Notice u/s226(3) on Income Tax Act

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Rajneesh Jairath (Querist)
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09 September 2009 Dear All

I am heading a MNC. The query might look stupid. The query is:-
We initially had a lease agreement with company X in Jan 2008 & later on signed & registered the same lease agreement for same building with Company Y in June'2008. Since then we have been paying rental to company Y. Now u/s 226 (3), we have received a notice from IT department to pay rental to them rather than to Company Y as Company X has defaulted payment of tax liabilities. IT department does not know that the initial lease agreement signed with company X was later on registered as Lease agreement with Company Y.

Need special advice on what to Do? How does I safeguard tghe interest of my company?

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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09 September 2009 YOU MUST HAVE RECD NOTICE FOR AMOUNT PAYABLE TO COMPANY X , AND IF NO AMOUNT IS PAYABLE TO COMPANY X THERE IS NO LIABILITY U/S 226(3).

SECTION 226(3) READS AS FOLLOWS:

i) The [Assessing] Officer [or Tax Recovery Officer] may, at any time or from time to time, 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 [Assessing] Officer [or Tax Recovery 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 assessee in respect of arrears or the whole of the money when it is equal to or less than that amount.

BUT TAKE CARE IT SHOULD NOT BE A DEVISE TO EVADE PAYMENT.....I PRESUME THAT CO Y IS THE OWNER OF BUILDING OR YOU HAVE TAKEN ON SU-LEASE FROM CO Y AND DEED REGD PRIOR TO RECEIPT OF NOTICE

SECTION 226(3)(vi) reads as follows

vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or 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 sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the [Assessing] Officer [or Tax Recovery Officer] to the extent of his own liability to the assessee on the date of the notice, or to the extent of the assesseeâ€™s liability for any sum due under this Act, whichever is less.

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