Notice of AO treating assessee in default quashed by HC in writ.

Facts in Brief:

1.  Petitioner is a public limited company incorporated under the Companies Act and is engaged in the business of financial services.

2.  Tax Recovery Officer issued a notice to the petitioner indicating that certain amount was due from the garnishee (i.e. the petitioner) to the assessee and, accordingly, required the garnishee to pay within the time specified in the notice so much of the amount as was sufficient to pay the amount due from the assessee in respect of arrears of tax. 

3.  Petitioner appeared and produced the relevant books of account as demanded by the Tax Recovery Officer and submitted that no amount was due or payable to the defaulter, namely, M/s. Rich Capital and Financial services Ltd.

4.  present writ petition praying for a writ of mandamus commanding the respondents to restore 1,70,000 equity shares of Jhunjhunwala Vanaspati Ltd. in the demat account of the petitioner with Karvi Stock Broking Ltd. and further restore the amount of Rs. 28,988.78 in the bank account of the petitioner with ICICI Bank, Chowk Branch, Varanasi, along interest, etc. The petitioner also prayed for the quashing of the notice dated March 17, 2008, whereby the Tax Recovery Officer treated the petitioner as an assessee in default. 

5.  The petitioner has also prayed for the quashing of the entire proceedings initiated under section 226(3) of the Act

  HC held as under:

6.  Court held that the order of the Tax Recovery Officer dated March 17, 2008, treating the petitioner as an assessee in default cannot be sustained and is quashed. We further find no justification in continuing with the attachment order and the same is also quashed. 

  RELEVANT PARAS OF JUDGMENT ARE UNDER:

7.  A writ of mandamus is issued commanding the Tax Recovery Officer to ensure that 1,70,000 equity shares of Jhunjhunwala Vanaspati Ltd. is transferred again in the demat account of the petitioner with Karvy Stock Broking Ltd. within two weeks from the date of the production of a certified copy of the order. If any dividend was received by the Tax Recovery Officer on these shares, the said amount shall also be transferred to the petitioner.

8.  We further quash the direction attaching the bank account of the petitioner with ICICI Bank, Chowk Branch, Varanasi. We further issue a mandamus directing the Tax Recovery Officer to refund the amount of Rs. 28,988.78 along with interest payable as per the rates payable by the bank in the savings bank account during the period in question, which amount shall be paid again by the Tax Recovery Officer to the petitioner within two weeks from the date of the production of a certified copy of this order. 

9.  In view of the aforesaid, the writ petition is allowed. In the circumstances of the case, the parties shall bear their own costs.