TMI Blog1970 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Partnership Act, one Bimala Devi Rateria, the wife of Jaidayal Rateria, and one Krishnakanta Rateria, wife of Dewan Chand Rateria, agreed to carry on business with equal shares on and from the aforesaid date under the name and style of P. K. Trading Company. Subsequently, the partnership was reconstituted under a fresh deed of partnership dated the 9th May, 1962, with effect from the 13th April, 1962, whereby the shares of these two ladies were reduced to 40 per cent. each and a new partner, Onkarmal Rateria, with a share of 20 per cent. was introduced. There has also been a subsequent reconstitution of this firm which is not material for the purpose of this application. The assessment of the petitioner firm for the assessment years 1962-63, the first year of the business of the firm, and 1963-64, were completed by the Income-tax Officer, District V(I), Calcutta, on the 7th February, 1967, and the 29th February, 1968. In the order for the first assessment the Income-tax Officer took the status of the petitioner to be an association of persons as against that of a unregistered firm claimed and further held that as the source of capital introduced in the business could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the income of the petitioner firm or the proportionate income therein of the two ladies who are partners have been included. The petitioner has a current account with the Union Bank of India Ltd., hereinafter referred to as the bank, and in March, 1968, it had deposited with Messrs. Andrew Yule Co. Ltd. a sum of Rs. 1 lakh as security deposit for being appointed a broker for the sale of jute goods of that company and an amount of Rs. 75,000 is lying with the company to the credit of the petitioner. On March 22, 1968, the petitioner was informed by the bank that it had been directed by the respondent-Income-tax Officer to pay to him forthwith any amount lying with the bank in the account of the petitioner on account of a tax liability of Rs. 1,30,000 due from Messrs. Dunichand Sons Co. and in accordance with the aforesaid notice the bank has attached the said account. Along with the said letter the bank forwarded a copy of the aforesaid notice to the petitioner which has been annexed to the petition. The notice is dated the 21st March, 1968, and the respondent-Income-tax Officer requires the bank to pay to him any amount due from the bank to Messrs. P. K. Trading Co. as a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referring to the letters written by Messrs. Jalan Co., it was intimated to the respondent No. 1 that, unless a notice under section 226(3) was issued in the name of Messrs. P. K. Trading Co.. it would not be possible for the company to release any payment to the respondent No. 1 that might be due from the company to Messrs. P. K. Trading Co. In answer to the aforesaid letter the respondent No. 1 by his letter dated the 15th April, 1968, informed the company that, as the firm, Messrs. P. K. Trading Co., has been found to be a benami business of the partners of Messrs. Dunichand Sons Co., the tax liability of the firm Messrs. Dunichand Sons Co., could validly be realized from tile benami business carried by the partners of the aforesaid firm as the liability of the firm is the liability of the partners. In the circumstances, the company was required to pay the amount due by it to Messrs. P. K. Trading Co. The two notices under section 226(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act), are impugned broadly on the two following grounds, viz., (1) that the said section 226(3) is ultra vires articles 14 and 19 of the Constitution of India as the said sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said firm, Dunichand Sons Co., and as such the impugned notices were validly issued to realise the tax due from the said firm, Dunichand Sons Co. Lastly, it is stated in paragraph 15, which is affirmed as information based on the records, that the petitioners and the said Dunichand Sons Co. and/or its partners are and have been found to be the same persons or association of persons and as such the petitioner is bound to pay the tax lawfully due. Before I consider the respective contentions of the learned counsel for the parties, it would be convenient to consider the relevant provisions of the repealed Income-tax Act, 1922, and the present Act. The corresponding provision in the repealed Act was in section 46(5A) which entitled the Income-tax Officer by notice in writing (a copy of which was to be forwarded to the assessee) to require any person from whom money was due or might become due to the assessee or any person who held or might subsequently hold money for or on account of the assessee to pay to the Income-tax Officer, either forthwith upon the money becoming due or being held or at or within the time specified in the notice so much of the money as was sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent No. 1 that the business of P. K. Trading Company, the petitioner, has been found to be a benami business of the said Jaidayal Rateria and Dewanchand Rateria and/or of the said Dunichand Sons Co. It is further submitted that while protective assessment might be permissible, realisation of tax in such a case from both the assessee on whom protective assessment has been made and the assessee in whose total income, the income assessed under the protective assessment is intended to be included, is not permissible. This has been settled since the decision of this court in Jagannath Hanumanbux v. Income-tax Officer. On the wording of section 226(3) itself it is clear that a garnishee order as contemplated in that sub-section can only be issued where any tax or penalty is due from a taxpayer on the persons from whom money is due or may become due to the said taxpayer. In this case the taxpayer is M/s. Dunichand Sons Co. and merely by assuming that the business of the petitioner-firm is the benami business of the partners of M/s. Dunichand Sons Co. no garnishee order contemplated by the above sub-section could be issued to the debtors of the petitioner-firm. The pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent-Income-tax Officer was justified in issuing the impugned notices and/or orders. It is further contended by Mr. Sen that if there is some basis or reason for the department's finding or conclusion that the two firms are really one and the same, this court would not go into the sufficiency of such reason. It is not necessary for me to consider the contention of the department as to whether the petitioner-firm is the benamidar of Messrs. Dunichand Sons Co. or whether the two ladies were carrying on business in the benami of their husbands. In my opinion the words of section 226(3) are clear and a notice or order thereunder can only be issued in respect of the income-tax liability of a taxpayer to persons from whom money is due or may become due to the assessee or who may subsequently hold money for or on account of the assessee. In this case the taxpayer and/or the assessee is Dunichand Sons Co and any such notice can be issued only on a debtor of the taxpayer, namely, of Dunichand Sons Co. By treating some other firm as the benamidar of the assessee-firm or of the partners of the assessee-firm the Income-tax Officer is not entitled to issue notices under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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