A division bench of the Delhi High Court in GECAS Services India Pvt. Ltd v. ITO & Ors, held that prior intimation need not be given to the Assssee by the Income Tax department before attaching the amount held in Bank Account when assesse has not responded to the demand notice sent under section 156 of the Income Tax Act.
Assessee, a wholly-owned subsidiary of the GE Group, is engaged in the business of providing marketing support, liaising and administrative services in connection with leasing of aircrafts in India to its parent company. The department completed assessment against the assesse under section 143(3) of the Act against which an appeal is pending before the first appellate authority.
During the pendency of the appeal, Assessee received a notice issued under Section 226 (3) (i) of the Act addressed to the HSBC bank attaching the Assessee’s bank account held there and any other amount held in recurring deposit/fixed account and current account held with the said bank towards the recovery of the demand. Later, assessee learned that the amount has already been recovered by the department from the Bank.
Aggrieved by the action of the department, assesse approached the Court seeking to quash the said notice and to refund the amount so attached.
On counter-affidavit, the department maintained that the Assessee had neither paid the demand nor filed a stay application before the first appellate authority to stay the recovery of demand.
The bench noted that a demand notice under Section 156 of the Act has already been sent by the AO demanding tax, interest, penalty, fine etc., and therefore, the petitioner-Assessee was fully aware that it would be deemed to be an Assessee in default u/s 221 (1) r/w s. 220 (4) of the Act. Further, the assesse has not explained the reason for not filing stay application before the first appellate authority.
“With the Assessee not having paid the amount within 30 days of the service of notice under Section 156 of the Act, the Department was justified in proceeding to treat it as an Assessee in default and in proceeding to take the necessary action to recover the demanded amount.”
Based on a plethora of judicial decisions, the bench dismissed the petition and held that “in the present case there was no illegality committed by the Department in not issuing to the Assessee a notice under Section 226 (3) (iii) of the Act simultaneously with or prior to the notice issued to its bank under Section 226 (3) (i) of the Act for recovery of the tax demand from its account. The Court accepts the submission of the Revenue that requirement under Section 226 (3) (iii) is only that a copy of the notice should be “forwarded to the assessee” and not that a copy should be served on the Assessee in advance or simultaneously.”
Read the full text of the Judgment below.
