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KANERIA GRANITO LTD Versus ASSISTANT COMMISSIONER OF INCOME TAX

2016 (7) TMI 65 - GUJARAT HIGH COURT

Recovery of the tax dues - notice u/s. 226(3) issued to the Allahabad Bank - notice of attachment of bank account - existence of debtor-creditor relationship - Held that:- Under clause (i) of sub section (3) of section 226, the Assessing Officer has power to issue notice requiring any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Assessing Officer forthwith upon the money beco .....

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r may subsequently hold money for or on account of the assessee. - This power is essentially in the nature of garnishee order requiring the debtor of the assessee to make direct payment to the Assessing Officer of the arrears of tax instead of paying over such amount to the assessee. In essence, therefore, this power would be available when there is person from whom money is due or may become due to the assessee or there is a person who holds or may subsequently hold for or on account of th .....

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rom the bank. The bank and the assessee, therefore, do not have the debtor-creditor relationship. See K.M. ADAM Versus INCOME-TAX OFFICER, II ADDITIONAL II CIRCLE, MADRAS [1957 (10) TMI 32 - MADRAS HIGH COURT]. In the result, impugned notice of attachment is set aside - Decided in favour of assessee - SPECIAL CIVIL APPLICATION NO. 14497 of 2014 - Dated:- 27-6-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR TEJ SHAH, ADVOCATE FOR THE RESPONDENT : MR SUDHIR M MEHTA, ADVOC .....

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issued by the respondent to the Allahabad Bank dtd. 15- 09-2014 qua Cash Credit account no. 50003029622, Term Loan A/c. No. 5003178046 & Term Loan A/c. No. 50017597471; c. Directing the respondent to grant stay on the recovery of outstanding demand by disposing off the stay application preferred before it; d. Pending admission and final hearing of this petition, direct the respondent to grant stay on the recovery of O/s demand and withdraw the notice u/s 226(3) issued by the respondent to t .....

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or short] computing total income of the assessee for the said year at ₹ 12.10 crores. He raised a demand of ₹ 5.86 crores (rounded off). Against such order of assesment, the petitioner has filed appeal before the Appellate Commissioner which appeal is pending. At that stage, the Assessing Officer started the procedure for recovery of the unpaid tax. By way of coercive measures, he issued notice under Section 226(3) of the Act to the Allahabad Bank, Girdhar Chambers, Vadodara Branch, .....

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c. No. 50003178046 T/L Bank A/c. No. 50017597471 T/L 3. Case of the petitioner is that such accounts were either in the nature of cash credit account or term loan account and that, therefore, it cannot be stated that there was any money due to the petitioner from the bank which can be recovered in terms of sub section (3) of Section 226 of the Act. 4. Having heard learned counsel for the parties and having perused the materials on record we may notice that Section 226 of the Act pertains to othe .....

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ee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the [Assessing] Officer [or Tax Recovery Officer] either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice unde .....

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y 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. 5. Under clause (i) of sub section (3) of section 226, the Assessing Officer has power to issue notice requiring any per .....

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ecovery, the Assessing Officer would have power to recover the same to the extent of the arrears of the assessee from any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee. This power is essentially in the nature of garnishee order requiring the debtor of the assessee to make direct payment to the Assessing Officer of the arrears of tax instead of paying over such amount to the assessee. In ess .....

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therefore, that the bank may make available to the assessee would necessarily be in the nature of a loan or a cash credit facility, in either case, would be in the nature of borrowing by the assessee from the bank. The bank and the assessee, therefore, do not have the debtor-creditor relationship. 7. Somewhat similar situation arose before the learned Single Judge of Madras High Court in case of K.M.Adam vs. Income Tax Officer, II Additional II Circle, Madra reported in 33 ITR 26. The Assessing .....

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are two: (i) any person from whom money is due or may become due to the assessee; and (2) any person who holds or may subsequently hold money for or on account of the assessee. The question which arises for consideration in the present case is, as to whether a bank, which has afforded overdraft facilities to its customer, holds the amount, specified as that up to which the customer may draw as either a debtor of the customer or holds that money on behalf of or on account of the customer. 8. Thi .....

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