Case: Income-Tax Officer, Madras Vs. Budha Pictures, Madras

to law the demand made by the Income-tax Officer for the sum of Rupees 20,000 was illegal and without jurisdiction.3. The High Court, as we have already mentioned, hold that the Department was not entitled to call upon Budha Pictures Ltd., the respondent, to make good the sum of Rs. 20,000 already paid to Baliah as such payments did not contravene the notice under S. 46 (5-A) dated June 18, 1959. Section 46 (5-A) reads as follows:"(5-A) The Income-tax Officer may at any time or from time to time, by notice in writing (a copy of which shall be forwarded to the assessee at his last address known to the Income-tax Officer) require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Income tax Officer, either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the tax-payer in respect of arrears of income-tax and penalty or the whole of the money when it is equal to or less than that amount.The Income-tax Officer may at any time or from time to time amend or revoke any such notice or extend the time for making any payment in pursuance of the notice.Any person making any payment in compliance with a notice under this sub-section shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in the receipt.Any person discharging any liability to the assessee after receipt of the notice referred to in this sub-section shall be personally liable to the Income-tax Officer to the extent of the liability discharged or to the extent of the liability of the assessee for tax and penalties, whichever is less.If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Income-tax Officer, further proceedings may be taken by and before the Collector on the footing that the Income-tax Officers notice has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub-section (2) of Section 46.Where a person to whom a notice under this sub-section is sent objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, to the Income-tax Officer."4. The learned counse1 for the appellant contends that S. 46 (5-A) applies in four sets of circumstances:(1) when money is due from a person to the assessee:(2) when money may become due to the assessee;(3) when a person holds money for an assessee; and(4) when a person may hold money on account of the assessee.He says that there is no reason for cutting down the words in categories (2) and (4); the words are plain and they do not suggest that at the time of notice a relationship, which may result in money being owed or being held on account of the assessee, should subsist. In our view, if the assessee has not subsisting relationship with a person it would be speculative to think that that person may get into relationship with the assessee and start owing money to him or start holding money for him. We can hardly believe that the Legislature framed this sub-section on speculative considerations. It seems to us that the Legislature contemplated a subsisting relationship of which the Income-tax Officer gets information and which could reasonably lead to recovery of arrears. Theoretically it would be possible for an assessee to enter into relationship with almost anybody, say in the town in which he resides. We can hardly imagine that it was expected that the Income-tax Officer would issue notices to all the residents of a locality or a town to pay money in case they begin to hold or owe money to the assessee.5. It seems to us that the High Court was right in holding that what was contemplated is the subsistence of a similar relationship as between a garnishee and the assessee. This construction of the sub-section is strengthened by the last para in S. 46 (5-A).A person to whom the notice has been issued has only to object that the sum demanded or part thereof is not due to the assessee or that he does not hold any money on account of the assessee. He has not to say that he is not likely to owe or to hold money. It seems to us that the expressions "may become due" or "may subsequently hold money" suggest, in the context, a subsisting relationship between the person served with a notice and the assessee; e. g. assessees employer or banker, or debtor, or a person paying annuity to him; they do not suggest a bank with which he has never dealt with, a person he has never lent money to or dealt with, or all persons who may possibly in the future employ an assessee out of job or work.If the contention of the Department were to be accepted, the Income-tax Officer could send a circular letter under S. 46 (5-A) in respect of all defaulters to all possible employers or traders. This would cast enormous burden on person receiving such notices. We cannot sustain a construction which could lead to such results. We agree with the conclusion arrived at by the High Court.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our view, if the assessee has not subsisting relationship with a person it would be speculative to think that that person may get into relationship with the assessee and start owing money to him or start holding money for him. We can hardly believe that the Legislature framed this sub-section on speculative considerations. It seems to us that the Legislature contemplated a subsisting relationship of which the Income-tax Officer gets information and which could reasonably lead to recovery of arrears. Theoretically it would be possible for an assessee to enter into relationship with almost anybody, say in the town in which he resides. We can hardly imagine that it was expected that the Income-tax Officer would issue notices to all the residents of a locality or a town to pay money in case they begin to hold or owe money to the assessee.5. It seems to us that the High Court was right in holding that what was contemplated is the subsistence of a similar relationship as between a garnishee and the assessee. This construction of the sub-section is strengthened by the last para in S. 46 (5-A).A person to whom the notice has been issued has only to object that the sum demanded or part thereof is not due to the assessee or that he does not hold any money on account of the assessee. He has not to say that he is not likely to owe or to hold money. It seems to us that the expressions "may become due" or "may subsequently hold money" suggest, in the context, a subsisting relationship between the person served with a notice and the assessee; e. g. assessees employer or banker, or debtor, or a person paying annuity to him; they do not suggest a bank with which he has never dealt with, a person he has never lent money to or dealt with, or all persons who may possibly in the future employ an assessee out of job or work.If the contention of the Department were to be accepted, the Income-tax Officer could send a circular letter under S. 46 (5-A) in respect of all defaulters to all possible employers or traders. This would cast enormous burden on person receiving such notices. We cannot sustain a construction which could lead to such results. We agree with the conclusion arrived at by the High Court.