SANJEEV RAMCHAND Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioners had entered into an agreement of sale on July 23, 1986, with one Shri Ramchand Hirasingh for the purchase of office premises No. 201 -B in the Neelkanth Niranjan Premises Co -operative Society Ltd. Bombay, for a sum of Rs. 1,66,000. The transferor and the transferees filed a copy of the agreement for sale along with Form No. 37EE on August 14, 1986, in the office of the Competent Authority as required under rule 48DD and Section 269AB(2) of the Income -tax Act, 1961. Transfer form was filed with the society on July 23, 1986, itself on which day an application for membership was also filed. Another application was made to the society for the transfer of the premises in favour of the petitioners on August 11, 1986. Before the premises were transferred in favour of the petitioners, the Income -tax Officer served notice dated December 29, 1986, issued under Section 226(3) on the society requiring it not to transfer the shares to Hirasingh Ramchand in the society to any person as the said Hirasingh Ramchand was an assessee in default for a sum of Rs. 4,55,990 plus interest. Transfer of shares, in turn, meant transfer of the premises. On receipt o the aforesaid notice from the Income -tax Officer on January 3, 1987, the society has refused to transfer the suit premises in favour of the petitioners.

(2.) SHRI Bhatia, learned counsel for the petitioners, argues that the petitioners had purchased the suit premises from one Shri Ramchand Hirasingh and not from Hirasingh Ramchand. The assessee in default is Hirasingh Ramchand, a partnership firm. Shri Ramchand Hirasingh is only a partner in that firm. He is not and, in any event, has not been treated as an assessee in default. Notice under Section 226(3) has been issued by the Income -tax Officer and served on the society directing it not to transfer certain number of shares belonging to the partnership firm. The suit premises belong to Shri Ramchand Hirasingh individually. The society, he contended, was, thus, not at all justified in refusing to transfer the suit property in favour of the petitioners. He even stated that the impugned notice does not give any indication whether or not a certificate has been issued by the Income -tax Officer to the Tax Recovery Officer under Section 222 of the Income -tax Act, 1961. The Allahabad High Court, in the case of Manohar Lal Ahuja v. ITO : [1984]148ITR608(All) , he stated, held that unless the Income -tax Officer had issued a certificate under Section 222 earlier in point of time, his action in issuing notice under Section 226(3) will be illegal. The Karnataka High Court, in the case of K. A. Veerichetty and Sons v. ITO : [1976]102ITR225(KAR) and the Kerala High Court in the case of C. V. George v. ITO : [1976]102ITR724(Ker) , he further stated, held that income -tax dues from a partnership firm could not be recovered from a partner under the Income -tax Act. He urged that the impugned notice was invalid and must, therefore, be quashed.

(3.) SOME averments have been made in the counter -affidavit to the effect that a firm and its partners stand on the same footing in the matter of recovery of tax due from the firm. But the fact that the assessee in default is the partnership firm, Hirasingh Ramchand, and not the partner, Shri Ramchand Hirasingh, as such is not in dispute. Section 226(3) empowers the Income -tax Officer by a notice in writing to require any person from whom money is due or may become due to the assessee in default to pay the money to the Department instead of to the assessee in default. This provision does not contemplate issuing of notice to any person from whom money is due or is likely to be due from a partner of the assessee (firm) in default. The impugned notice is clearly in accordance with the sub -section as it requires the society not to transfer a number of shares belonging to the assessee in default, i.e., the partnership firm.