TaxTMI 
TaxTMI 
2022 (5) TMI 139
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....ched in lieu of notice dated 02.07.2021 in favour of the petitioners; (iii) Pending admission, final hearing and disposal of this petition, Your Lordships may be pleased to stay the implementation of the notice dated 02.07.2021; (iv) Pending admission, final hearing and disposal of this petition, Your Lordships may be pleased to pass an order releasing all the properties except the properties mentioned in the notice dated 13.10.2017. (v) Pass any such other and/or further orders that Your Lordships deems appropriate, just and proper, in the facts and circumstances of the present case." 2. We need not delve much into the facts giving rise to this litigation, as not only the pivotal issue raised in the present litigation is now squarely covered by a decision of this High Court but the two orders dated 24th February 2022 and 17th March 2022 respectively would make the picture abundantly clear. 3. The order dated 24th February 2022 reads thus : "1. Mr. Utkarsh Sharma, the learned A.G.P. prays for some time as he has not been able to take proper instructions in the matter. There is no problem in granting time to Mr. Sharma, but on the returnable....
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....e fact that M/s M.M. Traders and M/s. Standard Textiles are proprietary firms whereas, M/s. Gaurang Traders and M/s. M.S. Cotton Co. are partnership firms. Prima facie, having regard to the materials on record, it appears to be a case of fraud. We are informed that criminal prosecution has also been instituted. Sunil Shah might have indulged in the acts constituting offence punishable under the Indian Penal Code. We are informed that the proprietors and the partners of the firms are also sought to be prosecuted. We are informed that the four writ applicants herein as family members of Sunil Shah, have also been arraigned as accused. Be that as it may, the short point for our consideration is whether for the purpose of recovering the amount as fixed towards the liability of the two proprietary firms and the two partnership firms, whether the personal assets of the four writ applicants herein could have been attached by invoking Section 44 of the Act. In other words, whether the personal assets of the writ applicants can be put to auction and the amount be recovered towards the discharge of the liability of the two proprietary firms and the two partnership firms. 5. Section ....
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....Digant Popat, the learned counsel appearing on behalf of the writ-applicants, vehemently submitted that the attachment of the individual properties of the writ-applicants could be termed as a very arbitrary action on the part of the respondents. The respondents could not have invoked Section 44 of the GVAT Act for the purpose of attaching the individual assets of the writ-applicants on the ground that the writapplicants are all family members of one Shri Sunil Shah (since deceased) and late Sunil Shah indulged into a large scale fraud. 6. Mr.Popat submitted that Ruchita Shah is the daughter-inlaw of late Sunil Shah and wife of Shri Rohan Shah. She has neither withdrawn any cash from any account of late Sunil Shah nor is she named in any of the FIRs or in the assessment orders which were passed in 2017. Inspite of that, even her joint bank account with her parents at Mumbai has been attached. Few other properties belonging to her are also attached. 7. Mr.Popat vehemently submitted that late Sunil Shah nor any of his family members are the registered dealers. This fact is evident from the various assessment orders passed in the assessment of the firms, i.e. the two partnership ....
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.... be stated that the present Petitioners are holding monies, for or on account of those four firms. 5. At this stage, it is pertinent to note that on the basis of the aforesaid prima facie view, the impugned notice is issued upon the present Petitioners, which is always subject to the inquiry conducted by the Commissioner, as contemplated under Section 44(5) of the GVAT Act. 6. Thus, in view of the typical facts and circumstances of the case, the action of the Respondent Authorities could not be considered to be without jurisdiction and/or arbitrary, and even otherwise, the impugned letter is merely a notice, which is subject to the full-fledged inquiry, as contemplated under Section 44(5) of the GVAT Act. 7. Alternatively, it is submitted that on perusing Section 49 of the GVAT Act, Mr.Sunil Shah could also be prima-facie considered as 'dealer' for the purpose of recovery of the tax dues of the four firms. Thus, while considering Mr.Sunil Shah as 'dealer' in terms of Section 44 of the GVAT Act, the monies due or held by the present petitioners for or on account of Sunil Shah, can also be prima-facie recovered by the Respondent Authorities. 8. The....
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....to pay the amount due by the dealer in respect of the arrears of tax, penalty or interest under this Act, or the whole of the money when it is equal to or less than that amount. Explanation.- For the purposes of this subsection, the amount of monies due to a dealer from, or monies held for or on account of a dealer by any person, shall be calculated by the Commissioner after deducting there from such claims, if any, lawfully subsisting, as may have fallen due for payment by such dealer to such person. (2) The Commissioner may amend or revoke any suchnotice or extended the time for making any payment in pursuance of the notice. (3) Any person making any payment in compliancewith a notice under this section shall be deemed to have made the payment under the authority of the dealer, and the receipt thereof by the Commissioner shall continue a good and sufficient discharge of the liability of such person to the extent of the amount specified in the receipt. (4) Any person discharging any liability to the dealer after receipt of the notice referred to in this section, shall be personally liable to the Commissioner to the extent of the liability discha....
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.... 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 subsection, 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) Any claim respecting any property in relation to which a notice under this sub- section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this sub-section shall....
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....y to the tax-payer without having to proceed to judgment and issue execution. Thus, subsection (1) authorises the Commissioner to give notice to any person mentioned in (a), (b), (c) on (d) of the subsection to pay to the Commissioner either forthwith or at or within a time specified in the notice, not being a time before the money becomes due or is held, such amount as is sufficient to pay the tax due and any financial costs. or the whole of the money if it is not greater than (he amount due. A copy of the notice is to be forwarded to the tax-payer. Any person making payment pursuant to such a notice is deemed to have been acting under the authority of the taxpayer and is indemnified in respect of the payment (sub-section 4), whilst any person failing to comply with such a notice is guilty of an offence (subsection 2). For a case in which Section 218 was considered, Re, Whiting 1951 VLR 205 has been referred to. We have not been able to get at this report and we do not know the decision therein." 15. The plain reading of Section 44 of the GVAT Act would indicate that it provides a machinery for the VAT department to collect tax arrears from the debtors of the ass....
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....ce and the letter. The High Court held that an unutilised overdraft account does not render the banker a debtor in any sense and the banker is, therefore, not a person from whom money is due to the customer. It further held that the banker in such a case is not a "person from whom money became due". Accordingly a writ was issued. Rajagopala Aiyangar, J., as he then was, referring to the provision of Section 46(5-A), in 1958-33 ITR 26 (AIR 1958 Mad 181) observed thus at page 31. "Unless the bank were a debtor there could be no attachment and an unutilised overdraft account does not render the bank a debtor in any sense, and, therefore, the bank is not a person from whom money is due to the customer. Nor does the bank in such a case fall within the expression 'person from whom money may become due." Again, at page 32, he observes : "Section 46(5-A) of the Act cannot on any construction be intended as a credit-freeze, with this feature superadded, that if there was any thawing, the resultant credit released became immediately payable to the department. Of course, if at any stage the account of the customer is in credit, Section 46(5-A) would come into pl....
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....n issued to it nor has any averment to that effect been made in the affidavit-in-reply filed on behalf of the first respondent. Therefore, the basic requirement for invoking the provisions of section 44 of the GVAT Act, viz. service of notice to the dealer under sub-section (1) thereof, has not been satisfied. 19. Another aspect of the matter is that a condition precedent for issuing notice under section 44 of the GVAT Act to the second respondent bank is that the said bank should be holding or may subsequently hold monies on account of such dealer. The expression "dealer" has been defined under section 2(10) of the GVAT Act to mean any person who, for the purpose of or consequential to his engagement in or, in connection with or incidental to or in the course of business buys, sells, manufactures, makes supplies or distributes goods directly or otherwise, whether for cash or deferred payment, or for commission, remuneration or otherwise and includes the categories of persons enumerated thereunder. In the present case, it is not the case of the first respondent that the bank was holding any monies on account of the dealer, viz. the third respondent herein. Therefore, the i....
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..... 24. After the person concerned objects by filing a statement that the sum demanded or any part thereof is not due from him to the assessee, then recovery cannot be effected from him unless the Assessing Officer or the Tax Recovery Officer holds an inquiry in which the concerned person is associated. In the inquiry, such person or dealer shall have to be given an opportunity of being heard. 25. In the case on hand, no notice was sent to the writ-applicants nos.2 and 3 respectively in the manner prescribed and straightway the respondent no.1 proceeded to attach the personal properties of the two writ-applicants. 26. Had the notice been sent to the writ-applicants nos.2 and 3 respectively as contemplated under sub-section (5) of Section 44 of the GVAT Act, both would have had the liberty to file their objections denying their liability to pay the amount as they did not owe the money to the assessee in default. 27. The entire proceedings, being without any jurisdiction, have resulted in undue harassment to the writ-applicants nos.2 and 3 respectively as the recovery was sought to be made without issuing notice to the writ-applicants. 28. I....