S.H. Kapadia, J.
1. Matter mentioned for urgent interim relief.
Facts :
2. By this petition, the petitioners seek to challenge notice dated December 24, 2002, issued by respondent No. 1 to the Branch Manager, Standard CharteredBank--bankers of the petitioners. The notice has been given under Section 226(3) of the Income-tax Act, 1961, directing the branch manager to pay to the first respondent an amount of Rs. 49,38,880 allegedly due from the petitioners as assessee in default on account of income-tax, penalty, etc. The facts preceding the impugned notice are as follows :
(a) On December 2, 2002, the Tax Recovery Officer (respondent No. 1) issued a notice to the petitioners under Section 226(3) of the Income-tax Act stating that an amount of Rs. 41.90 lakhs was due to the first respondent from DBC Sons (Bombay) Private Limited on account of income-tax. Under the said notice, the petitioners were required to pay to the first respondent amounts due from the petitioners to DBC Sons (Bombay) Private Limited failing which the petitioners were forewarned that they shall be deemed to be assessee in default.
(b) By reply dated December 17, 2002, the petitioners, denied their liability.
(c) In the meantime, on December 17, 2002, the Tax Recovery Officer (TRO) issued prohibitory order restraining the petitioners from making payments to DBC Sons (Bombay) Private Limited.
(d) By letter dated December 18, 2002, summons under Rule 83 of the Second Schedule to the Income-tax Act was served on the principal officer of the petitioners. Finally, on December 24, 2002, the impugned notice came to be issued to Standard Chartered Bank, who are the bankers of the petitioners to pay the said sum of Rs. 49,38,880 to the Income-tax Department. In this connection, it is important to note that after service of notice on the petitioners under Section 226(3)(i) the persons objecting to such notice is required to file a statement on oath that the sum demanded was not due to the assessee or that such a person did not hold any money on account of the assessee--(see Section 226(3)(vi)). Till today the petitioners have not filed such a statement.
3. Although the petitioners have not filed their objections as required under Section 226(3)(vi), the Tax Recovery Officer has not declared the petitioners as assessee in default under Section 226(3)(x). The Tax Recovery Officer has, however, issued the prohibitory order restraining the assessee from making any payment to DBC Sons (Bombay) Private Limited. In the circumstances, without going into the merits of the matter, we pass the following order.
ORDER
(i) The assessee shall file their statement on oath under Section 226(3)(vi) of the Income-tax Act on or before January 29, 2003. If they fail to do so, the Tax Recovery Officer can proceed under Section 226(3)(x) read with Sections 222 to 225 read with the Second Schedule to the Income-tax Act.
(ii) However, if the petitioners file statement on oath as required under Section 226(3)(vi) then, respondent No. 1 is directed to give a hearing to the petitioners and decide the matter in accordance with law by giving reasons on or before February 15, 2003. We are directing the hearing to be given to the petitioners as the Tax Recovery Officer had proposed such a hearing vide letter dated December 18, 2002 (see page 127 of the paper book).
(iii) In the meantime, we clarify that the prohibitory order referred to above will continue to operate and so also, the attachment of the account of the petitioners in Standard Chartered Bank will continue to operate to the extent of Rs. 49,38,880 till a period of one week from the date of communication of the decision by the Tax Recovery Officer to the petitioners. In other-words, the aforestated amount of Rs. 49,38,880 will not be appropriated to the Income-tax Department's account and will not become recoverable for a period of one week after receipt of communication by the petitioners of the order of the Tax Recovery Officer. This period of one week is given to the petitioners in case they are advised to challenge the order of the Tax Recovery Officer in accordance with law. On the expiry of the period of one week, the Tax Recovery Officer will be free to proceed with the matter unless the petitioners produce before the Tax Recovery Officer order of stay from appropriate court/authority.
(iv) On behalf of the assessee, a request is made to lift the attachment on the assessee furnishing a bank guarantee. Under the proviso to Rule 3, application of this nature has to be made to the Tax Recovery Officer. Till today, no such application has been made. However, it is open to the petitioners to make such application before the Tax Recovery Officer under the said proviso and the Tax Recovery Officer will decide such an application in accordance with law.
4. Accordingly, the above writ petition is disposed of.
5. Certified copy expedited, However, the office shall not issue certified copyunless the writ petition is numbered. The petitioners undertake to get the petition numbered on or before January 24, 2003.