# INCOME-TAX OFFICER, ID.ORAS v. BUDHA PICTURES, MADRAS

- **Citation:** [1967] 3 S.C.R. 425
- **Court:** Supreme Court of India
- **Decided:** 1967-04-05
- **Case number:** Civil Appeal No. 401 of 1966
- **Bench:** J. C. Shah, S. M. S!Kri, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/income-tax-officer-id-oras-v-budha-pictures-madras-4062
- **Pages:** 5

## Headnote

. Indian Income-tax Act, 1922, s. 46(5A )-Notice under section to
who1n can be given-There must be
subsisting
relationship
between
asJtssee and person to whom notice is gi-.,·en.
The respondent a film producing company was served a notice under
s. 46(5A) by the Income-tax Officer on June 18, 1957, asking it to pay
to the Income-tax Officer any amount due from the company or held by
it for or on account of 'B' an actor. On June 26" 1959 the company replied that it bad not engaged 'B' foc its current production and there
was no contract with him and consequently it could not comply with the
notice. On March 28, 1960 the company
signed a contract with 'B'
agreeing to pay him Rs. 20,000 for a role in its current production. Tho
amount was paid to him in three instalments on March 28, 1960, Februa·ry
~. 1961 and March 18, 1961.
On March 22, 1961 the Income-tax Offl·
cec sent to the company another notice under s. 46(5A) to which the
company replied that there were no payment due and payable to 'B' on
the date of receipt of the J}otice. The Income-tax Officer held that the
payment of Rs. 20,000 to .'B' was in violation. of the notice under
s. 46(5A) issued on June 18, 1959 and requested the company to pay the
said amount to the Income-tax department. The
company filed a writ
petition in the High Court which decided in its favour holding that the
section required the subsistence of a similar relationship as between
a
garnishee and the assessee. The department appealed to this Court.
HELD : Jn s. 46(5A) the legislature contemplates a subsisting relationship of which the Income-tax Officer gets information and which can
reasonably lead to the re<:overy of arrears. [ 429C]
The expression "may become due" or
11may subsequently hold money"
suggest in the context a subsisting relationship between the person served
with a notice and the assessee; e.g. assessee's employer or banker
or
debtor, or a person paying an annuity to him; they do not suggest a bank
which he has never dealt with, a person he has never lent money to or
dealt with, or all persons who may possibly in the future employ an
asses.ee out of job or work. The section cannot apply to all possible
employers or traders
[429F]
Since there was no subsisting relationship between the company and
'B' at the time when the notice was issued the recovery of Rs. 20,000
from the company was not justified.

## Text

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INCOME-TAX OFFICER, ID.ORAS
v.
BUDHA PICTURES, MADRAS
April 5, 1967
[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.]
. Indian Income-tax Act, 1922, s. 46(5A )-Notice under section to
who1n can be given-There must be
subsisting
relationship
between
asJtssee and person to whom notice is gi-.,·en.
The respondent a film producing company was served a notice under
s. 46(5A) by the Income-tax Officer on June 18, 1957, asking it to pay
to the Income-tax Officer any amount due from the company or held by
it for or on account of 'B' an actor. On June 26" 1959 the company replied that it bad not engaged 'B' foc its current production and there
was no contract with him and consequently it could not comply with the
notice. On March 28, 1960 the company
signed a contract with 'B'
agreeing to pay him Rs. 20,000 for a role in its current production. Tho
amount was paid to him in three instalments on March 28, 1960, Februa·ry
~. 1961 and March 18, 1961.
On March 22, 1961 the Income-tax Offl·
cec sent to the company another notice under s. 46(5A) to which the
company replied that there were no payment due and payable to 'B' on
the date of receipt of the J}otice. The Income-tax Officer held that the
payment of Rs. 20,000 to .'B' was in violation. of the notice under
s. 46(5A) issued on June 18, 1959 and requested the company to pay the
said amount to the Income-tax department. The
company filed a writ
petition in the High Court which decided in its favour holding that the
section required the subsistence of a similar relationship as between
a
garnishee and the assessee. The department appealed to this Court.
HELD : Jn s. 46(5A) the legislature contemplates a subsisting relationship of which the Income-tax Officer gets information and which can
reasonably lead to the re<:overy of arrears. [ 429C]
The expression "may become due" or
11may subsequently hold money"
suggest in the context a subsisting relationship between the person served
with a notice and the assessee; e.g. assessee's employer or banker
or
debtor, or a person paying an annuity to him; they do not suggest a bank
which he has never dealt with, a person he has never lent money to or
dealt with, or all persons who may possibly in the future employ an
asses.ee out of job or work. The section cannot apply to all possible
employers or traders
[429F]
Since there was no subsisting relationship between the company and
'B' at the time when the notice was issued the recovery of Rs. 20,000
from the company was not justified.
CIVIL APPELLATE JURISDICTION :
Civil Appeal No. 401 of
1966.
Appeal by special leave from the judgment and order dated
October 10, 1963 of the Madras High Court in Writ Petition No.
71 of 1962.
H
T. V. Viswanatha Iyer, S. K. Aiyar, S. P. Nay.var for R. N.
Sachthey, for the appellants.
K. Srinivasan and R. Gopa/akrishnan, for the respondent.
426
SUPUMB COUllT REPORTS
[1967) 3 S.C.R.
The Judgment of the Court was delivered by
Slkri, J. This appeal by special leave is directed against the
judgment of the Madras High Court allowing the petition filed
under art. 226 of the Constitution by Budha Pictures, Madras,
respondent before us. The respondent had, inter alia, prayed for
a writ of mandamus or such other appropriate writ, order or direction in the nature of a writ directing the 4th Income-tax Officer,
City Circle V, Madras, to forbear from {;Ollecting from the respondent the sum of Rs. 20,000/- in pursuance of his notices dated
June 18, 1959, and March 21, 1961, issued under s. 46(5A) of
the Indian Income-tax Act, 1922.
These notices came to be
issued in the following circumstances :
One, T. S. Balaiah, a cine artist, was apparently in arrears of
income-tax. The III Additional Income-tax Officer sent a letter
dated Julie 18, 1959 to the respondent saying :
·
"I understand that you have engaged the services of
Shri T. S. Balaiah for a film being produced by you.
As the above gentleman is in arrears of income-tax, I
herewith enclose a notice under Section 46(5A) of the
I. T. Act, attaching the remuneration payable by you to
Shri Balaiah. Please credit to the Government account
all amount that is and will become payable to him."
The first paragraph of the notice reads as under :
"A sum of Rs. 46819-15 is due from Shri T. S. Baliah
on account of Income-tax and/ or penalty, I am to request you, under Section 46(5A) of the Income-tax Act,
1922, to pay to me forthwith any amount due from you
to, or held by you for or on account of the said Shri
T. S. Baliah of 4, Arulammal St. Madras-17 upto the
amount of arrears shown above, and also request you to
pay any money which may subsequently become due
from you to him or which you may subsequently hold
for or one account of him up to the amounfof arrears
still remaining unpaid, forthwith on the money becoming due or being held by you as aforesaid as such payment is required to meet the amount due by the tax-payer
in respect of arrears of Income-tax and penalty. I am
to say that any payment made by you in compliance
with this Notice is in law deemed to have been made
under the authority of the tax-payer and my receipt
will constitute a good and sufficient discharge of your
liability to the person to the extent of the amount referred to in the receipt."
TI1e respondent replied on June 26, 1959, as follows :
"We have not engaged Sri T. S. Baliah for acting in
our production No. 2. Hence there is no contract with
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I.T.O. v. BUPHA PICTURES (Sikri, J.)
said Shri T. S. Baliah, and consequently we are unable
to comply with your request."
427
On March 22, 1961, another communication was sent enclosing
a notice under s. 46(5A) of the Indian Income Tax Act.
The
notice is in the same form except that the sum to be recovered had
increased to Rs. 86111/12. The respondent replied on March
25, 1961, saying that "there are no payments due and payable
to Shri T. S. Baliah, cine-artist, as on the date of receipt of your
letter." The respondent enclosed a statement of account which
showed that on March 28, 1960, a cheque for Rs. 7,000/- was given
to T. S. Baliah; on February 9, .1961, cash amounting to
Rs. 6,000/- was paid to him, and again on March 18, 1961, cash
amounting to Rs. 7,000/- was paid to him. The respondent also
enclosed a copy of the contract with T. S. Baliah. The contract
shows that there was an agreement between T. S. Baliah and the
respondent, signed on March 28, 1960, whereby T. S. Baliah agreed
to a role in production No. 2 (Tamil) for a consolidated remuneration of Rs. 20,000/-. On April 26, 1961, the Income Tax Officer
wro•e to the respondent stating that payment of Rs. 20,000/-
made to T. S. Baliah was in violation of the notice under s. 46(5A)
issued on June 18, 1959, and requested the respondent to pay
the sum of Rs. 20,000/- to the Income Tax Department within
three days from the receipt of the letter. On June 26, 1961, the
respondent wrote to the Income Tax Officer protesting that the
respondent was not liable to pay the sum of Rs. 20,000/- giving
various reasons, which need not be mentioned at this stage. On
August 29, 1961, the Income Tax Officer declined to accept the
contention of the respondent and requested him to pay to the
Department Rs. 20,000/- on or before September 7, 1961. On
January 18, 1962, the respondent filed the petition under art.
226. After giving the above facts and the grounds the petitioner,
in brief, alleged that according to law the demand made by the
Income Tax Officer for the sum of Rs. 20,000/- was illegal and
without jurisdiction.
The High Court, as we have already mentioned, held that the
Department was not entitled to call upon Budha Pictures Ltd.,
the respondent, to make good the sum of Rs. 20,000/- already paid
to Baliah as such payments did not contravene the notice under
s. 46(5A) dated June 18, 1959.
Section 46(5A) reads as follows :
"(5A) The Income-tax Officer may at any time or
from time to time, by notice in writing (a copy of which
shall be forwarded to the assessee at his last address
known to the Income-tax Officer) require any person from
whom money is due or may become due to the assessee
or any person who holds or may subsequently hold
428
SUPIU!MB COURT RBPORTS
(1967] 3 S.C.R.
money for or on account of the assessee to pay to the
Income-tax Officer, 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 tax-payer in respect
of arrears of income-tax and penalty or the whole of the
money when it is equal to or less than that amount.
The Income-tax Officer may at any time or from
time to time amend or revoke any such notice or extend
the time for making any payment in pursuance of the
notice.
A.ny person making any payment in compliance with
a notice under this sub-section shall be deemed to have
made the payment under the authority of the assessee
and the receipt of the Income-tax Officer shall constitute
a good and sufficient discharge of the liability of such
person to the assessee to the extent of the amount referred
to in the receipt.
Any person discharging any liability to the assessee
after receipt of the notice referred to in this sub-section
shall be personally liable to the Income-tax Officer to
the extent of the liability discharged or to the extent of
the liability of the assessee for tax and penalties, whichever is less.
If the person to whom a notice under this sub-section
is sent fails to make payment in pursuance thereof to the
Income-tax Officer, further proceedings may be taken
by and before the Collector on tho footlri~ that the
Income-tax Officer's notice has the same effect as an
attachment by the Collector in exercise of his powers
under the proviso to sub-section (2) of section 46.
Where a person to whom a notice under this sub·
section is sent objects to it on the ground that the sum
demanded er any part thereof is not due to the assessee
or that he does not hold any money for or on account
of the assessee, then, nothing contained in this section
shall be deemed to require such person to pay any such
sum or part thereof, as the case may be, to the Incometax Officer."
The learned counsel for the appellant contends that s. 46(5 A)
applies in four sets of circumstances :
(1) when money is due from a person to the assessee;
(2) when money may become due to the assessee;
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l.T.O. V. BUDHA PICTURES (Sikri, J.)
~29
(3) when a person holds money for an assessee; and
(4) when a person may hold money on account of
the assessee.
He says that there is no reason for cutting down the words in cate·
gorics (2) and (4); the words are plain and they do not suggest that
at the time of notice a relationship, which may result in money
being owed or being held on account of the assessee, should sub·
sist. Iil our view, if the assessee has no subsisting relationship with
a person it would be speculative to think that that person may get
into relationship with the assessee and start owing money to him
or start holding mone~ for him. We can hardly believe that the
Legislature framed this sub-section on speculative considerations.
It seems to us that the Legislature contemplated a subsisting rela·
tionship of which the Income-tax Officer gets information and
which could reasonably lead to recovery of arrears. Theoretically
it would be possible for an assessee to enter into relationship with
almost anybody, say in the town in which he resides.
We can
hardly imagine that it was expected that the Income Tax Officer
would issue notices to all the residents of a locality or a town
to pay money In cast they begin to hold or owe money to the
assessee.
It seems to us that the High Court was right in holding that
what was contemplated was the subsistence of a similar relationship as between a garnishee and the assessee. This construction of
the sub-section is strengthened by the last para in s. 46(SA). A
person to whom the notice has issued has only to object that the
sum demanded or part thereof is not due to the assessee or that
be doea not hold any money on account of the assessee. He has
not to say that he is not like!~ to owe or to hold money. It see11111
to u1 that the expreasions 'may become due" or "may subse·
quently hold money" suggest, in the context, a subsisting relation·
ship between the person served with a notice and the assessee; 1.g.
assessee's employer, or banker, or debtor, or a person paying an·
nuity to him; they do not suggest a bank with which he has never
dealt with, a person he has never lent money to or dealt with, or
all ~rsons who may possibly in the future employ an assessee out
of JOb or work. If the contention of the Department were to be
accepted, the Income Tax Officer could send a circular letter under .
s. 46(SA) in respect of all defaulters to all possible employers or
traders. This would cast enormous burden on persons receiving
such notices. We cannot sustain a construction which could lead
to such results. We agree with the conclusion arrived at by the
High Court.
In the result the appeal fails and is dismissed with costs.
G.C.
A.pptal dlsmls:rtd.