Page 88 - GSTL_26th March 2020_Vol 34_Part 4

598 GST LAW TIMES [ Vol. 34
issued to a post office, banking company or an insurer, it shall not be
necessary for any pass book, deposit receipt, policy or any other doc-
ument to be produced for the purpose of any entry, endorsement or
the like being made before payment is made, notwithstanding any
rule, practice or requirement to the contrary.”
5. Under clause (i) of sub-section (3) of Section 226, the Assessing Officer
has power to issue notice requiring any person from whom money is due or
may become due to the assessee or any person who holds or may subse-
quently hold money for or on account of the assessee to pay to the As-
sessing Officer forthwith upon the money becoming due or being held or
within the specified time, so much of the money as is sufficient to pay the
amount due by the assessee in respect of the arrears or the whole of the
money when it is equal to or less than the amount of arrears. In other
words, in the process of seeking coercive recovery, the Assessing Officer
would have power to recover the same to the extent of the arrears of the as-
sessee from 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. This power is essentially in the nature of gar-
nishee order requiring the debtor of the assessee to make direct payment to
the Assessing Officer of the arrears of tax instead of paying over such
amount to the assessee. In essence, therefore, this power would be available
when there is person from whom money is due or may become due to the
assessee or there is a person who holds or may subsequently hold for or on
account of the assessee any money.
6. In this case, admittedly, all the three bank accounts were in the nature of either
the cash credit account or term loan account. In other words, the accounts were
opened to enable the assessee to borrow the money from the bank for the purpose of
its business. Any money. therefore, that the bank may make available to the assessee
would necessarily be in the nature of a loan or a cash credit facility, in either case,
would be in the nature of borrowing by the assessee from the bank. The bank and
the assessee. therefore, do not have the debtor-creditor relationship.
7. Somewhat similar situation arose before the Learned Single Judge of
Madras High Court in case of K.M. Adam v. ITO [1958] 33 ITR 26. The As-
sessing Officer desired to invoke powers analogous to Section 226(3) of the
Act for recovery of the tax dues of the assessee from the overdraft account
that the assessee maintained with its bank. In such background, referring to
similar provisions contained in Section 46 of the Income-tax Act, 1922, it
was observed as under :
‘It will be seen that this provision is analogous to an attachment of a
debt or what is commonly terms a garnishee summons. The classes of
persons to whom such notice could be served are two: (i) any person
from whom money is due or may become due to the assessee; and (2)
any person who holds or may subsequently hold money for or on ac-
count of the assessee. The question which arises for consideration in
the present case is, as to whether a bank, which has afforded over-
draft facilities to its customer, holds the amount, specified as that up
to which the customer may draw as either “a debtor” of the customer
or holds that money on behalf of or on account of the customer.’
8. This decision was followed by the Learned Single Judge of Bombay
High Court in reported judgment of Calcutta High Court in case of Jugal
Kishore Das v. Union of India [W.P. No. 22899 of 2013, dated 8-10-2013]. In
the said case, the Assessing Officer had tried to recover the tax dues of the
assessee in exercise of powers under Section 226(3) of the Act by attaching
the cash credit account of the assessee. Following the decision of Madras
High Court in case of K.M. Adam {supra), it was observed as under :
“In view of the above, this Court does not find that the action on the
part of the respondents in passing the order of attachment of Cash
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