Garnishee proceedings

What is meant by Garnishee Proceedings? When can such proceedings be initiated and executed?

The legal meaning of the term "Garnishee" is "a person who has been warned not to pay a debt to anyone other than the third party who has obtained judgement against the debtor's own creditor". Accordingly, "Garnishee Proceedings" is a procedure by which a judgement creditor may obtain a Court order against the third party who owes money to or holds money for the judgement debtor. It is usually obtained against a bank (Garnishee) requiring the bank to pay money held in the account of the debtor (Assessee) to the creditor (Income-tax department).

Under the Income-tax Act, Garnishee proceedings can be initiated after the expiry of the time limit (30 days or as prescribed) as per section 220(1) provided for paying the demand as mentioned in the Notice of demand u/s. 156 of the I.T. Act, 1961.

What is the meaning of Garnishee Notice? When it can be issued?

A Garnishee Notice is a prohibitory order directing the debtors of the assessee to refuse the payment of the same, as the same is attached by the department for the recovery of its tax dues payable by the assessee.

It can be issued on the assessee being treated as deemed to be in default as per section 220(4).

Can TRO issue Notice of Recovery to Garnishee who resides outside jurisdiction of TRO?

No. The situs of the debt is where the debtor resides or if the debt has been contracted to be paid elsewhere, then the place of payment. If the situs of the debt is outside the jurisdiction of the TRO attaching the debt, then the prohibitory order (ITCP-3) cannot be served on the debtor by the said TRO. The TRO can issue the prohibitory order to the defaulter, but must transfer the recovery certificate to the TRO having jurisdiction over the situs of the debt to recover from the Garnishee.

In case tax is payable in instalments, when can Garnishee proceedings be initiated?

Garnishee proceedings can be initiated in the event of the assessee failing to honour any of the instalments payable by him.

A debt is time barred and hence the assessee believes that the Department cannot recover from such a debtor. Can TRO issue Notice for Recovery to such debtor though the same is time barred?

No. The Limitation Act, 1963, does not provide for any exception to recover a time barred debt in favour of the revenue. An extinguished right of the assessee cannot be revived by the issue of Notice for Recovery by the TRO to such a debtor.

Can TRO issue Notice for Recovery of money payable under insurance policy?

As per Rule 10(1) of the Second Schedule of the Income-tax Act, all such property as is by the Code of Civil Procedure, 1908 exempted from attachment and sale in execution of a decree of a Civil Court shall be exempt from attachment and sale under the said Schedule. As per section 60(1)(KB) of the Code of Civil Procedure, all monies payable under a policy of insurance on the life of the judgement debtor is exempt from attachment and hence the TRO cannot issue any Notice for recovery of money payable under an insurance policy.

If Garnishee fails to comply with the Notice under section 226(3), what types of action TRO can take against him?

If the Garnishee fails to comply with the Notice under section 226(3), then the TRO can treat him to be an assessee in default as per section 226(3)(x) in respect of the amount specified in the Notice and further proceedings can be taken against him for the realisation of the amount, as if it were an arrear of tax due from him personally, in the manner provided in sections 222 to 225 and the Notice shall have the same effect as an attachment of a debt by the TRO in exercise of his powers under section 222.

Can the AO recover amount directly from bank account of assessee, though Stay Application is pending before Tribunal?

Yes. An Application for Stay cannot be treated as automatically granted unless specifically granted by the Tribunal.

Can the bank with which the assessee is holding fixed deposit which is yet to mature pay the amount of such fixed deposit along with interest due thereon till then to the Department under section 226(3)?

Yes. The term "debt" means actual money claimed that has already become due though it may be payable on a future date. A debt in order to be attachable need not become payable at once. The Karnataka High Court in the case of Vysya Bank Ltd. vs. CIT and Global Trust Bank Ltd. (241 ITR 178) held that the Department can enforce premature encashment of the fixed deposit belonging to the assessee in terms of section 226(3).

A company enjoys cash credit limit of Rs. 5 Lakhs, out of which Rs. 2 Lakhs are utilised (withdrawn) and balance Rs. 3 Lakhs are unutilised. Can the bank pay Rs. 3 Lakhs pursuant to the demand by Department under section 226(3)?

As per section 226(3), what is attachable is a debt owed by any person to the assessee. A cash credit limit given by the bank results into the bank becoming a creditor of the assessee. Hence, any unutilised portion of a credit given to the assessee cannot be treated as a debt attachable u/s. 226(3). Accordingly, the bank is under no legal obligation to pay the unutilised portion to the Department.

What is the meaning of Garnishee Notice ? When it can be issued ?

A Garnishee Notice is a prohibitory order directing the debtors of the assessee to refuse the payment of the same, as the same is attached by the department for the recovery of its tax dues payable by the assessee.

As mentioned in section 220(4), in case the amount is not paid in due time, then the aforesaid notice can be issued to the assessee being treated as assessee deemed to be in default.

Attachment and disposal of immovable property

Which income-tax authority can attach immovable property and when can such immovable property be attached?

Under the Income-tax Act, immovable property can be attached by the AO as well as the TRO. As per section 281B, the AO can attach the property of the assessee provisionally in the manner provided in the Second Schedule to protect the interest of the revenue. The TRO can attach the property of the defaulter only after he has drawn a Certificate of recovery and issued a Notice under Rule 2 (ITCP-1) of the Second Schedule. No attachment of immovable property can be done by the TRO till the period of 15 days has elapsed from the date of service of ITCP-1. However, as per Rule 51 of the Second Schedule, the attachment of the immovable property shall relate back to and take effect from the date on which the Notice to pay the arrears (ITCP-1) was served upon the defaulter.

What is the procedure for attachment of immovable property?

The procedure for attachment of immovable property is as under:

The order in Form No. ITCP-16 is first served on the defaulter by the Tax Recovery Inspector.

Next, he has to affix a copy of the order on a conspicuous portion of the property. In the case of house property, the copy may be affixed on the front door and in the case of land, it may be affixed on any tree or pole on it, or on the land itself. The affixture must be witnessed by at least two witnesses.

Thereafter, the Inspector has to get the drum beaten, proclaiming the attachment of the immovable property. The proclamation by oral announcement must be in the language of the district. It may be made additionally in English, if necessary. The proclamation has also to be witnessed by two witnesses.

A panchnama evidencing the proceedings is prepared next. The panchnama should specifically highlight the fact that a copy of the order of attachment was served on the defaulter; that a copy thereof was affixed on the property; that drum was beaten; and that the proclamation was made in the language of the district.

The Inspector has then to return to his office, affix a copy of the order of Attachment on the Notice board, and record an endorsement to that effect.

What are the consequences of attachment of immovable property?

The attachment of immovable property by an order in Form No. ITCP-16 prohibits the defaulter from either transferring the property or charging it in any way and prohibits all persons from taking any benefit under such transfer or charge. Attachment is a Notice to all concerned so that any person who accepts a private transfer of the property by the defaulter after an attachment cannot plead that he had no knowledge of the attachment. Attachment does not create any title and so it does not confer any title or interest on the TRO who is the holder of the Certificate. It prevents private alienations, but does not prevent alienation by the process of law.

Can immovable property belonging to a third party which the tax-payer in default is occupying by virtue of possession of an irrevocable power of attorney to occupy and use, be attached?

An irrevocable power of attorney to occupy and use does not bestow any title or ownership rights in the property to the tax-payer in default. Section 222 which lays down the modes of recovery states that the recovery can be made from the attachment and sale of the assessee’s immovable property in accordance with the rules laid down in Second Schedule. Hence, a property belonging to a third party cannot be attached for the recovery of dues from the person holding an irrevocable power of attorney.

Can immovable property of a HUF be attached in respect of arrears of tax payable by (a) its Karta; (b) its other members?

Yes. The property of the HUF to the extent of the share of the member in default can be attached for the recovery of the tax dues, including those of a Karta in his capacity as a member of the HUF.

When can the attached immovable property be sold? What is the procedure to be followed in case of such sale?

The time limit for sale of attached immovable property is given in Rule 68B of the Second Schedule of the Income-tax Act. According to this Rule, no sale of immovable property shall be made after the expiry of four years from the end of the financial year in which the order giving rise to a demand of any tax, etc., for the recovery of which the property was attached, has become conclusive under the provisions of section 245-I or, as the case may be, final in terms of the provisions of Chapter XX. A plain reading of this Rule makes it clear that it is in the form of a negative covenant, placing a time barring limit on the department’s right to deal with an attached immovable property. Accordingly, once the assessee is held to be an assessee in default and the statutory period of 30 days from the date of the proclamation of sale has elapsed, the TRO is free to sell the property at any time. The procedure for the sale of immovable property is as under:—

After the attachment of property, the TRO issues a Notice in ITCP-17 for settling the terms of a sale proclamation. Through this Notice, the TRO collects the details of any encumbrances, charges, claims or liabilities attaching to the property to be sold.

Next, the TRO after incorporating all the essential ingredients (especially the details collected vide ITCP-17) of a valid proclamation issues the same in Form No. ITCP-13. The proclamation is made by beat of drum and a copy of the same is affixed on the conspicuous part of the property and witnessed by two independent witnesses by drawing up a panchnama for the same.

Thereafter the TRO publishes the proclamation in widely circulated newspapers including one in the local language. Having done so, he authorises the Tax Recovery Inspector or a Government Auctioneer to auction the same vide ITCP Form No. 12. The sale of the property shall be by public auction in the highest bidder and shall be subject to confirmation by the TRO. No sale will be made if the amount bid by the highest bidder is less than the reserve price.

Once the property is knocked down in favour of the highest bidder, the purchaser shall pay a deposit of 25% of the sale value to the officer conducting the sale immediately, failing which the property shall forthwith be resold. The full amount of purchase price shall be paid by the purchaser to the TRO within 15 days from the date of sale, failing which the TRO may forfeit the deposit paid earlier.

When does the sale of immovable property become absolute? Under what circumstances can the sale be set aside?

Where the TRO does not receive any application for setting aside the sale or having received one disallows the same, he shall make an order confirming the sale and thereupon the sale shall become absolute. However, such confirmation of sale can be issued only on receiving the full purchase money and not before the expiry of 30 days from the date of sale.

The sale can be set aside in the following circumstances:

The defaulter has not been served with a Notice under Rule 2.

Some material irregularity has taken place in publishing or conducting of the sale.

The Applicant has sustained substantial injury as a result of such non-service or irregularity.

In case the Applicant happens to be the defaulter, he should have deposited the amount recoverable from him. The persons who are entitled to apply for setting aside a sale are:

The AO.

Any person whose interest is affected by the sale.

How can a purchaser of immovable property, which is set aside, claim refund of the money paid by him? Is such purchaser entitled to interest on the amount paid by him? If yes, who bears the interest burden, the assessee or the Department?

The purchaser will have to make an application to the TRO under Rule 64 of the Second Schedule. The TRO thereafter, at his discretion, may allow the payment of interest and some amount by way of penalty to the purchaser from the amount deposited by the defaulter. Hence, the burden of interest payment to the purchaser is borne by the assessee and not by the Income-tax Department.

Who is liable to bear the expenses on attachment and sale of immovable property?

As per Rule 8 of the Second Schedule, the defaulter is liable to bear the expenses of attachment and sale.

Is there a restriction on the purchase of immovable property?

No officer or other person having any duty to perform in connection with any sale under Second Schedule shall, either directly or indirectly, bid for, acquire or attempt to acquire any interest in the property sold as per Rule 17 of the Second Schedule.

Under section 222(1) of the Act, can TRO attach property immediately after issuing Notice of Recovery?

No. He will have to wait for the statutory period of 15 days as provided in Rule 3 of the Second Schedule.

Which types of property cannot be attached by TRO? Section 60 of Civil Procedure Code provides the list of assets which cannot be attached even with the consent of the assessee

Land and houses belonging to an agriculturalist, an expectancy of a succession by survivorship or other merely contingent or possible right and the interest of a lessee in respect of a residential building to which rent control laws are applicable.

Can TRO declare any transfer of property as void under section 281 of the Act?

Yes, if he has drawn the Certificate of arrears.

Can TRO issue Notice for Recovery of tax by attaching personal rights, like, stock exchange card?

As per the decision of the Supreme Court in the case of the Ahmedabad Stock Exchange vs. CIT 248 ITR 209, the stock exchange card of a defaulter cannot be attached. However, the monies lying to the credit of the defaulter’s account in the stock exchange like margin money deposits, etc. are attachable. The Bombay High Court, in its decision in the case of Suresh D. Shah (W.P. No. 220 of 1997) has held that the stock exchange clearing house has a prior lien over the sale proceeds received by the exchange on the sale of the card of a defaulting member, while the claim of the income-tax department on the other amounts lying to the credit of the defaulter is superior. Both parties have filed SLP with the Supreme Court and the decision is awaited.

Can TRO attach property of spouse of defaulter?

No. However, if the TRO has evidence to prove benami holding, then it can be attached.

Defaulter has many properties, like, residential house, a plot of land, etc. having market value of Rs. 10 Lakhs. He has to pay tax of Rs. 2 Lakhs. TRO attaches all the properties as he is not aware of the market value of properties. What remedy is available to the assessee?

As per Rule 34 of the Second Schedule, the attachment by seizure shall not be excessive, that is to say, the property attached shall be as nearly as possible proportionate to the amount specified in the warrant. In the light of the said provision, the assessee can approach the TRO along with the valuation reports of the properties attached and ask him to retain only such attachment which is closest to the amount of arrears due.

Is there any time limit for sale of attached property? If TRO fails to dispose of the same within reasonable time, what will be the status of the property?

Rule 68B of Second Schedule prescribes the time limit. When the TRO fails to sell the property in accordance with the provisions of Rule 68B(1), the attachment order of the said property shall be deemed to have been vacated on the expiry of the limitation period of four years.

Can TRO make attachment or pass prohibitory order on the unsold flats of the builders and/or stock in hand?

Yes, as the same are not exempt from attachment.

Attachment and disposal of movable property

What is the procedure of attachment of movable property? What are the remedies available to a tax-payer in case his movable property is attached?

The movables are attached when the TRO issues a warrant in Form No. ITCP-2, authorising the Tax Recovery Inspector to attach the same. The TRI executes the warrant with the help of two panchas and prepares an inventory of the movables attached. In case the assessee does not want the movable properties to be removed from his premises, he may offer to keep the same on executing a duly stamped sapurdnama and also furnish a Surety Bond executed by two solvent persons. The amount of stamp duty varies according to the value of the property, minimum being Rs. 250. The format of sapurdnama is as per ITCP-23.

Jewellery of Mr. ‘A’ is in Mr. ‘B’s possession and is attached by the tax authorities What is the remedy available to Mr. A?

Mr. A will have to file his claim before the TRO who after carrying out the necessary verification and investigation, will pass an order under Rule 11 of the Second Schedule, either accepting or rejecting the claim of Mr. A.

When and in respect of what kinds of assets can a prohibitory order be issued?

Prohibitory order can be issued for attaching debts, shares, decrees, salaries, interest in partnership firm, negotiable instruments, etc. at any time after the issue of Notice to the assessee in Form No. ITCP-1 by the TRO and the completion of statutory period of 15 days from the service of the said Notice.

What is the procedure for sale of movable property that is attached? Who can conduct such sale and when does such sale get completed?

Anybody authorised by the TRO (usually the Tax Recovery Inspector) can conduct the sale by public auction. Such sale can be made only after the TRO issues a proclamation for the same specifying the time and place of such sale and whether the same is subject to confirmation or not. The sale can take place only after the expiry of 15 days from the date on which the sale proclamation takes place. The goods put up for auction are sold to the highest bidder whose bid has to be more than the reserve price fixed by the TRO. The purchase price has to be paid at the time of sale or as soon after as allowed by the TRO. When the purchaser pays the purchase money, the officer conducting the auction grants a receipt for the same and thereafter the TRO issues a Certificate of sale which incorporates the details of the goods sold, name of the purchaser, purchase price, etc.

Can tax officials come and attach movable property at any time, say even at midnight?

No. The attachment can take place only after sunrise and before sunset.

If no male member is present, can a lady refuse entry to the IT authorities coming to her residence for attachment of property? Can she ask them to postpone the attachment proceedings till a male member is present?

The lady cannot refuse entry to the IT authorities on plea that there is no male member present. However, if she is a woman following the purdah system, she can ask for time to withdraw before allowing entry to the IT authorities. No postponement of the attachment proceedings can be sought till a male member is present, as the IT authorities are accompanied by independent panchas. However, the lady can ensure the genuineness of the officers concerned by verifying the same from their identity cards.

Arrest and detention

Under what circumstances can a person defaulting in payment of tax be arrested?

A defaulter can be arrested by the TRO only when he is guilty of some contumacious conduct. Rule 73 of the Second Schedule prescribes two conditions of the happening of which a defaulter can be arrested, namely:

he has with the object or effect of obstructing the execution of the Certificate has, after the drawing up of the Certificate by the TRO, dishonestly transferred, concealed or removed any part of his property, or

he has since the drawing of the Certificate, the means to pay the arrears or some substantial part thereof and refuses or neglects to pay the same.

As per Rule 81 of the Second Schedule, a woman, a minor or a person of unsound mind cannot be arrested. Normally, arrest is possible only when the defaulter is a natural person; i.e., human being. However, if the defaulters happen to be entities other than individuals as defined in section 2(31) of the Act, then those individuals who comprise or manage the affairs of such entities, if held personally responsible for discharging the tax liability are liable to be arrested. For example, Karta of an HUF, partners of a firm and Directors of private limited companies.

What is the procedure for arrest and detention?

After the TRO has recorded his reasons of his satisfaction about the contumacious behaviour of the assessee, a show cause Notice in Form No. ITCP-25 is issued to the defaulter. Thereafter, when the defaulter appears, the TRO provides him with an opportunity of showing cause as to why he should not be committed to the civil prison. In case, the defaulter pays the amount due, he is set free, failing which the TRO passes the order of detention in Form No. ITCP-27 committing him to the civil prison. In case, the defaulter fails to appear in response to the show cause Notice, then the TRO issues a warrant of arrest in Form No. ITCP-26 directing the persons mentioned therein to arrest the defaulter and produce him before the TRO. An arrest is completed when there is a submission to the custody by word or action. Hence, mere touching the defaulter and asking him to submit to custody is sufficient and there is no need for confinement and rough handling. However, if the defaulter resists or attempts to evade arrest, then the person directed to arrest may use all means necessary to effect the arrest, which does not include violence beyond what is justified in stopping the fugitive.

Is the order for detention issued by an Income-tax authority or is issued by the Police Department or a Court of law?

The order for detention is issued by the Income-tax authority for income-tax arrears only.

What is the remedy available against an order of detention?

The assessee may appeal against the order of detention to the CIT or seek suitable remedy by way of a writ petition.

Which type of custody/detention to which the assessee is subjected, i.e., judicial, civil, etc.?

The assessee is subjected to detention in the civil prison, i.e., civil custody.

What procedure TRO should follow for arrest and detention? For how long the defaulter can be detained in civil prison?

The procedure has been explained here-in-above. The defaulter can be detained for a period of six months if the amount of demand in the Certificate exceeds Rs. 250 and for a period of six weeks in any other case.

Describe the circumstances under which arrest/detention cannot be made.

Ans. A defaulter cannot be arrested merely because of his inability to pay the tax. The general legal opinion is that if a judgement debtor satisfies the court that he has no assets, no useful purpose will be served by sending him to prison. Lastly, if the assessee is not in a fit state of health or is suffering from any serious illness, then he is generally not arrested.

Can the detainee be discharged from payment of tax, if he has been detained for full term?

The detainee cannot be discharged from payment of tax. However, he cannot be arrested again if he has served the full term in detention.

Other modes of recovery

Can the tax authorities recover the tax due from a husband out of his wife’s salary by issue of requisition to her employer?

No.

Can the tax authorities recover the tax of a defaulting tax-payer from pension that he receives from LIC of India in accordance with a scheme of pension of his employer?

Yes, as the same is not covered by section 60 of CPC, 1908 and is also included in the definition of salary as given in section 17(1).

Mr. A has taken an overdraft facility from a bank secured against the receivables from his business. The tax authorities have sent a Notice under section 226(3) to Mr. A’s debtors and have recovered arrears of tax due from Mr. A from them. Mr. A has defaulted in paying the overdraft facility and the bank has told him to pay up. Mr. A contends that the bank should have recovered its dues from the debtors and has requested the bank to collect its dues from the tax authority since the bank had a lien on the receivables whereas the tax authorities did not. Is assessee’s contention correct? Is his liability to the bank discharged and can the bank recover the amount due from the tax authorities?

A general lien on the receivables of the assessee does not make a bank a secured creditor. The general rule is that the revenue (the State) is first amongst the unsecured creditors and hence, the contention of Mr. A is not correct. His liability to the bank is not discharged and neither can the bank recover the overdraft granted to him from the tax authorities. The action of the tax authorities of recovering from the debtors of Mr. A is
as per law and hence Mr. A cannot request the bank to collect its dues from the department.

The tax authorities issue a Notice to Mr. B to pay them the sum of
Rs. 50,000 due to Mr. A. The Notice of the tax authorities reaches Mr. B on 31st December, 2003 at 5.00 p.m. Meanwhile, on 31st December, 2003 at 11.00 a.m., Mr. A has collected a cheque from Mr. B in full and final settlement of the amount due to him. Should Mr. B honour the cheque or should he ask his bank to stop payment thereon? If he does not ask his bank to stop payment of the said cheque, what would be the consequences?

Mr. B should inform the facts to the TRO without loss of time or delay on the 31st of December 2003, itself. In case, he fails to communicate the facts on 31st December or at the earliest and there is an inexplicable delay on his part and the TRO finds that the cheque has been presented for collection by Mr. A on a date later than 31-12-2003, there is every likelihood of it being treated as collusive. This will lead to the TRO treating Mr. B as "assessee deemed to be in default" and enforcing recovery from him as if they were his own dues. Having issued the cheque before the receipt of Notice, if Mr. B resorts to stop payment, he may expose himself to proceedings u/s. 138 of the Negotiable Instruments Act. However, timely communication with the TRO will save him from being treated as assessee deemed to be in default and allow the TRO the opportunity to attach the payment made by him in the account of Mr. A.

Is the Notice under section 226(3) required to be served through registered post only?

No. It can be by service on person also.

F. Recovery in special cases

What are the provisions for recovery of tax from the following categories of assessees:

Beneficiaries of a trust for arrears of tax from the trustees.

Section 166 of the Income-tax Act states as under:

"Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income."

Members of an AOP for the arrears of tax on income of the AOP.

According to section 177 of the Income-tax Act, the liability of the members of the AOP is joint and several for the amount of tax due from the AO and hence, it can be recovered from the members also.

Directors of a closely held company for tax arrears of the company.

As per section 179, the liability of such directors is joint and several.

Members of a Hindu Undivided Family (HUF) for tax arrears on income of the HUF.

As per section 171, the liability of the members of the HUF is joint and several, however, if the demand pertains to the period after partition of the HUF, then the liability of the members is restricted to the portion of the joint family property allotted to each of them.

Successor of a business for recovery of arrears of tax of the predecessor.

As per section 170(3), the successor is liable for the arrears of the predecessor.

Members of a co-operative society for arrears of tax of the co-operative society.

Members are not individually liable for the tax dues of the society and their liability is restricted to their share holding in the capital of the society.

Members of a club (a mutual association) in respect of arrears of tax on the non-mutual income of such association?

The liability is joint and several as per section 177 for such non-mutual income.

Can assets located outside India be attached for recovery of tax due in India? Is the position different for assets outside India belonging to non-resident?

Yes. As per section 228A(2), if India has an agreement with the country where the assets are located, the same can be attached through the CBDT. If the tax is due in India from a non-resident, the position remains same as above.

General/Common interest

In most of the cases, the assessee is asked to pay at least 50% of demand, although his appeal is pending before the CIT(A). Such demand under section 156 is some times due to high pitched order by AO. In such circumstances, the jurisdictional CIT should look into the matter and advise the AO not to ask the assessee to make the payment, especially, because the appeal would be disposed of within next 6 to 12 months. However, it does not so happen in many cases. What the assessee should do in such a
situation?

The assessee should approach the Department by offering security in the form of title deeds of some of his property which is sufficient to cover the amount of tax arrears and also offer to start paying up some instalments till the appeal is decided. As per Instruction No. 1914, the Department is bound to consider the request in a fair and reasonable manner, whereby the assessee will have no cause for any grievance. In case, the offer of the assessee is not accepted, then he may resort to action as suggested above.

As per section 220(1), demand under section 156 is payable within 30 days from the date of service of the Notice. Suppose, the Notice under section 156 is served on 1-12-2003, by which date the said demand should be paid by the assessee, by 30-12-2003 or 31-12-2003?

The demand should be paid by 31-12-2003. The words used in section 220(1) read as "shall be paid within 30 days of the service of the Notice". Hence, it is clear that the section prescribes an exclusive definition, i.e., 30 days excluding the date of service.

What is the role of Grievance Cell of the Department and when it should be approached by the assessee?

The assessee should approach the Grievance Cell only when he has exhausted all the normal avenues of redressing his grievance; i.e., the Assessing Officer, the Jt./Addl. Commissioner and the C.I.T. concerned. The Grievance Cell exists to increase the accountability of the Tax Department and monitor the Department’s response to the genuine problems of the assessees. It helps the tax-payers to achieve their rights in a speedier manner, thereby removing the irritants which prevent the establishing of a cordial relationship between the Department and the tax-payer.

Please explain as to how actually Department conducts the auctions pertaining to recovery and generally who purchases at such auctions. How are these auctions different from those under Chapter XX-C?

The auctions for recovery of tax are different from those under Chapter XX-C, as they are meant to counteract the tax evasion, while those for recovery are meant to reduce the arrears. The Department widely publicises the auction sale of movable and immovable property so as to attract a large number of prospective buyers. To ensure fairness, each property to be auctioned carries a reserve price fixed by the experts. Inspection of the property to be sold is given sufficiently in advance of the date of sale to enable the buyers to judge the value of the same. In case of auction of movables, the buyers have to pay the price immediately while in the case of immovable property, they get a time of 15 days. As far as movables are concerned, if the same happens to be jewellery, due to superstitious reasons, the actual users do not buy it and hence, the same are generally purchased by dealers of jewellery for resale.

The views/opinions expressed in this Article are personal views/opinions of the author himself and not necessarily the views/opinions of the Income Tax Department.