HIGH COURT OF PUNJAB & HARYANA 

A. K. Mittal, for the Petitioner : R. P. Sawhney with section K. Sharma, for the Respondents 

JUDGMENT 

ASHOK BHAN, J. : 

This petition has been filed for issuance of a writ of certiorari quashing orders, Annexures-P-2 and P-3, directing Amrik Singh and company-respondent No. 2, the tenant of the petitioner to deposit the rent payable by it to the petitioner towards arrears of tax due from the firm Om Prakash Harbans Lal, and for a writ of mandamus directing respondent No. 1 to refund the amount illegally collected by him from respondent No. 2. 

2. One Anil Kumar was the owner in possession of a vacant plot with an area of 147 square yards situated at Mehlan Road, Sangrur. He mortaged the same with possession with all rights attached to it with the petitioner for a consideration of Rs.10,000 vide registered mortage deed dt. 30 September, 1986 (Annexure P-1). One of the rights conferred in the mortage deed on the mortgagee-petitioner is that she has the right to make the construction on the plot, and, when the mortage is to be got redeemed, the mortgagee shall remove the material, or if agreed to shall be entitled to get the price of the material from the mortagor. In the year 1991, the petitioner started construction of two shops which were completed in December, 1994. The said shops remained vacant for about 1 1/4 years or so and thereafter in the year 1996, both the shops were let out to respondent No. 2 at a monthly rent of Rs. 6,500. 

3. The TRO, Ludhiana, issued a notice under section 226(3) of the IT Act, 1961 (hereinafter referred to as the Act), dt. 13th June, 1996 to Amrik Singh & Co., stating therein that a sum of Rs. 1,10,043 plus interest under section 220(2) of the Act is due from Krishan Kumar, a partner of Om Prakash Harbans Lal, Sangrur, on account of arrears of income-tax and that respondent No. 2 should pay to the TRO, Ludhiana, any amount due from it or held by it, for or on account of the said Krishan Kumar. A copy of the said notice is Annexure P-2. The jurisdiction over Om Parkash Harbans Lal, Sangrur, changed on 2nd Aug., 1996, from the TRO (Central), Ludhiana, to the TRO, Leela Bhawan, Patiala. Respondent No. 1 thereafter addressed a communication dt. 7th August, 1996, asking respondent No. 2 to send a draft of Rs. 5,000 on account of rent to respondent No. 1 for adjusting the same against outstanding income-tax liability against Om Prakash Harbans Lal. A copy of the said letter is Annexure P-3. It is averred that respondent No. 2 thereafter in pursuance of the letter, Annexure P-3, has been paying the rent of Rs. 6,500 per month w.e.f. July, 1996 to respondent No. 1. 

The petitioner coming to know of the fact that her rent has been attached for recovery of arrears of tax of Om Prakash Harbans Lal, Sangrur, addressed a letter dt. 14th September, 1996, to respondent No. 1 bringing to his notice that the property in question was duly mortaged through a registered mortgage deed dt. 30th September, 1986, by Anil Kumar in her favour and that Krishan Kumar, a partner of Om Parkash Harbans Lal, has no right or title of any kind in the property from which he was recovering the income-tax. It was further requested that tax recovered from the tenant of the petitioner be refunded to the petitioner and that he should not collect any kind of tax rom the above-mentioned property in future. Failing to get a favourable response from respondent No. 1, the present writ petition has been filed challenging the action of respondent No. 1 seeking to recover the arrears of tax from the rent due and payable to the petitioner by respondent No. 2. 

4. In the written statement filed, the stand taken by the respondents is that the answering respondent did not have any knowledge regarding the alleged mortage except the information contained in the mortage deed, Annexure, P-1, of this petition. As Anil Kumar was the owner of the land in dispute, the respondents were justified in recovering the arrears of tax due rom the firm, Om Prakash Harbans Lal, from any of the partners. Anil Kumar being partner of the firm is the owner of the property in question therefore, the tax liability of the firm is recoverable from him under section 188A of the Act and the recovery of the tax has been justified being made rom the tenants of Shri Anil Kumar. 

5. Counsel for the parties have been heard. 

6. The property in question was mortaged to the petitioner through registered mortgage deed dt. 30th September, 1986,
by Anil Kumar with permission to raise construction. The petitioner after raising the construction of two shops let out the same to respondent No. 2. Anil Kumar, mortgagor, had no possessory rights over the land or the shops at present. As and when the mortage is redeemed, Anil Kumar could get possessory rights over the land and in case he purchases the material used for construction of shops then the shops as well. Till that day, the only right which he possesses is to redeem the property. Anil Kumar has no right to receive the rent of the leased premises. 

7. Under section 226(3) of the Act, the ITO, can 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 ITO upon the money becoming due or being held within the time specified in the notice so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears of income-tax. The petitioner did not owe any money to Om Prakash Harbans Lal or any of its partners. Similarly, respondent No. 2 not being a tenant of Om Prakash Harbans Lal or any of its partners was not required to pay the rent to them. The rent was payable by respondent No. 2 to the petitioner. Neither the petitioner nor respondent No. 2 was holding the money on behalf of Om Prakash Harbans al or its partners. Under section 226(3) of the Act, the money 2„ payable by respondent No. 2 to the petitioner as rent of the shops could not be garnished for adjustment of arrears of income-tax of Om Prakash Harbans Lal or its partners. The rent payable on account of the leased shops by respondent No. 2 to the petitioner could not be attached/recovered and adjusted against the arrears of tax due against Om Parkash Harbans Lal or any of its partners. The action taken by respondent No. 1 is thus illegal and unjustified. 

8. For the reasons stated above this petition is accepted and the impugned orders, Annexures P-2 and P-3, being invalid are quashed. Respondent No. 1 is directed to refund the amount recovered from Amrik Singh and company, respondent No. 2, to the petitioner within two months of the receipt/production of a certified copy of this order. In case the amount is not refunded within two months, respondent No. 1 shall be liable to pay interest at the rate of 12 per cent per annum on the amount due from the date it was recovered till its payment. 

9. Respondent No. 1, however, shall be at liberty to recover the arrears of tax from Om Parkash Harbans Lal or any of its partners under the IT Act in accordance with law.