Case Note & Summary
The case involves an appeal by the Tax Recovery Officer (TRO) and the Commissioner of Income Tax against an order of a Single Judge of the Karnataka High Court. The respondent, Sri Bhishma Pithamaha, had filed a writ petition challenging five notices dated 3-3-2006 issued by the TRO under Section 226(3) of the Income Tax Act, 1961 to the managers of five banks where one Sri Ramajanam held accounts. The notices stated that a sum of Rs.60,00,000 was due from Ramajanam on account of dues of M/s Tirupura Bhairavi Math in Northern India. The writ petitioner claimed that a General Power of Attorney (GPA) had been executed by Bhishma Pithamaha in favour of Ramajanam, and thus the accounts belonged to the petitioner. The Single Judge allowed the writ petition, quashing the notices and directing the Income Tax Department to refund Rs.18,57,999 to the banks with 9% interest. The Division Bench, in appeal, considered the validity of the notices. The court held that a GPA does not transfer ownership of the bank accounts; the accounts remained the property of the principal (the Math). Therefore, the TRO was justified in issuing the notices under Section 226(3) to attach the accounts for recovery of tax dues. The appeal was allowed, the order of the Single Judge was set aside, and the writ petition was dismissed.
Headnote
A) Income Tax - Recovery of Tax - Section 226(3) of the Income Tax Act, 1961 - Attachment of Bank Accounts - The Tax Recovery Officer issued notices under Section 226(3) to banks attaching accounts held in the name of a General Power of Attorney holder of the assessee. The writ petitioner, claiming to be the GPA holder, challenged the notices. The Single Judge quashed the notices and directed refund of amounts already recovered. On appeal, the Division Bench held that the GPA holder is not the owner of the accounts and the notices were validly issued against the assessee's agent. The appeal was allowed, setting aside the Single Judge's order. (Paras 1-3) B) Income Tax - Recovery of Tax - Section 226(3) of the Income Tax Act, 1961 - General Power of Attorney - The court held that a General Power of Attorney does not transfer ownership of the bank accounts to the GPA holder. The accounts remained the property of the principal (assessee). Therefore, the TRO was entitled to attach those accounts for recovery of tax dues of the assessee. (Paras 2-3)
Issue of Consideration
Whether the Tax Recovery Officer can issue notices under Section 226(3) of the Income Tax Act, 1961 to banks attaching the accounts of a person who holds a General Power of Attorney from the assessee, and whether such notices are valid when the GPA holder claims ownership of the accounts.
Final Decision
Appeal allowed. Order of Single Judge set aside. Writ petition dismissed.
Law Points
- Section 226(3) of the Income Tax Act
- 1961
- General Power of Attorney does not transfer ownership
- Attachment of bank accounts
- Recovery of tax dues
