make an investigation as to whether the assessment of tax was according to law or if the tax was in arrears or whether the notice of demand had been served or whether the recovery of tax was barred by a general or special law of limitation and that on such an application, the amount deposited in court to the credit of....

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....e, it is certainly open to the court to determine as to whether there has been proper notice of demand served on the decreeholder (assessee in default) according to law. It is only after the court is satisfied of this that the court can proceed to pay over the amount demanded to the Income-tax Officer, It is settled by authority long accepted that tax can be recovered from an assessee only when it becomes a debt due from him and that it becomes a debt due when a notice of demand calling for payment of the tax has been served on the assessee. If an assessee objects to the recovery proceeding taken under section 226(4) on the ground that there has been no valid service of a notice of demand and that, therefore, no debt is due, the court mu....