TaxTMI 
TaxTMI 
2018 (4) TMI 139
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....arily deducted the said amount from the bank account of the petitioner in purported exercise of power under Section 226 (3) of the Income Tax Act 1961. 3. The facts relevant for adjudication of the present writ application lies in a narrow compass. Petitioner M/s. Sainik Food Private Limited, a registered company, participated in the tender process pursuant to the notice inviting tender for settlement of Sand Ghats located in different districts in the State of Bihar for the period of 2015 - 2019 including Sand Ghats located in Bhagalpur district. The petitioner participated in the tender process and being the highest financial bidder he was declared successful and awarded settlement for the purpose of mining for a period of five years. As per the notice inviting tender the petitioner was required to pay settlement amount in three instalments with simultaneous payment of the required amount of tax to the Sales Tax Department of the State, Income Tax Department and other statutory charges. The petitioner deposited the entire settlement amount for the year 2015 and likewise for the year 2016 in terms of the notice inviting tender. 4. The petitioner was required to deposit third and....
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.... to issue necessary guidelines as the ITO is demanding payment of a huge some on account of income tax which is not his liability but the liability of the mining office. Under immense pressure and coercion the representative of the petitioner submitted that petitioner may be granted sometimes so that third instalment amount is paid to the Income Tax Department instead of District Mining Officer. 6. Mr Gautam Kumar Kejariwal, learned counsel appearing on behalf of the petitioner submitted that the instant case is telling tale of arbitrary exercise of the jurisdiction by the statutory authority. The tax liabilities are of the District Mining Officer, Bhagalpur and for the default of District Mining Officer, the Income Tax Department in most arbitrary manner has seized the bank account of the petitioner and recovered a sum of Rs. 73,75,559/-. Thus, the action of the action of the Income Tax Department, on the face of it, is arbitrary and capricious. 7. Mr. Kejariwal submitted that the tax liability in the instant case is of the District Mining Officer, Bhagalpur who failed to deposit TDS deducted from various persons and not only the present petitioner yet the respondents Income Tax....
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.... from various settlee, Brick kiln owners. The petitioner was fastened with liability as debtor of Mining Department. The court also noticed the fact that for the default of others including the Mines and Geology Department, action of the Income Tax Department was not justified. The Court has also noted in the order dated 19.12.2017 the stand of the Mining Department that the three Mining Officers were responsible for the lapse in not collecting TCS who should have initiated steps to recover the said TCS from all previous settlees and for their default Income Tax Department has recovered the said dues of TDS/ TCS from the existing settlee, namely the petitioner M/s. Sainik Food Private Limited. 12. In the counter affidavit filed by the Department of Mines, the Principal Secretary of the Department has stated that the Department has conducted enquiry and passed an order on 2.12.2017 and directed that notice be issued to all the Mining Officers at Bhagalpur who were posted from 2007 till date and who were responsible for having not collected the TCS from the settlees. The said counter affidavit is acknowledgment of the fact that the lapse was on account of the Mining Officer of the D....
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.... 15. Counsel appearing on behalf of the Mines Department has not disputed the fact that the petitioner was not liable to pay even a single farthing towards the tax liability pursuant to the settlement of Sand Ghat under the Income Tax Act. 16. Mr.Naresh Dikshit, counsel for the Mines Department submitted that certain recovery have been made from the erstwhile settlee, however, he has not been able to explain whether the entire liability of TCS have been discharged by the Mines Department. He has not submitted that the Department is ready to make good the loss to the petitioner on account of lapse of the District Mining Officer, Bhagalpur in not depositing the TCS collected from the settlees of the Sand Ghats. 17. Mrs. Archana Sinha, learned counsel appearing on behalf of the Income Tax Department has submitted that the action of the Income Tax Department is not illegal or arbitrary. She refers to Section 226 (3) (x) to justify the action of the Department. For ready reference, Section 226(3)(x) is quoted below for ready reference. 226(3)(x). If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Assessing Officer or Tax R....
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....tted fact that primarily, the Mines And Geology Department was liable for payment of the tax collected at source (TCS/TDS). It is not also in dispute that the petitioner was fastened with the liability of the other settlee despite withdrawal of settlement on 14.10.2017 and its acceptance on 20.10.2017. Even if we accept the contention of the Income Tax Department that debtor is liable to pay the tax liability, we do not find any justification for saddling the petitioner for liability of Mining Department. The Income Tax Department has not conducted any enquiry whether other settlees of Mines and Geology Department have to pay settlement amount or not and whether the other settlees are debtor and liable to pay Income Tax liability under Section 226(3) (x) of the Income Tax Act. The order passed by this court in the present proceedings on various dates are indicative of the fact that from day one this court has made it clear that the petitioner is not liable to pay any amount and as such the Mines and Geology Department and the Income Tax Department were directed to workout mechanism to refund the amount illegally and arbitrary deducted from the bank account of the petitioner. This C....
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....r the lapse of the Mines And Geology Department in not collecting the tax liability under the settlement or failure of the Mines Department in depositing the amount collected and the remedy available to the Income Tax Officer under Sections 276B and 276BB yet the petitioner has been sandwiched in the dispute between Mines & Geology Department and Income Tax Department on failure of the Mines & Geology Department in paying the tax liability the Income Tax Department recovering the same from the Bank account of the petitioner is lawful and justified or not? 24. Neither contextual nor dictionary meaning of the debtor permits innocent taxpayer to be declared debtor of the Mines And Geology Department after surrender of lease and since the respondent Income Tax Department has not carried out any factual enquiry to examine whether there was any liability to be paid by the petitioner in connection with the settlement of Sand Ghat or not and in the absence of factual enquiry, proceeding against the petitioner treating him as debtor is not justified. We cannot approve the action of the Incomes Tax Department in treating the petitioner as debtor and attaching his bank account and recovering....
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....urt has been complied with and the action initiated against these officers will lead to its logical end in accordance with law." 26. We are reminded with the principle laid down by the Chief Justice M.C Chagla in the case of All India Groundnut Syndicate Ltd. Vs. Commissioner of Income Tax, Bombay City: AIR 1954 Bom. 232 the relevant part of the said judgment is quoted hereinbelow: "But the most surprising contention is put forward by the Department that because their own officer failed to discharge his statutory duty, the assessee is deprived of his right which the law has given to him under SubPatna section (2) of Section 24. In other words, the Department wants to benefit from and wants to take advantage of its own default. It is an elementary principle of law that no person--we take it that the Income Tax Department is included in that definition--can put forward his own default in defence to a right asserted by the other party. A person cannot say that the party claiming the right is deprived of that right because "I have committed a default and the right is lost because of that default." 27. We are of the considered view that for the lapse of the respondents, petitioner ca....
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.... statutory Notice u/s 226(3) of the Income Tax Act, 1961, with respect to The District Mining Officer-cum- Drawing and Disbursing Officer (DDO), District Mining Office, Bhagalpur, Bhagalpur, holding TAN-PTND01610A was sent to you for the kind needful w.r.t. the said DDO. Now, the above said person has made necessary correction and promised to pay the rst amount. Consequent upon this, the attachment u/s 226(3) relating to the District Mining Officer -cum- Drawing and Disbursing Officer (DDO), District Mining Officer, Bhagalpur, Bhagalpur, holding TAN-PTND01610A stands revoked. Now, the assessee may be permitted to make transactions freely. Further, I convey my sincere thanks for all your cooperation in this regard. Yours faithfully (Vikas Kumar) INCOME TAX OFFICER (TDS) Bhagalpur" 29. We are of the considered view that the ITO (TDS) Bhagalpur cannot act arbitrarily and extend favour to the Mining Department and release their Bank account and decide to attach the Bank account of the petitioner and recover the tax liability from the Bank account of the petitioner. 30. We have also noticed the fact that after exchange of pleading it has emerged in this case (a) there was no amo....