Law:

Section:

Section 226(3) of the Income tax Act, 1961 [Corresponding to section 46 (5A) of Indian Income tax Act, 1922] - Collection and recovery of tax - Assessment years 1950-51 to 1952-53 - After death of deceased who was partner in petitioner firm, amount standing to his credit was converted into capital of his legal representatives in firm - ITO issued notice under section 46(5A) of 1922 Act forbearing petitioner-firm from paying amounts to legal representatives of deceased till claim of department relating to income-tax arrears of deceased was satisfied - Firm, however, permitted legal representatives to withdraw entire amount standing to their credit including capital - Whether since petitioner was informed of tax arrears of deceased and property of deceased coming into possession of legal representatives, it was liable to hold entire amount due to legal representatives for satisfaction of tax arrears of deceased - Held, yes - Whether, therefore, payment of amount by petitioner to legal representatives in spite of notice under section 46(5A) of 1922 Act was on its own risk and as such it was liable to pay amount to department - Held, yes FACTS After the death of the deceased who was partner in the petitioner firm, his widow became a partner and his two minor daughters were admitted to the benefits of the partnership. By a letter the ITO informed the petitioner that the deceased was in arrears of income-tax; that his legal representatives who, later on, had either become partners or been admitted to the partnership, were liable to pay tax due by the deceased to the extent to which they had inherited the asset of the deceased and that, therefore, the petitioner would not pay any amount to the legal heirs. Along with this letter, he also enclosed a notice under section 46(5A) of the 1922 Act, forbearing the petitioner-firm from paying the amounts to the legal representatives of the deceased till the claim of the department relating to income-tax arrears of the deceased was satisfied. But, in spite of said notice, the petitioner permitted the widow and the two daughters of the deceased to withdraw the entire amount standing to their credit including the capital.…

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