Section 226 of the Income-tax Act, 1961 - Collection and recovery of tax

Court :
SUPREME COURT OF INDIA

Brief :
Section 226 of the Income-tax Act, 1961 - Collection and recovery of tax - Other modes of recovery - Whether section 226(3) would be applicable when a money is due to assessee from any person - Held, yes Section 226 of the Income-tax Act, 1961 - Collection and recovery of tax - Other modes of recovery - Assessee had invested certain amount in unit of monthly income plan (III) offered by appellant-Unit Trust of India - Since a certain sum was due from assessee on account of income-tax, Department issued a notice dated 8-2-2002 to appellant under section 226(3) - In compliance of demand made, appellant paid certain sum to department wherefor value of unit at relevant time was calculated at rate of Rs. 6.93 per unit - Assessee filed writ petition questioning said action of appellant in resorting to sale of said units without his consent - Lock-in-period of plan was for a period of five years - Repurchase of units was allowed from 1-9-2001 at NAV based repurchase price - Said option of purchase was to be exercised by assessee but assessee did not opt therefor - Whether section 226(3)(vi) cannot be interpreted to mean that Unit Trust of India was fully authorised to dispose of units on its own without any notice to holder of units - Held, yes - Whether in absence of any right of option having been exercised by assessee, appellant could not have transferred units without consent of assessee - Held, yes - Whether since eventhough assessee never authorised appellant to sell units in market at lower price, appellant sold same in market without any intimation to assessee, appellant’s action was unjustified - Held, yes FACTS The assessee had invested on amount of Rs. 65 lakhs in units of monthly income plan (III) offered by the appellant- Unit Trust of India under capital gain scheme. Said plan was a five year close ended income plan. Since certain sum was due from assessee on account of income-tax, department issued a notice dated 8-2-2002 to the appellant under section 226(3) to pay amount due. In compliance of the demand made, appellant paid certain amount to department wherefor value of unit at relevant time was calculated at the rate of Rs. 6.93 paise per unit. The assessee filed a writ petition questioning the action of the appellant in resorting to sale of the said units without his consent. The High Court held that although the units were transferred, their value had not become due to the assessee on date on which such notice was given and, therefore, such transfer of units was to be quashed and assessee was entitled to redemption value of units at rate of 10 per unit after five years.

Citation :
Administrator, Unit Trust of India v. B. M. Malani