Law:

Section:

Section 226 of the Income-tax act, 1961 [Corresponding to section 46(5A) of Indian Income-tax Act, 1922] - Collection and recovery of tax - Other modes of recovery - Three recovery certificates were outstanding against petitioner-assessee - Since nothing was received from petitioner, Commissioner remitted said outstanding amount - Later on, department came to know that another firm owed certain amount to petitioner - Thus, a notice under section 46(5A) was issued to said firm that sums owed by firm to petitioner, should be paid to him (ITO) - Whether mere fact that demand was written of by department in their own account, did not preclude department to recover amount if and when they found that it had become possible to recover same - Held, yes - Whether, moreover, in view of fact that proceedings for recovery had commenced within prescribed period of one year, it could not therefore be held that ITO had no power to take action under section 46(5A) - Held, yes FACTS The petitioner-assessee was a firm. There were three recovery certificates outstanding against the assessee for three assessment years. Nothing was, however, recovered. The ITO made a report to the Commissioner that the amounts were outstanding against the assessees and that nothing had been recovered from them on which the IAC recommended that the demands might be written off. The Department later came to know that another firm 'M' owed some money to the petitioner and in exercise of the powers, under section 46(5A) the ITO sent a notice to the said firm saying that the assessed amounts were due from the petitioners and that the sums owed by the firm 'M' to the petitioners to the extent of the assessed amounts should be paid to him instead of to the petitioner. Against this order of ITO instant writ petition was filed on the ground the assessed amount had been remitted by the Commissioner and that there was no money to be recovered from them regarding which action under section 46(5A) could be taken. The petitioners also alleged that the ITO could not issue a fresh certificate under section 46(2) of the Act, in view of the provision of section 46(7). HELD Order was passed on the recommendation of…

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