Law: Income Tax Act, 1961

Section: 156,226

Income-tax------Recovery of tax ---Garnishee proceedings---Condition precedent notice to concerned person---Indian Income Tax Act, 1961, S.226. Proceedings under section 226(3) of the Income Tax Act, 1961, are in the nature of garnishee proceedings i.e., attachment of a debt by means of which the -creditor is able to reach money due from the -¬debtor which is in the hands of a third person. Issuance of a notice in writing to the 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 the same to the Assessing Officer is a sine qua non for initiating the proceedings under section 226(3) of the Act. In the absence of notice to the concerned person, there is no valid initiation of garnishee proceedings. Clause (x) of section 226(3) of the Act provides that if a person to whom notice under section 226(3) of the Act has been issued, fails to make payment in pursuance thereof only then he will be deemed to be -an assessee in default: Held, on the facts, that no notice was sent to the petitioner under section 226(3)(i) of the Act and straightaway a notice was sent by the Assistant Commissioner of Income-tax, Investigation Circle-II, Chandigarh, to the Bank attaching the amount of the petitioner lying in the Bank. The recovery proceedings were not valid and were liable to be quashed. JUDGMENT ASHOK BHAN, J.---This order shall dispose of Civil Writ Petitions Nos.4625 and 2626 of 1995, as they arise from the same set of facts giving rise to the same question of law. The facts are taken from Civil Writ Petition No.4625 of 1995. The challenge in this petition is to the notice, Annexure "P-1" issued by the Assistant Commissioner of Income-tax, Investigation Circle-2, respondent No.2 (hereinafter referred to as "respondent No.2") under section 226(3) of the Income Tax Act. 1961 (hereinafter referred to as "the Act"), directing the Manager, Bank of Baroda, Sector 17, Chandigarh, respondent No.3 (hereinafter referred to as "the bank") to pay forthwith any amount due from the bank or held by it on account of the petitioner up to Rs.5,53,920. The petitioner-company is an…

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