1999 (8) TMI 26 - HC - Income Tax

Summary

Issues Involved:
1. Validity of notices issued under section 226(3) of the IT Act, 1961.
2. Obligation of the petitioner bank to make payment of fixed deposit before its maturity.
3. Interpretation of the term "due" in the context of garnishee proceedings.
4. Jurisdiction of the IT authorities to attach fixed deposits.

Issue-wise Detailed Analysis:

1. Validity of Notices Issued Under Section 226(3) of the IT Act, 1961:
The petitions challenge the validity of notices issued under section 226(3) of the IT Act, 1961. The court upheld the validity of these notices, stating that section 226(3) empowers the Income Tax Officer (ITO) to recover outstanding dues using methods provided in the section. The notices are considered valid as long as they comply with the statutory requirements and the relationship between the garnishee and the assessee is subsisting.

2. Obligation of the Petitioner Bank to Make Payment of Fixed Deposit Before Its Maturity:
The court examined whether the petitioner bank is obligated to make the payment of fixed deposits before their maturity. It was determined that the bank, being in a debtor-creditor relationship with the assessee, has an obligation to comply with the garnishee notice and make the payment even before the maturity of the fixed deposits. The court noted that banks generally allow premature withdrawal of fixed deposits with a penalty or reduced interest, and the IT Department can step into the shoes of the assessee to claim such payment.

3. Interpretation of the Term "Due" in the Context of Garnishee Proceedings:
The term "due" was interpreted in various legal contexts to determine its applicability in garnishee proceedings. The court referenced multiple judgments and legal dictionaries to conclude that "due" can mean either immediately payable or payable in the future by reason of a present obligation. The court emphasized that the subsisting relationship between the debtor and creditor is crucial, and the amount can be attached even if it is payable at a future date.

4. Jurisdiction of the IT Authorities to Attach Fixed Deposits:
The court affirmed that the IT authorities have the jurisdiction to attach fixed deposits under section 226(3) of the IT Act. The relationship between the bank and the assessee as debtor and creditor allows the IT authorities to attach the fixed deposits irrespective of their maturity date. The court clarified that the banking norms permit the encashment of fixed deposits before maturity, thereby enabling the IT Department to claim such amounts.

Conclusion:
The court concluded that the notices issued under section 226(3) are valid, and the petitioner bank is obligated to comply with them by making the payment of fixed deposits even before their maturity. The term "due" was interpreted to include future obligations arising from present contracts, and the IT authorities have the jurisdiction to attach fixed deposits in garnishee proceedings. The court also provided safeguards for the assessee, including the requirement to serve a copy of the notice and the provision for adjudicating objections. The petitions were disposed of with these observations, and the fixed deposit receipts were ordered to remain attached pending further proceedings.