AASHRAYA SOUHARD CREDIT SOCIETY LTD Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ON account of search proceedings conducted against one Sri. Ramesh Motilal Chindak and family members in exercise of powers under s. 132 of the IT Act, 1961 (for short 'the Act') block assessment came to be made and assessment orders came to be passed accordingly. On tax amount being quantified, demand has been raised against the assessee. During the course of assessment proceedings, it was noticed by the Department that family members of the assessee had floated a co -operative society known and called as Shivaganga Multi purpose Co -operative Society Ltd. and the assessees had invested their undeclared income in the said cooperative society which in turn had invested the amounts in petitioner - -Shree Aashraya Souhard Credit Society Ltd., and as such garnishee notice under s. 226(3) came to be issued by the Department to the petitioner -Society on 12th Feb., 2014 vide Annex. -G1. Same was not replied by the petitioner. Hence, one more notice came to be issued on 28th Feb., 2014 Annex. -H calling upon petitioner -Society to show cause as to why it should not be treated as an assessee in default as per s. 226(3)(x) of the Act and as to why further proceedings should not be initiated for realisation of the amount as if it was an arrears of tax due from the petitioner -Society itself by treating it as assessee in default. Said notice came to be replied by the petitioner by reply dt. 1st March, 2014 which was communicated to the respondent by registered post acknowledgement due and it was duly served on the respondent on 10th March, 2014. However, by the time reply could be received, respondent had already proceeded to pass an order under s. 226(3)(x) by treating petitioner as a deemed defaulter for not complying with the demand made under notice issued under s. 226(3) of the Act. Accordingly, garnishee notices came to be issued as per Annexs. A to A4 and demand notices was raised as per Annexs. A -5 to A -9. Immediately, thereafter, petitioner has submitted a representation on 20th March, 2014 to respondent requesting the respondent not to treat petitioner -Society as a deemed defaulter and undertaking to pay the amounts due to its depositors (assessees) in respect of which it has received the garnishee notices immediately after maturity of deposits or on the dates when fixed deposits become due and payable to them and as such, petitioner -society requested the respondent to treat said representation as an application for rectification of the order passed against it by respondent whereunder petitioners had been held as assessee in default. Said representation was not considered by respondent. A communication has been sent to the petitioner on 24th March, 2014 Annex. K calling upon petitioner to comply with the garnishee notices Annexs. A to A4. As such, petitioner is before this Court. The grievance of the petitioner as urged by Sri. C.V. Angadi, learned counsel appearing for the petitioner -Society in these writ petitions is fixed deposits (for short FDRs) in respect of which garnishee notices have been issued is yet to mature or they have not become due and premature payment would not arise and it is not liable to pay the proceeds of the fixed deposit before the maturity period and as such, petitioner -society cannot be treated as a creditor of the assessee to enable the Department to issue garnishee notice. In support of his submission, he has relied upon the judgment of the Hon'ble apex Court in the case of Administrator of the Specified Undertaking of Unit Trust of India vs. B.M. Malani & Ors. : (2007) 212 CTR (SC) 425.

(2.) PER contra, Sri. Raviraj, learned counsel appearing for the respondent -Department would contend that when undisputedly the Department has concluded assessment proceedings against the assessees, TRO would get Jurisdiction to recover tax demanded and in the instant case, the AO having found that assessees undisclosed income had been invested in Shivaganga Multi -purpose Co -operative Society which in turn had invested these amounts in Aashraya Souhard Credit Society Ltd., namely the petitioner -Society, Recovery Officer was well within his bounds to recover the tax due from assessee by issuance of notice under s. 226(3) inasmuch as depositor or the assessee would be entitled to seek for premature withdrawal of fixed deposits and on account of AO or the TRO stepping into the shoes of the assessee, it cannot be contended that AO will have to wait till maturity of the fixed deposits and thereafter invoke provision of s. 226(3) since their fixed deposits had already been attached by the Department by issuance of prohibitory orders at the time of conducting search proceedings under s. 132 against the petitioner -Society and as such TRO Is well within his bounds to recover the amounts due to the assessee from Society by treating the petitioner -Society as an assessee in default. In support of his submission, he has relied upon the judgment of a co -ordinate bench of this Court in the case of Vysya Bank Ltd. vs. Jt. CIT, (2000) 153 CTR (Kar) 60 :, (2000) 241 ITR 173 (Kar).

(3.) RECORDS would indicate that search proceedings under s. 132 was conducted on 20th Sept., 2011 in the premises of Shri Ramesh Motilal Chindak and his family members as also the business premises belonging to them. During the search proceedings, an order of prohibition came to be passed by the Authorised Officer in exercise of power under s. 132(3) of the IT Act, directing petitioner herein not to remove, part with or otherwise deal with articles like bank accounts, SB, CC, FD, TD etc., and the bank lockers held in the names of assessees and all types of lockers and accounts held in the name of M/s. Shivaganga Multipurpose Co -operative Society Ltd., Shahapur, Belgaum. Pursuant to search proceedings, block assessment was conducted for the year 2006 -07 to 2012 -13. In respect of assessees and in respect of M/s. Shivaganga Multipurpose Co -operative Society Ltd.. Shahapur, Belgaum for the asst. yr. 2012 -13 pursuant to which demand was raised by issuing notice under s. 226(3) to the petitioner -society herein by calling upon petitioner to pay the amounts held by it on behalf of assessee and the amounts invested by M/s. Shivaganga Multipurpose Cooperative Society Ltd.. Shahapur, Belgaum since it was the undisclosed income of Shri Ramesh Motilal Chindak and his family members. Undisputedly, no reply was submitted by the petitioner -Society to the notice issued under Art, 226(3)(i), as such, an order came to be passed on 10th March, 2014 by the respondents under s. 226(3)(x) of the IT Act, 1961, calling upon the petitioner to pay the proceeds of fixed deposit, failing which it was notified by the AO that petitioner -Society would be treated as an assesses in default. Reply was required to be submitted within three days from the date of notice. However, it was not submitted on time and as such garnishee order came to be passed on 10th March, 2014.