High Court Of Kerala
Shibu S. Nair & Ors. vs. CIT & Ors.
Sections 226(2), 226(3)
C.N. Ramachandran Nair, J.
OP No. 16523 of 2002
20th June, 2002
Counsel Appeared
K. Ramakumar, for the Petitioners
JUDGMENT
C. N. Ramachandran Nair, J. :
The petitioners claim to be employees of the third respondent-company which supplies security personnel to various companies including the second respondent. They are at present employed by the third respondent for looking after the security matters of the second respondent-company. The petitioners are challenging Exhibit P-1 income-tax recovery notice dt. 14th June, 2001, issued by the Dy. CIT, Company Circle II, Madurai, to various companies, the names and addresses of which are contained in the list attached to Exhibit P-1, which includes the second respondent herein. Exhibit P-1 is a garnishee proceeding initiated for recovery of arrears of income-tax due from the third respondent, i.e., the petitioner’s employer-company. The petitioners are challenging the said notice on the ground that the amounts to be paid by the second respondent to the third respondent are to be utilised towards payment of salary to the petitioners and if income-tax is recovered by the IT Department by recovering the amount due by the second respondent to the third respondent, the petitioners’ rights are affected. The petitioners rely on the protection conferred under the proviso to s. 226(2) of the IT Act, 1961, which gives an immunity from attachment in respect of part of salary exempt from attachment in execution of a decree of a civil Court under s. 60 of the CPC. According to the petitioners, the amount of money due from the second respondent to the third respondent, now attached under Exhibit P-1 notice, partakes of the character of “salary” because on receipt of the said money, the third respondent will disburse salary to the petitioners who are admittedly employees of the third respondent.
2. I have heard counsel for the petitioners at length. However, since I do not feel that the original petition is maintainable, I proceed to dispose of the same at the admission stage without notice to the respondents. Since the petitioners claim immunity from attachment of the amount payable, or that may become payable, by the second respondent to the third respondent under the proviso to s. 226(2) of the IT Act, I extract hereunder s. 226 insofar as it is relevant for the purpose of this original petition : “226.—(1) Where no certificate has been drawn up under s. 222, the AO may recover the tax by any one or more of the modes provided in this section. (1A) Where a certificate has been drawn up under s. 222, the TRO may, without prejudice to the modes of recovery specified in that section, recover the tax by any one or more of the modes provided in this section. (2) If any assessee is in receipt of any income chargeable under the head ‘Salaries’ the AO or TRO may require any person paying the same to deduct from any payment subsequent to the date of such requisition any arrears of tax due from such assessee, and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Central Government or as the Board directs : Provided that any part of the salary exempt from attachment in execution of a decree of a civil Court under s. 60 of the CPC, 1908 (5 of 1908), shall be exempt from any requisition made under this sub-section. (3)(i) The AO or TRO may, at any time or from time to time, by notice in writing 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 AO or TRO 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 assessee in respect of arrears or the whole of the money when it is equal to or less than that amount ……….”.
3. In the first place, I do not think the original petition is entertainable for the reason that the petitioners have no locus standi to question Exhibit P-1 which is nothing but income-tax recovery proceedings initiated by the IT authorities against their employer the third respondent. The notice itself is issued as early as on 14th June, 2001, and it is not known whether the aggrieved person, that is the third respondent has challenged the same and if so the result or the subsequent developments in the recovery proceedings. In order to recover the arrears of income- tax due from a defaulter, the IT authorities have the right to adopt all the means available under the Act for recovery. The employees of a defaulter-assessee have no right to question it.
4. The garnishee proceedings is a routine proceedings provided in every taxing statute for recovery of tax, and there is nothing unusual about Exhibit P-1. The petitioners may be the employees of the third respondent and the averment of the petitioners that the third respondent may owe arrears of salary to the petitioners also may be true. However, unless the petitioners establish their claim of priority over income-tax dues, the petitioners cannot stall the recovery proceedings initiated under s. 226(3) of the IT Act. There is nothing on record to indicate that the petitioners have got any order under the Payment of Wages Act or from any other forum showing the specific amount of arrears due to them from the third respondent so as to enable the petitioners or any one of them to attach the amounts receivable by the third respondent from the second respondent. In the absence of any such claim of priority over income-tax dues due from the employer to the Government, the petitioners cannot challenge Exhibit P-1 notice against which the petitioners cannot have any direct grievance. If at all anybody is aggrieved by Exhibit P-1 notice, it is the third respondent, which has not approached this Court against Exhibit P-1 notice nor do they appear to have made alternative arrangement for getting Exhibit P-1 revoked by the authority, which issued the same one year back. On the face of it, the original petition itself is probably the sinister move by the third respondent to prevent income-tax recovery by sending its employees to this Court with this original petition. Since the petitioners have no direct grievance nor any claim of priority over the income-tax dues, I do not think that they have any right to question the recovery notice against the employer. On this ground alone, the original petition is liable to be dismissed.
The next question is the petitioners claim of immunity under the proviso to s. 226(2) of the IT Act. It is obvious from the said sub-section that immunity is against attachment of part of salary in recovery proceedings initiated against an employer for recovery of tax due from an employee. Exhibit P-1 garnishee proceedings are initiated against the creditors for recovery of arrears of tax due from the third respondent-company which happens to be the employer of the petitioners. The attachment is neither on the salary of the petitioners nor is the notice served on the employer of the petitioners. Therefore, the proviso to s. 226(2) has no application and the petitioners cannot claim any immunity from attachment under the proviso to sub-s. (2) of s. 226. As already stated Exhibit P-1 is in the nature of recovery proceedings initiated against the defaulter company, the assessee, which is the third respondent. The amount payable by the second respondent to the third respondent admittedly is under a contract between them for supply of security personnel and whatever be the basis of payment for supply of security personnel, it is still payment of contract amount by the second respondent to the third respondent in accordance with the terms and conditions of contract between them. There is absolutely no immunity from attachment of any amount payable by the second respondent to the third respondent under the contract between them. Therefore, the immunity claimed under the proviso to s. 226(2) is not available to the petitioners. If the petitioners have any claim against the third respondent towards arrears of salary, it is for them to approach the concerned authority or Court as the case may be claiming the amount, get an award and attach the amount payable by the second respondent to the third respondent and if entitled to claim priority over income-tax arrears. So long as this Court has no jurisdiction under Art. 226 of the Constitution of India to decree the salary arrears payable by the third respondent which is a company at Madras to the petitioners’ this Court is disabled to consider any priority for the petitioners’ claim over the arrears of income-tax due from their employer to the Government. They cannot indirectly question Exhibit P-1 proceedings which only serves the purpose of defeating the recovery proceedings initiated for recovery of income-tax arrears due from the third respondent
In the circumstances, I find no ground to interfere with Exhibit P-1 and therefore the original petition is dismissed. The Registry is directed to send a copy of this judgment to the first respondent for information.
[Citation : 260 ITR 586]
