AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 461
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Vikram Co-operative Bank Ltd. Management of the said bank was in the hands of one Shri Om Prakash Agrawal in the year 1980-81. The Income-tax Department conducted series of search operations on the said bank during the period from November 8, 10, 1981 in connection with certain transactions of Shri Om Prakash Agrawal. Serious irregularities were found during the investigation and some prohibitions were imposed. The board of director of the said bank has superseded by the District Registrar of Co-operative Societies, Ahmedabad, and an Administrator was appointed for running the affairs of the bank. Initially, a representative of the Co-operative Department was appointed as Administrator, however, later on the petitioner joined as a co-administrator of the bank on October 8, 1993. 2.1 The petitioner found that it was possible to revive the said bank. Therefore, a scheme of amalgamation was proposed, after detailed discussion. Ultimately, an amalgamation scheme was framed under the provisions of the Gujarat Co-operative Societies Act and the said bank was amalgamated with the petitioner bank from September 30, 1991. It appears that at the time when raid was carried out, the Income-t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mount of fixed deposit receipts pledged on July 12, 1980 and that Vikram Co-operative Bank should pay the said amount of fixed deposit receipts under section 226(3) of the Income-tax Act, 1961 ('the Act' for short). Together with the said letter notice under section 226(3) of the Act was sent informing Vikram Co-operative Bank that a sum of Rs. 36,31,185 is due by said Shri Agarwal to the Income-tax Department On August 14, 1991, another letter was written by the Assessing Officer informing Vikram Co-operative Bank that the Income-tax Department was in possession of the fixed deposit receipt and if the same is required the Assessing Officer was prepared to hand it over to Vikram Co-operative Bank and he enclosed the photo copy of the front page of the fixed deposit receipt. On August 28, 1991 this letter was replied to by Vikram Co-operative Bank to the Assessing Officer pointing out that Vikram Co-operative Bank has obtained decree against said Shri Agarwal and his group aggregating Rs. 221.90 lakhs. Vikram Co-operative Bank, therefore, requested the Income-tax Department to lift the prohibitory order so that appropriation of the deposit amount can be made against the amou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the members of his group. 2.5 On October 26, 1993 the Assessing Officer sent his Inspector to look into the records of the petitioner bank to determine the amount pay able to said Shri Agrawal by the petitioner. On October 29, 1993 the petitioner addressed a letter, wherein complete details were given about the fact that no amount is payable by the petitioner to said Shri Agrawal and adjustments have already been made as prescribed under the laws. There upon, on October 29, 1993, the Assessing Officer has issued a notice calling upon the petitioner to produce all the relevant correspondence, files regarding fixed deposit receipts by the said Shri Agrawal and the members of his group relevant register wherein such transactions are recorded, etc. This letter was replied to by the petitioner on November 1, 1993. Another letter dated January 5, 1994 was also addressed by the petitioner to the Income-tax Department clarifying the situation. The Assessing Officer gave reply dated January 18, 1994 disputing the petitioner's right to adjust the amount against its dues recoverable from said Shri Agrawal and the members of his group and referred to the orders of the Board of Nominee, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hon'ble court (Coram : M. B. Shah and H. L. Gokhale. JJ.) and the hon'ble court was pleased to issue notice to respondent No. 2 and granted ad interim relief in terms of para 7(B) of the petition which reads as under : "7(B) Pending the hearing and final disposal of this petition to restrain the respondents from calling upon the petitioner and/or any other person with whom the petitioner has placed money either in fixed deposit receipts or call money or otherwise to pay to the Income-tax Department amount of Rs. 93,14,650 with interest in respect of the dues of Shri Om Prakash Agarwal or the members of his group." 2.7 Thereupon the petition came up for further hearing before this hon'ble court (Coram : M. B. Shah & H. L. Gokhale JJ.) and at the time of said hearing the learned counsel for the respondents made a statement that prohibitory orders as also other impugned orders are being with drawn. In view of the same, the petition did not survive and was with drawn. On April 12, 1994, respondent No. 2 issued a notice purporting to be under section 226(3) of the Act calling upon the petitioner to pay Rs. 1,22,86,006 with interest allegedly on the ground that the said am....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was holding fixed deposit receipts and, therefore, there was no need for a separate attachment order. This letter was replied to by the petitioner on November 3, 2000 pointing out that according to the decision of this honourable court in the case of Bhagwandas Narayandas v. CIT [1975] 98 ITR 194 (Guj), that fixed deposit receipts could not be attached. In any case, the petitioner called upon the respondent to give particulars and copies of attachment orders and/or extension orders, if any. The petitioner also requested to fix the hearing only after supplying the said information. 3. Mr. Soparkar, learned counsel for the petitioner submitted that in view of the provisions of the Gujarat Co-operative Societies Act and the Contract Act, the respondents have committed an error while issuing the impugned notice. He submitted that after the order dated July 13, 1999 passed by this court, notice was issued by the respondent and the petitioner gave reply pointing out the factual data and particularly stating that there was no attachment order. After letter dated November 3, 2000, respondent No. 2 has not issued notice to the petitioner and straightaway impugned order is passed. Therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as raised, at that time the amount recoverable by the fixed deposit receipts under attachment also was in the sum of Rs. 36,35,285. Thereafter, six deposit receipts were given in the sum of Rs. 8 lakhs of which deposit worth Rs. 5 lakhs was pledged with the petitioner bank and therefore the bank was entitled to refuse the said payment. The fact that pledged deposit receipts came into possession of the Income-tax Department itself shows that they were illegally taken away by the Department at the time when the raid operations took place, but an illegal possession of deposit receipts cannot give any right in the deposit receipts and no claim can be made on that basis. So far as the other two deposits were concerned. deposit holders had given letters to the bank authorising the bank to set off that amount against the dues of the associated concerns. Therefore also the bank was not bound to make any such payment. Thereafter also the bank has pointed out from time to time that all the deposits in the name of or belonging to or in connection with the said Shri Agarwal and the members of his group were subject to pledge to the bank or were given to the bank with letters of authority to se....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... outstanding dues of the assessee is illegal and in violation of the provisions of section 132(3) of the Act. He further submitted that notice under section 226(3) of the Act was also issued to the petitioner on August 12, 1991. He further submitted that notice issued on February 28, 1994 was in respect of entire demand including demand raised by the Settlement Commissioner and interest thereon. He further submitted that as per the section 226(3) of the Act, no opportunity is required to be given to the person to whom notice is issued in spite of that all the objection raised by the petitioner were considered in the order dated December 18, 2000. He further submitted that Shri Om Prakash Agrawal was the debtor of the bank, however, the issue is whether the bank had first lien over the fixed deposit receipts or not. Since there was no lien mark on the fixed deposit receipts, it cannot be said that the bank had first lien over it. He further submitted that so far as prohibitory orders are concerned, the attachment under section 226(3) does not need support of any prohibitory order. He, therefore, submitted that the petitioner could not have adjusted fixed deposit receipt amounts agai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the assessee at his last address known to the Assessing Officer or Tax Recovery Officer, and in the case of a joint account to all the joint holders at their last addresses known to the Assessing Officer or Tax Recovery Officer. (iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. (v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....very Officer may apply to the court in whose custody there is money belonging to the assessee for payment to him of the entire amount of such money, or, if it is more than the tax due, an amount sufficient to discharge the tax. (5) The Assessing Officer or Tax Recovery Officer may, if so authorized by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner by general or special order, recover any arrears of tax due from an assessee by distraint and sale of his movable property in the manner laid down in the Third Schedule." 6. We may also consider the decision of the apex court in the case of Syndicate Bank v. Vijay Kumar [1992] 74 Comp Cas 597 (SC) ; [1992] 2 SCC 330, wherein it is observed as under : "15. Now the next question is whether the fixed deposit receipts which are with the bank and on which the bank claims a general lien can be attached. So far as the attachment is concerned, the banker's lien cannot by itself be a bar for such attachment. In para. 89 of Vol. 3 of Halsbury's Laws of England, 4th Edn. the law is stated as under : 'For the purpose of satisfying a High Court or county court judgment for the paymen....