Indira Banerjee, J.@mdashWest Bengal Consumers Co-operative Federation Ltd., hereinafter referred to as CONFED, has filed this writ petition, inter alia challenging a notice u/s 226(3) of the income tax Act, 1961 dated 24th January, 2011 addressed to the Officer-in-Charge, CONFED calling upon him to pay to the Tax Recovery Officer, Durgapur, all dues of CONFED to Panagarh Cold Storage Pvt. Ltd., hereinafter referred to as Panagarh, to the extent of the tax liability of Panagarh as indicated in the said notice. The Officer-in-Charge, CONFED was warned that in case of default in payment to the Tax Recovery Officer, in terms of the said impugned notices, CONFED would be deemed to be an assessee in default in respect of the sum due from CONFED to Panagarh or the amount of tax liability of Panagarh, whichever was less. The Officer-in-Charge, CONFED was further warned that if any liability to Panagarh was discharged after receipt of the said notice, the Officer-in-Charge would personally be liable to the Tax Recovery Officer, to the extent of the sum discharged or the tax liability of Panagarh, whichever was less.
2. CONFED has also challenged a notice of demand dated 12th April, 2011 calling upon the Chief Executive Officer, CONFED to pay Rs. 15 lakhs within 15 days from the date of receipt of the said notice, failing which the amount would be recovered in accordance with sections 222 to 232 of the income tax Act, 1961.
3. By an order of assessment dated 27th December, 2002, the Assistant Commissioner of income tax, Circle 2, Durgapur being the Assessing Officer assessed Panagarh to tax of Rs. 59,65,344.
4. Being aggrieved by the aforesaid order of assessment, the assessee, Panagarh preferred an appeal before the Commissioner of income tax (Appeals), Durgapur, u/s 250 of the income tax Act.
5. By an order dated 23rd September, 2010, the Commissioner (Appeals), Durgapur, allowed the said appeal in part and reduced the tax liability of Panagarh to a substantial extent. The tax liability of CONFED stands reduced to Rs. 15 lakhs.
6. Against the order of the Appellate Commissioner, Panagarh appealed to the income tax Appellate Tribunal, hereinafter referred to as ''TTAT''. Panagarh has also filed an application for stay of the demand of Rs. 15 lakhs pending disposal of the appeal.
7. Dr. Pal, appearing on behalf of CONFED submitted that the appeal has been fixed for hearing on 1st August, 2011. Notwithstanding the pendency of the appeal, a notice u/s 226(3) dated 24th January, 2011 was issued to CONFED purporting to inform CONFED of tax liability of Rs. 59,65,344 of Panagarh for the assessment year 2005-06 and requesting CONFED to pay all amounts due and payable by CONFED to Panagarh to the tune of Rs. 59,65,344 to the Tax Recovery Officer.
8. However, notwithstanding the aforesaid notice, CONFED paid a sum of Rs. 15 lakhs to Panagarh. In the circumstances, a notice No. TRO-2/DGP/2011-12/3 was issued demanding from CONFED Rs. 15 lakhs paid by CONFED to the defaulting assessee, Panagarh.
9. A certificate was also issued, certifying that a sum of Rs. 15 lakhs had become due from CONFED to the Tax Recovery Officer. CONFED was called upon to pay the aforesaid sum of Rs. 15 lakhs within 15 days from the date of receipt of notice. CONFED was threatened with recovery in accordance with the provisions of sections 222 to 232 of the income tax Act, 1961 and the Second Schedule to the said Act, as well as the rules made thereunder in default of payment. In addition, CONFED was threatened with liability for interest, costs and charges.
10. Dr. Pal vehemently argued that the Appellate Commissioner had partly allowed the appeal of the assessee, as a result of which the tax liability of the assessee, Panagarh stood reduced to Rs. 15 lakhs. The impugned notice dated 24th January, 2011, calling upon CONFED to pay to the Tax Recovery Officer, the dues of CONFED to Panagarh to the extent of Rs. 59 lakhs odd was thus illegal. Notwithstanding the appellate order, the Tax Recovery Officer was purporting to recover Rs. 59 lakhs odd.
11. Dr. Pal referred to section 225 sub-section (2) of the income tax Act, which provides as follows:
Where the order giving rise to a demand of tax for which a certificate has been drawn up is modified in appeal or other proceeding under this Act, and, as a consequence thereof, the demand is reduced but the order is the subject-matter of further proceeding under this Act, the Tax Recovery Officer shall stay the recovery of such part of the amount specified in the certificate as pertains to the said reduction for the period for which the appeal or other proceeding remains pending.
12. It is difficult to accept the submission that recovery of the amount specified in the certificate is liable to be stayed, just because the notice of demand mentioned an amount higher than that which could lawfully have been recovered from Panagarh or its debtors. An error in the figure, in a notice of demand does not vitiate the demand.
13. The certificate in the instant case, is for Rs. 15 lakhs. In my view, section 225(2) does not, in any case, stay recovery of the entire amount specified in the certificate but only that part of the amount reduced in appeal.
14. Thus, Rs. 59 lakhs could not have been recovered, the arrear tax liability having been reduced to Rs. 15 lakhs. The aforesaid sum of Rs. 15 lakhs could be recovered. The certificate is for Rs. 15 lakhs. There are no grounds for interference with the recovery.
15. Mr. Nizamuddin appearing on behalf of the Department has rightly argued that the purported reasons made out in the writ petition for payment of Rs. 15 lakhs to Panagarh, notwithstanding the notice dated 24th January, 2011 are frivolous and not sustainable in the eye of law, for payment to the Tax Recovery Officer upon receipt would tantamount to discharge of liability to Panagarh to the extent of the amount paid to the Tax Recovery Officer. The threat of auction of the potatoes could be no ground in law to ignore the notice dated 24th January, 2011.
16. The writ application is, therefore, dismissed.
