B. Indira Rani vs Commissioner of Income Tax and Others

T.L. Viswanatha Iyer, J.—The petitioner is the daughter of one R. Bharathan. Both of them were in arrears of huge amounts by way of tax to the Income Tax Department. Immovable properties belonging to the petitioner were attached for recovery of the amounts due from the petitioner. She paid off the entire arrears and filed the application, exhibit P-6, before the Commissioner of Income Tax, Thiruvananthapuram, requesting that the attachment of her properties may be lifted. But the Commissioner sent a reply, exhibit P-7, dated March 30, 1992, declining the request and informing the petitioner that the attachment cannot be lifted. The petitioner has thereupon filed this writ petition for the issue of a writ of mandamus to the respondents, viz., the Commissioner of Income Tax and the Tax Recovery Officer, to declare/proclaim that the attachment of her immovable properties stands withdrawn, and for other incidental reliefs.

In the counter-affidavit filed on behalf of the respondents, it is admitted that the arrears due from the petitioner have been completely paid ; but it is stated that her father, Bharathan, owes an amount of Rs. 14,26,382.30 to the Department, for which the petitioner is slated to be "vicariously" liable under Rule 26 of the Second Schedule to the Income Tax Act, 1961 ( for short "the Act" ), The case of the respondents is that this amount had been paid by Bharathan to the Kerala State Beverages Corporation Limited, for the purchase of foreign liquor in the business of the petitioner, and that the petitioner has not repaid the amount to him. Garnishee proceedings were initiated and the notices, exhibits R-2(b), dated July 25, 1991, and R-2(c), dated July 31, 1991, were issued under Rule 26 of the Second Schedule to the Act, mentioning the above facts and prohibiting the petitioner from making payment of any amount to Bharathan, and Bharathan from recovering the debt due from the petitioner. There was also a direction to the petitioner to pay the amount of the debt to the Tax Recovery Officer. The petitioner did riot respond to the notices or file any statement on oath so that the Tax Recovery Officer wrote to the petitioner by exhibit R-2(d), dated November 15, 1991, informing her that since she did not respond to the notices, exhibits R-2(b) and R-2(c), she will be deemed to be in default of payment of the amount specified in the letter, exhibit R-2(b) and that, further proceedings will be taken against her for realisation of the amount as if it were an arrear of tax due from her.

Counsel for the petitioner submits that since the attachment was for the arrears of tax due from her, it stood automatically withdrawn as soon as the entire amount due from her was paid. No further act formally withdrawing the attachment was necessary as it stood withdrawn on payment of the arrears. If any further amounts were due from her as alleged, as a person owing debts to Bharathan, the respondents have to take fresh proceedings for attachment of her properties for recovery of those amounts. No such proceedings have been initiated and, therefore, and having regard to the terms of Rule 12 of the Second Schedule to the Act, the petitioner is entitled to the declaration that the attachment stands withdrawn.

The contention of counsel for the Revenue, in reply, is that amounts were due from the petitioner, both by way of arrears of her own tax as also under the garnishee proceedings initiated by exhibits R-2(b) and R-2(c) and, therefore, the attachment must subsist so long as the amounts due under either of the demands remains unpaid.

It is admitted in paragraph 5 of the counter-affidavit that the immovable properties were attached "for realising the arrears due" from the petitioner and that the amounts due from her have been paid. But she has a vicarious liability to pay the amounts of Rs. 14,26,382.30 due from Bharathan. No material has been placed before me to show that the attachment was also for the amounts due under the garnishee proceedings. In fact, the attachment was much earlier while the garnishee proceedings were only in July, 1991. It has, therefore, to be held that the attachment of the properties was only for the present arrears due from the petitioner, and not for the amounts due from her under the garnishee proceedings. As stated earlier, the petitioner has paid all the amounts due from her.

Rule 12(a) of the Second Schedule to the Act provides that, if the amount due, with costs and all charges and expenses resulting from the attachment of the property are paid to the Tax Recovery Officer, the attachment shall be deemed to be withdrawn. This rule applies whether the property attached is movable or immovable. In the case of immovable properties, the rule provides further that the withdrawal shall, if the defaulter so desires, be proclaimed at his expense, and a copy of the proclamation shall be affixed in the manner provided for a proclamation for sale of immovable property. Rule 12 is thus categoric that, when once the amount due with costs and all charges and expenses is paid, the attachment shall be deemed to be withdrawn. The withdrawal of the attachment is automatic when the amounts mentioned in Rule 12(a) are paid. No further act is required to effectuate the withdrawal. The attachment ceases the moment the specified amounts are paid. It does not subsist thereafter. The subsequent proclamation contemplated is only a mode of conveying the information to the public at large that the attachment does not subsist. But the cesser of the attachment does not depend on such proclamation. It takes effect at the time the amounts mentioned in Rule 12(a) are paid, I may also mention that the amount due for purposes of Rule 12(a) is the amount mentioned in the warrant issued under Rule 20 and for which the attachment is effected under Rule 22.

Therefore, when the petitioner paid the amount due from her for which the attachment was effected, the attachment ceased to be operative. The garnishee proceedings did not result in an attachment of the petitioner''s property. The petitioner was, therefore, entitled to have the proclamation made as laid down in Rule 12. Once the attachment stands withdrawn, the respondents cannot refuse to make the proclamation as laid down in Rule 12, on the ground that other amounts are due from the defaulter for which no attachment has been effected. If the respondents desire to proceed again with the petitioner''s properties, they will have to effect fresh attachment thereof for recovery of the amount of Rs. 14,26,382.30, but in the absence of any such attachment, the earlier attachment stands withdrawn, and the proclamation has to be effected.

Counsel for the petitioner contends that she had filed objections to the garnishee notices, exhibits R-2(b) and R-2(c), as per her affidavit, exhibit P-6, on November 23, 1991, and, therefore, the recovery proceedings against her could not be continued by virtue of Section 22G(3)(vi) of the Act. This section provides that if the person to whom a garnishee notice is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee, or that she does not hold any money for or on account of the assessee, then, nothing contained in Sub-section (3) of Section 226 shall be deemed to require such person to pay the amount mentioned in the garnishee notice, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Income Tax Officer to the extent of his liability to the assessee on the date of the notice. It is the petitioner''s case that she does not owe any amount to Bharathan. The amounts paid by Bharathan to the Kerala State Beverages Corporation Ltd. belonged to her, which Bharathan paid to the Corporation on her behalf as her power of attorney. She states, therefore, that unless and until the contents of the affidavit are found to be wrong, she cannot be proceeded against for realisation of the amount of Rs. 14,26,382.30 due from Bharathan. It is unnecessary for me to go into this question, which is beyond the pale of this writ petition, where the only relief claimed relates to the cesser of the attachment effected earlier for realisation of the amounts due from her. Therefore, I leave this question open without any adjudication thereon.

The original petition is allowed and exhibit P-7 is quashed. The second respondent is directed to proclaim at the petitioner''s expense, in terms of Rule 12 of the Second Schedule to the Income Tax Act, 1961, that the attachment of the petitioner''s properties for recovery of the amounts due from her personally stands withdrawn. The second respondent shall make the proclamation within a period of two months from the date on which the petitioner makes payment of the requisite expenses for the proclamation.