D.K. Seth, J. - (1.) This appeal is directed against an order dated August 28, 2003, passed by the learned single judge disposing of W. P. No. 941 of 2003 (see [2004] 267 ITR 241). The writ petitioner/appellant-Shaw Wallace and Company Limited (SWCL) had assailed the notices issued under Section 226(3)(x) of the Income-tax Act, 1961 ("the Act"), against the Andhra Pradesh Beverages Corporation Limited (APBCL) as debtor of SWCL, the garnishee against whom a notice under Section 226(3) of the Act was issued, seeking to recover the tax due and payable by Visisth Chay Vyapar Limited (VCVL) in respect of the amount due and payable by SWCL, the garnishee to VCVL, the decree-holder, pursuant to a decree obtained by the latter against the former.
(2.) The case has a chequered history. A brief reference to the facts would be of great assistance to understand the situation and follow the erudite arguments advanced respectively by Mr. Sudipta Sarkar, senior counsel for the appellants, Mr. S.K. Kapoor, Additional Solicitor General for the Income-tax Department, and Mr. Anindya Mitra, senior advocate for VCVL.
(3.) It appears that SWCL obtained a loan from the decree-holder, VCVL. This loan, reflected in the return of SWCL, was held to be a sham transaction and was assessed and charged to income-tax in the assessment of income of SWCL made by the income-tax authority at Calcutta. The tax payable on the said loan amount held to be an income of the assessee/appellant was being recovered from the appellant, SWCL, in instalments. Claiming to recover the said loan amount since held to be a sham transaction, the VCVL filed a suit against SWCL. This suit was decreed. The decree-holder, VCVL, was assessed in respect of its own income. The tax payable by the decree-holder, VCVL, was sought to be recovered by the income-tax authority at Delhi where VCVL was assessed. VCVL, the decree-holder, offered the decree obtained by it against the appellant, SWCL, for recovery of the income-tax payable by VCVL. After a certificate was drawn up against VCVL, the Tax Recovery Officer (TRO) at Delhi through a notice under Section 226(3) of the Act sought to recover the tax payable by the decree-holder, VCVL, from the appellant, SWCL, pursuant to the said decree. It appears that some amount has since been recovered from SWCL pursuant to the notice under Section 226(3). Series of litigations ensued. SWCL was all along objecting to the realisation under Section 226(3). However, the balance amount was again sought to be recovered from the debtors of SWCL, particularly from APBCL through a notice under Section 226(3), which has since been challenged in the writ petition out of which the appeal arises. On an earlier occasion challenging the notice under Section 226(3) issued upon SWCL, this court had observed as to whether Section 226(3) could be applicable having regard to the facts and circumstances of the case or not should be determined by the Tax Recovery Officer. After this order, the Tax Recovery Officer determined that Section 226(3) is applicable in the present case. Against this order, W. P. No. 941 of 2003 was moved.;