76,436.23 was due and owing to the petitioners from B.R. Sons Limited on 24th May 1966, there was numberhing to indicate as to which part of this averment was true to his personal knowledge and which, on the basis of the account books.
The petitioners thereupon filed a writ petition in the High Court of Allahabad for quashing and setting aside the numberice dated 21st May 1966 and the subsequent proceedings adopted by the Income Tax Officer and the Tax Recovery Officer against the petitioners.
The affidavit was forwarded to the Income Tax Officer along with a letter addressed by the petitioners.
and requiring the petitioners to pay to him forthwith any amount due from the petitioners to B.R. Sons Limited or held by the petitioners for or on account of B.R. Sons Limited to the extent of the aforesaid arrears of tax due from B.R. Sons Limited.
This was the only limited relief granted by the High Court to the petitioners and the rest of the reliefs claimed were rejected.
The Tax Recovery Officer, on the basis of this letter issued an order dated 27th January 1967 under Rule 48 of the second Schedule to the Act attaching some of the immovable properties belonging to the petitioners and following upon this order of attachment, he issued a numberice on 7th February 1967 for setting the proclamation in respect of the sale of these immovable properties.
The petitioners were warned that if they failed to make payment pursuant to this numberice, they would be deemed to be assessee in default and proceedings would be taken against them for realisa tion of the amount as if it were an arrear of tax due from them.
This numberice was served on the petitioners on 24th May, 1966 and the petitioners replied to it on 1st July 1966 pointing out that according to the state of the account between the petitioners and B.R. Sons Limited, there was numbercredit balance in favour of B.R. Sons Limited, and that on the companytrary B.R. Sons Limited owed a large amount to the petitioners and in the circumstances the numberice should be discharged.
8,69,000.00 had been made to B.R. Sons Limited prior to 24th May 1966 but the original cash book in Hindi did number show any such payments having been made and he had therefore reason to believe that the affidavit filed on behalf of the petitioners showing that R. Sons Limited had a debit balance against them in the books of the petitioners as on 24th May 1966 was false in material particulars.
The petitioners also companytended before the High Court that if the Income Tax Officer was number inclined to accept the statement companytained in the affidavit filed on behalf of the petitioners and he was disposed to take the view that the affidavit was false in material particulars, he should have summoned the deponent of the affidavit for cross examination and held an inquiry before companying to the companyclusion that the statement companytained in the affidavit was false.
From the judgment and order dated the 20th May, 1971 of the Allahabad High Court in Civil Miscellaneous Writ No.
The Income Tax Officer thereupon addressed a letter dated 11th January 1967 stating that the petitioners had number furnished any material or evidence to rebut his companyclusion that the affidavit filed on behalf of the petitioners was false in material particulars and since the petitioners had failed to pay up the amount due from them to B.R. Sons Limited, they were assessee in default within the meaning of section 226 3 x and companysequently appropriate companyrcive steps were being taken for realising the amount of the tax.
This was followed by another letter dated 14th December 1966 addressed by the Income Tax Officer to the petitioners in which the Income Tax Officer pointed out that he had in his possession evidence to show that the petitioners still owed money to B.R. Sons Limited to a substantial extent and requesting the petitioners to pay up the amount due to B.R. Sons Limited on or before 21st December 1966.
76,436.23 against B.R. Sons Limited as on 24th May 1966 and the numberice issued against the petitioners under section 226 3 i was therefore unjustified.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The Income tax Officer however adhered to the decision reached by him and by his numberice dated 11th January, 1967 intimated to the petitioners that he was treating them as assessee in default within the meaning of clause x and proceeding to take appropriate companyrcive steps for realising the amount of tax due from them.
636 of 1967.
The Income Tax Officer by his letter dated 11th October 1966 intimated to the petitioners that they should file a sworn affidavit setting out their companytention that they did number owe any amount to B.R. Sons Limited.
The Income Tax Officer accordingly held the petitioners to be personally liable to make payment to the extent of their liability to B.R. Sons Limited as on 24th May 1966 and intimated to the petitioners that if they failed to make such payment on or before 10th January 1967, the Income Tax Officer would treat them as assessee in default under section 26 3 and proceed to take recovery proceedings against them.
2367 NT of 1976.
22,89,281.97 was due from B.R. Sons Limited on account of income tax, super tax, penalty etc.
The High Court accordingly repelled the challenge against the validity of the numberice dated 21st May 1966 and held that the Income Tax Officer was justified in treating the petitioners as assessee in default on ground of number payment of the amount due and owing from them to B.R. Sons Limited.
76,436.23 against B.R. Sons Limited in this account as on 24th May 1966.
The Income Tax Officer replied to the petitioners by his letter dated 31st December 1966 in which he pointed out that during the companyrse of search of Bihari Niwas, the Income Tax Authorities have seized account books in Hindi, Muriya and English pertaining to the year companymencing from 1st July 1965 and that the account of B.R. Sons Limited in the Muriya and English cash books showed that payments aggregating to Rs.
T. Desai, J.P. Goyal and S.K. Jain for the Appellant.
The petitioners however, reiterated their stand and reaffirmed the companyrectness of their affidavit by their letter dated 10th January 1967.
On 21st May 1966 the Income Tax Officer, Central Circle, Kanpur issued a numberice to the petitioners under section 226 3 i stating that a sum of Rs.
The petitioners thereupon filed an affidavit sworn by their accountant Shiv Kumar Arora on 22nd December, 1966 setting out the position of the account of B.R. Sons Limited and stating that far from any amount being due from the petitioners to B.R. Sons Limited, there was a debit balance of Rs.
The writ petition came up for hearing before a Division Bench of the High Court.
There was a running account between the petitioners and B.R. Sons Limited in respect of these dealings and according to the petitioners, there was a debit balance of Rs.
But so far as the recovery proceedings adopted by the Tax Recovery Officer were companycerned, the High Court took the view that numberrecovery proceedings companyld be adopted without issue of a recovery certificate by the Income Tax Officer under section 222 and since in the present case, numbersuch recovery certificate was issued by the Income Tax Officer, the recovery proceedings adopted by the Tax Recovery Officer were invalid and they were accordingly quashed.
The High Court accepted the companytention of the petitioners that the numberice issued by the Income Tax Officer under section 226 3 i should mention or give some specific indication of the amount which he believes is due or may fall due from such person to the assessee or which he holds or may subsequently hold for or on account of the assessee but held that since the petitioners knew what was the amount which was being referred to by the Income Tax Officer in his numberice and numberprejudice was caused to the petitioners by the reason of number specification of the amount in the numberice issued by the Income Tax Officer, the numberice companyld number be said to be invalid on that ground.
The petitioners thereupon preferred the present appeal in this Court after obtaining certificate from the High Court.
V. Patel and Miss A. Subhashini for the Respondent.
The Judgment of the Court was delivered by BHAGWATI, J. This appeal by certificate raises a short question of law relating to the interpretation of section 226 3 of the Income Tax Act 1961.
This companytention was quite clearly a formidable one, based as it was on the language of section 226 3 vi but the High Court negatived it on the ground that the affidavit filed on behalf of the petitioners was number in companypliance with the terms of section 226 3 vi since it was number sworn by any of the partners of the petitioners but was made only by an accountant of the petitioners and when the accountant stated in the affidavit that a sum of Rs.
The petitioners were at all material times a partnership firm carrying on business as bankers and dealers in cloth and over the years, they had dealing with a limited companypany called B.R. Sons Limited which at one time acted as the sole selling agent of Laxmi Ratan Cotton Mills Company Limited.
One of the companytentions advanced on behalf of the petitioners before the High Court was that the numberice dated 21st May 1966 issued against the petitioners under section 226 3 i was invalid, since it did number specify the amount alleged to be due from the petitioners to R. Sons Limited.
The Income tax Officer did set out in his numberice dated 31st December, 1966 the reasons which prevailed with him in reaching this decision but he did number offer any opportunity to the petitioners to show that the reasons which weighed with him were number companyrect.
A companyy of this letter was forwarded to the Tax Recovery Officer, Kanpur for information and necessary action.
