IT Act | Challenge To Notice Under S.226, Without Challenge To Demand Under S.200A, Not Maintainable: J&K&L High Court
The Jammu and Kashmir and Ladakh High Court on Tuesday ruled that a challenge to the notices issued by the Assessing authority under Section 226 (3), without challenging the intimation of demand made by the Assessing authority under Section 200A of the Income Tax Act is not maintainable.
The observations were made by Justices Sanjeev Kumar and Moksha Khajuria Kazmi while hearing a plea in terms of which the petitioner, a partnership concern, had challenged notices issued by respondent IT Department to the respondents no. 4 to 9, directing the latter to pay an amount of rupees 32,32,100/- payable by their account holder, the petitioner.
The petitioner primarily challenged the impugned notices on the ground that no recovery proceedings in terms of Section 226 cannot be initiated unless the petitioner is declared as "Assessee in default‟ under Section 201 of the Income Tax Act.
The bench noted that the petitioner is not aggrieved of the demand raised by the respondent No. 3 for deposit of outstanding tax/ interest/ penalty for which intimation under Section 200A has been given to the petitioner. The petitioner is only aggrieved of the notices issued by the respondent No. 3 under Section 226 (3) of the Income Tax Act calling upon the Jammu and Kashmir Bank, who holds money for and on account of the Assessee, to make the deposit of the outstanding liability standing against the petitioner, the court recorded.
It opined that Section 201 is prima facie not attracted to the case, explaining that during processing the Income Tax returns of the petitioner, the respondents found discrepancy in the matter of deduction of tax at source on the salary component and, accordingly, on the basis of voluntary Income Tax return filed by the petitioner along with statement of tax deduction at source, and gave intimation in terms of Sub-Section (1) of Section 200A, to the petitioner to make good shortfall of Income Tax dues.
The bench further noted that since no response was given by the petitioner to the intimation of demand given by respondent no. 3, the intimation under Section 200A was treated as a notice of demand as accordingly Section 226(3) of the Income Tax Act was pressed into service, and a direction was issued to the banker of the petitioner to pay out of the accounts of the petitioner, a sum equivalent to the Income Tax liability standing against the petitioner.
Expounding law applicable to the case at hand the bench observed,
"Challenge to the notices issued by the Assessing authority under Section 226 (3) issued by respondent No. 3 without challenging the intimation of demand made by the Assessing authority under Section 200A of the Income Tax Act is not maintainable."
Declining to accept the contention of the petitioner that the entire Tax deducted at source stood deposited, and, therefore, the demand raised by the respondent no. 3 was non-est in the eye of law, the bench maintained that if the petitioner is aggrieved by the intimation of demand issued by respondent no. 3 under Sub-Section 1 of Section 200A, he is well within his rights to file an appeal before the jurisdictional Commissioner (Appeals), and cannot straightway approach this Court by invoking its extraordinary writ jurisdiction under Article 226 of the constitution of India.
Explaining the inseparable connection between Sec 200A and Sec 226 of the IT Act the bench elucidated that there is an inseparable causal connection between intimation of demand under Sub-Section 1 of Section 200A and recovery proceedings under Section 226 of the Income Tax Act and in the presence of subsistence of cause, the effect cannot be effaced or avoided.
"We find this petition which is directed against the notices issued by respondent no. 3 under Section 266 (3) of Income Tax Act, not maintainable in the absence of challenge to the intimation of demand issued under Sub-Section 1 of Section 200A", the court added.
Accordingly, the Court dismissed the petition with a liberty to work out alternative remedy of filing statutory appeal under the Income Tax Act, 1961.
Case Title : M/S Construction Engineers
Citation : 2022 LiveLaw (JKL) 266
Coram : Justice Sanjeev Kumar and Justice Moksha Kazmi Khajuria.
Counsel For Petitioner : Mr RA Jan Sr Adv, Mr Aswad Attar
Counsel For Respondent : Mr. T.M. Shamsi, DSGI, Mr. Aatir Javed Kawoosa, Adv, Mr. A Hanan.