Urban Heights vs The Deputy Commissioner of Commercial Taxes and Another

B.V. Nagarathna, J.—The action of the respondents in attaching the petitioner''s current account maintained with the second respondent-Bank as well as withdrawal of a sum of Rs. 6,07,682/- from that account and notice dated 25-10-2013 issued by the first respondent to the second respondent-Bank are assailed in this writ petition. A direction is also sought against the second respondent-Bank to deblock petitioner''s current Account No. 64076019778. Briefly stated, the facts are that the petitioner is engaged in development of real estate. One of the partners in the petitioner''s partnership firm is Sri Hemansu M. Shah and he is also a partner in M/s. Ambience Projects, which is a registered dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ''the Act''). The petitioner has a current account with the second respondent-Bank bearing No. 64076019778. It is also stated that Sri Hemansu M. Shah also holds a separate personal account with the second respondent-Bank. In respect of assessment year 2005-2006, M/s. Ambience Projects was reassessed u/s 39(2) read with Section 69(1) of the Act and an order dated 20-9-2013 was passed reassessing the tax liability of M/s. Ambience Projects to an extent of Rs. 1,14,38,391/- including interest and penalty. Consequently, a demand notice was issued to M/s. Ambience Projects calling upon them to make the aforesaid payment within ten days of service of the notice. Another notice was issued by the first respondent to the second respondent-revenue to pay the outstanding dues in the account of Sri Hemanshu M. Shah. This was on the premise that he being a partner in M/s. Ambience Projects who had dues with the first respondent could be collected from the petitioner-partnership firm, wherein Sri Hemanshu M. Shah was also a partner. In this context, several correspondence between the parties have taken place. Ultimately, the first respondent through the second respondent-bank has freezed the current account bearing No. 64076019778 of the petitioner-firm. That action is assailed in this writ petition.

I have heard the learned Senior Counsel for the petitioner and learned Additional Government Advocate who appears for respondent 1 and learned Counsel for respondent 2 and perused the material on record.

Learned Senior Counsel for the petitioner has brought to my notice the fact that the petitioner-firm has no business connection whatsoever with M/s. Ambience Projects, who is due to the Department. Merely because one of the partners of M/s. Ambience Projects Sri Hemanshu M. Shah is also partner in the petitioner-firm, the petitioner could not have been proceeded against and therefore, the withdrawal of a sum of Rs. 6,07,682/- from its current bank account as well as freezing of that account is not in accordance with law.

Learned Counsel for the respondents supported the action taken by contending that it was the only way by which the dues could have been recovered from petitioner-firm in which Sri Hemanshu M. Shah was also a partner in the firm.

On perusal of the material on record, it is noted that the reassessment order is passed in respect of M/s. Ambience Projects, which is a partnership firm. That order has no nexus to the petitioner-firm and merely because one of the partners in M/s. Ambience Projects is a partner in the petitioner-firm also would not enable the Department to proceed against the petitioner-partnership firm to the extent of withdrawing certain amounts from its current account. If recoveries have to be made by the Department, it should be from M/s. Ambience Projects or its partners. If any recovery has to be made from Sri Hemanshu M. Shah who is one of the partners in M/s. Ambience Projects in his personal capacity then in that regard the details regarding his assets had to be known and hence, a notice could have been issued to the petitioner to furnish the details. A coercive action against the petitioner who is stranger to the reassessment proceedings would not serve the purpose at all. In that view of the matter, the attachment of the current account of the petitioner is illegal. However, in the interest of justice and keeping in mind the interest of all the parties, the first respondent to issue notice to the petitioner with regard to the details of the trade balance and the share of Sri Hemanshu M. Shah in the partnership firm. If any other details vis-a-vis Sri Hemanshu M. Shah and the petitioner-firm is required, the first respondent to seek such details from Sri Hemanshu M. Shah. On such notice being issued to the petitioner-firm, the latter to furnish the details to the first respondent-Department and taking into consideration the response of the petitioner, the amount of Rs. 6,07,682/- which has been withdrawn by the Department to be returned to the petitioner if the need so arises. In the meanwhile, the first respondent to issue necessary communication to the second respondent-Bank to defreeze the current Account No. 64076019778 maintained by the petitioner with the second respondent-Bank forthwith. The writ petition is disposed of with the aforesaid observations and directions.