9911796707
TMI Blog2001 (7) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... are held by SWC. One Central Distillery and Breweries Limited, which is one of the petitioners, has 98 per cent of its shares held by SWC. Three other petitioners, viz., Maharashtra Distilleries Limited, Raj Breweries Limited and VRV Breweries and Bottling Industries Limited, have 100 per cent. of their shares held by SWC. All these petitioners supply Indian manufactured foreign liquor ("IMFL" for short) to respondent No. 1, i.e., the canteen stores department of the Ministry of Defence, Government of India. Their submission is that their income is independent of that of SWC and, therefore, if SWC is in default of any amounts as arrived at by its Assessing Officer, the recovery cannot be transferred and effected against them. The petitioners in Writ Petitions Nos. 1259 and 1261 of 2001 are independent tie-up units. Now, what has happened is that an amount of Rs. 93,23,43,357 is outstanding from Shaw Wallace and Company towards income-tax and to recover it, a notice dated March 26, 2001, has been issued by the Tax Recovery Officer under section 226(3) of the Income-tax Act, 1961 (for short, "the Act"), to respondent No. 1 directing it to stop payments which are due from the cantee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held that a plain reading of section 226(3), suggests that before any notice can be issued under section 226(3) the assessee must be in default in payment of tax. In the instant case, he submitted that whether Shaw Wallace and Co., is in default or not, no notice of demand can be served on the present petitioners and the order or stoppage of payment by the first respondent was unjustified. Mr. Deodhar, on the other hand, drew our attention to the fact that the petitioners are as such not challenging the demand made by the income-tax authorities on Shaw Wallace and Co. There is a specific averment to that effect in paragraph 3 of the petitions. He drew our attention to the various documents available on the file of the Tax Recovery Officer and submitted that the entire contractual relationship with respect to supply of IMFL was between respondents Nos. 1 and 2 on the one hand and Shaw Wallace and Company on the other. All necessary documents were signed by Shaw Wallace and Company with the first respondent. It is Shaw Wallace and Company which informed the first respondent that supply will be made to the first respondent from the various distilleries whose names were made availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular provision of law and direction given by respondent No. 4 and it had to forward those payments to the Tax Recovery Officer on account of the default made by Shaw Wallace and Company. In our view, there is much force in the submissions advanced by Mr. Deodhar. There can be no quarrel with the authorities relied upon by the petitioners. However, in the facts of the present case, respondents Nos. 3 and 4 have, prima facie, established that the entire contractual relationship for the concerned supply of IMFL to the canteen stores department was between Shaw Wallace and Company and respondent No. 1. The money in the hands of the petitioners is due and held on behalf of the assessee and hence the garnishee notice will not be hit by the proposition in Veerichetty's case [1976] 102 ITR 225 from Karnataka or of the apex court in Budha Pictures case [1967] 65 ITR 620. And as required under the judgment in McDermott's case [1988] 173 ITR 164 of this court, the assessee in the present case, i.e., Shaw Wallace and Company, is very much in default and all prior requirements have been completed before the Assessing Officer. In that view of the matter, respondent No. 4 was fully justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent No. 4 that prima facie the supplies concerned were made by and on behalf of Shaw Wallace and Company and, therefore, all such payments on account of these sup plies are now stopped by respondent No. 1. In our view, there is nothing wrong on the part of respondent No. 1 in stopping these payments because respondent No. 1 is duty bound to obey the notice which is issued by the Tax Recovery Officer. If the petitioners are aggrieved by the action of respondent No. 1, it would be open to them to take appropriate proceedings including filing of a suit, if they so desire to recover the amounts. Alternatively, in the facts and circumstances of the present case, it would be open to them to make a representation to the Assessing Officer, on whose assessment the disputed notice has been issued by the Tax Recovery Officer. The language of section 226(3)(vi) of the Act permits a person to whom a notice is sent to lodge his objections and after those objections are raised there is also a provision under clause (vii) that thereafter the notice can be revoked. Undoubtedly, the section provides for these objections being raised by a person to whom the notice is sent. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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