Law:

Section:

Section 226 of the Income-tax Act, 1961 - Collection and recovery of tax - Other mode of recovery - From documents it was evident, prima facie, that there was contract between one 'SW' and Defence Ministry for supply of liquor and petitioner supplied liquor on behalf of 'SW' - Whether money in hands of petitioner arising out of such supply was due and held on behalf of 'SW' - Held, yes - Whether where 'SW' defaulted in payment of tax dues, TRO was fully justified in issuing garnishee notice to Defence Ministry under section 226 and Ministry was justified in withholding payment to petitioner - Held, yes FACTS In instant writ, the petitioners' case was that they were companies with dominant shareholding by a company 'SW'. The petitioners supplied liquor to respondent, Canteen Stores Department of the Ministry of Defence. An amount was outstanding from the assessee towards income-tax and to recover it, a notice had been issued by the TRO under section 226(3) to respondent directing it to stop payment which was due from the Canteen Stores Department on account of the assessee. The grievance of the petitioners was that on the basis of that notice, respondent had stopped making any payment to them for the supplies which they had already made to respondent. They contended that their income was independent of that of the 'SW' and, therefore, if the 'SW' was in default of any amount as arrived at by its Assessing Officer, the recovery could not be transferred and effected against them. On the other hand, the respondents submitted that the entire contractual relationship with respect to supply of liquor was between the Defence Ministry and company 'SW' on the other. All necessary documents were signed by company 'SW' with the respondent. All these supplies made by the present petitioners were on behalf of the company 'SW'. Therefore, when TRO sent the garnishee notice to respondent No. 1, there was nothing wrong on the part of respondent in stopping the payments to the petitioners. HELD It was prima facie established that the entire contractual relationship for the concerned supply of IMFL to the Canteen Stores Department was between the company 'SW' and respondent No.…

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