TMI Blog2017 (7) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... tition by GECAS Services India Pvt. Ltd. is whether it was mandatory for the Income Tax Department ( Department ) to have issued a notice to the Petitioner under Section 226 (3) (iii) of the Income Tax Act, 1961 ('Act') prior to issuing a notice dated 27th February, 2017 to the garnishee, i.e., the Branch Manager, HSBC (with which the Petitioner has an account) under Section 226 (3) (i) of the Income Tax Act, 1961 (the Act)? Background facts 2. The background facts are that the Petitioner (hereinafter Assessee ) is a wholly-owned subsidiary of the GE Group. 99.5% of the shares in the Petitioner are held by GECAS Services Ltd., Ireland and the remainder is held by GE Capital Aviation Funding, Ireland. The Petitioner is stated to be engaged in the business of providing marketing support, liaising and administrative services in connection with leasing of aircrafts in India to its parent company. 3. The Assessee filed its return of income for Assessment Year ( AY ) 2014-15 declaring an income of ₹ 21,37,610. The return of income was picked up for scrutiny. By an order dated 19th December, 2016 the Income Tax Officer, Ward 11(3) [(hereinafter Assessing Officer ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default under Section 220 (4) of the Act. 9. It is claimed by the Department in para 2.6 of its counter-affidavit that on 1st February, 2017 a notice under Section 221 (1) of the Act was issued to the Assessee asking it to furnish a reply by 9th February, 2017 as to why penalty should not be levied on it for being an Assessee in default. It is claimed that no reply was received to the said notice. 10. Thereafter, in para 2.7 of the counter-affidavit, it is stated as under: 2.7 In view of the above facts, notice under Section 226 (3) of the Act was issued by the Assessing Officer to the Petitioner s banker on 27.02.2017 to recover the outstanding demand of ₹ 94,51,390/-. The banker issued a Cheque/Pay Order of the aforesaid amount which was received at the DAK Counter of the Ward on 15.03.2017, and was put up before the AO on 16.03.2017. 18.03.2017 (Saturday) and 19.03.2017 (Sunday) were holidays. On 21.03.2017 copy of the notice (dated 27.02.217), was sent to the Speed Post Department by the Assessing Officer and was, thereafter, finally booked/sent by the Speed Post Department on 22.02.2017 to the Petitioner/Assessee. The aforesaid copy of the notice sent by spee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords of the Department. He pointed out that the CBDT Circular No. 1914 applied only if a stay application had been preferred by the Assessee along with its appeal before the CIT(A). Likewise, the decisions of the Division Bench of the Allahabad High Court in Farrukhabad Gramin Bank v. Additional Commissioner of Income Tax (supra) and of the Bombay High Court in UTI Mutual Fund v. Income Tax Officer (supra) would apply only in the circumstances where an application for stay had been filed by the Assessee along with its appeal. In the present case, admittedly, no such application for stay has been filed till date. 15. Mr. Chaudhary pointed out that in Purnima Das v. Union of India (supra), the learned Single Judge of the Calcutta High Court had failed to notice an earlier judgment of the another Single Judge of the same High Court in Golam Momen v. Asstt. Commissioner of Income Tax (2003) 263 ITR 69 (Cal) which held to the contrary. This anomaly was noticed in a subsequent judgment of another learned Single Judge of the Calcutta High Court in Anil Kumar Banerjee v. Union of India (2014) 44 taxmann.com 465 (Cal). Therefore, as far as the Calcutta High Court is concerned, the two ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emanded amount. 20. At this juncture, it requires to be noticed that Para 2B of Instruction No. 1914 of the CBDT dated 2nd December, 1993 on the subject of recovery of demands is titled Stay Petitions . Para 2C gives Guidelines for Staying Demand wherein the AO may impose such conditions as he may think fit. The above Instruction No. 1914 was further modified by the OM dated 29th February, 2016. In para 4 of the OM, it is stated that the guidelines were being modified in order to streamline the process of grant of stay. Paras (A) and (B) therein, which are relevant for the present purpose, read thus: (A) In a case where the outstanding demand is disputed before CIT(A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case fails in the category discussed in para (B) hereunder. (B) In a situation where, (a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the third part was negatived by the Supreme Court. Following the said decision of the Supreme Court, the Madras High Court in P.P. Kanniah Chetty v. Income Tax Officer (supra) held: in order to issue a garnishee order, it is not necessary that the person from whom the tax is due in respect of which the garnishee order is issued be a defaulter within the meaning of Section 46 of the Indian Income Tax Act 1922 or the corresponding provision of the Income Tax Act 1961. 24. Consequently, this Court is unable to accept the contention of the Assessee that the decision of the Allahabad High Court in Farrukhabad Gramin Bank v. Additional Commissioner of Income Tax (supra) on the question of the mandatory nature of the requirement of prior service of notice upon the Assessee under Section 226 (3) (iii) of the Act reflects the correct position in law. 25. Turning to the decision of in UTI Mutual Fund v. Income Tax Officer (supra), it is plain from the facts of the case that there was an application for stay moved by the Petitioner before the AO immediately on the receipt of the demand. Thereafter, the Petitioner moved the CIT seeking his intervention apprehending that the AO may no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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