K.L. Roy, J.
1. This rule challenges the validity of certain notices issued by the-respondent-income-tax Officer on the Union Bank of India Ltd., respondent No. 4, and Messrs. Andrew Yule & Company Ltd., respondent No. 5, directing-them to pay to the respondent-Income-tax Officer any amount due from them or held by them for or on account of the petitioner to meet the tax liability of a firm called Messrs. Dunichand Sons & Company. The rule was issued on the 30th April, 1968, calling upon the respondents, the Income-tax Officer, 'K' Ward, District 1(1), Calcutta, the Commissioner of Income-tax, West Bengal III, Calcutta, and the Union of India to show cause why the aforesaid notices should not be quashed, and the said respondents restrained from giving any effect to the impugned notices.
2. The facts as alleged in the petition are shortly as follows: Under a deed of partnership dated the 24th July, 1960, and registered under the provisions of the Indian Partnership Act, one Bimala Devi Rateria, the wife of Jaidayal Rateria, and one Krishnakanta Rateria, wife of Dewan Chand Rateria, agreed to carry on business with equal shares on and from the aforesaid date under the name and style of P. K. Trading Company. Subsequently, the partnership was reconstituted under a fresh deed of' partnership dated the 9th May, 1962, with effect from the 13th April, 1962, whereby the shares of these two ladies were reduced to 40 per cent. each and a new partner, Onkarmal Rateria, with a share of 20 per cent. was introduced. There has also been a subsequent reconstitution of this firm which is not material for the purpose of this application. The assessment of the petitioner firm for the assessment years 1962-63, the first year of the business of the firm, and 1963-64, were completed by the Income-tax Officer, District V(I), Calcutta, on the 7th February, 1967, and the 29th February, 1968. In the order for the first assessment the Income-tax Officer took the status of the petitioner to be an association of persons as against that of a unregistered firm claimed and further held that as the source of capital introduced in the business could not be explained and, as the two ladies who were claiming to be. partners of the firm did not, in fact, conduct the business of the firm, the firm was not genuine. The assessment order went on to state that as the source of capital could not be explained satisfactorily the assessment was being completed as a protective measure. As the husbands of the alleged partners were doing individual business and were being assessed separately, considering the circumstances of the case, it was assumed that this concern was a benamidar of their husbands. Hence, this concern was being assessed on protective measure and the total income was determined at Rs. 18,231. For the subsequent year also the Income-tax Officer, following his decision in the earlier year, held that the income of the petitioner firm was the benami income of the husbands of the two ladies, but, as the return was filed in the name of the concern, the assessment was made without prejudice to any order that might be passed by any authority of the income-tax department. In that year the total income of the firm consisting of the two ladies up to the period of the introduction of the third partner was determined at Rs. 3,557. Appeals were preferred against the two assessment orders by the petitioner and the decision of the Appellate Assistant Commissioner in respect of the appeal for the assessment year 1962-63, dated the 27th August, 1969, i.e., long after the rule was issued, has been filed before me and in this order the Appellate Assistant Commissioner has refused to go into the question of benami or whether a protective assessment as purported to have been made in this case was permissible. On the merits, however, he held that it could not be said that the introduction of the capital of the business was unexplained and he deleted the addition made on that account. The two husbands, Jaidayal Rateria and Dewan-chand Rateria, carry on business in co-partnership under the name and style of Dunichand Sons & Co. whose assessments are made by the first respondent herein while they are also assessed separately in their individual, capacity by the Income-tax Officer, 'G' Ward, District I(I), Calcutta. It is stated in the petition that neither in the assessment of the said Dunichand Sons & Co. for the two assessment years, 1962-63 and 1963-64, nor in the individual assessments of the two husbands for these two years were the income of the petitioner firm or the proportionate Income therein of the two ladies who are partners have been included. The petitioner has a current account with the Union Bank of India Ltd., hereinafter referred to as the bank, and in March, 1968, it had deposited with Messrs. Andrew Yule & Co. Ltd. a sum of Rs. 1 lakh as security deposit for being appointed a broker for the sale of jute goods of that company and an amount of Rs. 75,000 is, lying with the company to the credit of the petitioner. On March 22, 1968, the petitioner was informed by the bank that it had been directed by the respondent-Income-tax Officer to pay to him forthwith any amount lying, with the bank in the account of the petitioner on account of a tax liability of Rs. 1,30,000 due from Messrs. Dunichand Sons & Co. and in accordance with the aforesaid notice the bank has attached the said account. Along with the said letter the bank forwarded a copy of the aforesaid notice to the petitioner which has been annexed to the petition. The notice is dated the 21st March, 1968, and the respondent-Income-tax Officer requires the bank to pay to him any amount due from the bank to Messrs. P. K. Trading Co. as a sum of Rs. 1,30,000 was due from Messrs. Dunichand Sons & Co. The Income-tax Officer by another notice further informed the bank that any payment by it in compliance with the notice would in law be deemed to have been made under the authority of the taxpayer and the receipt granted by the Income-tax Officer would constitute a good and sufficient discharge ofthe bank's liability to that person to the extent of the amount referred to in the receipt. The notice further cautions the bank that if it discharged any liability to the taxpayer after receipt of the notice it would personally be liable to the Income-tax Officer to the extent of the liability discharged or to the extent of the liability of the taxpayer referred to in the preceding paragraph. The notice concluded with the observation that a copy of the notice was being sent to Messrs. Dunichand Sons & Co. (taxpayer). The petitioner was further informed by Messrs. Andrew Yule & Co. Ltd., respondent No. 5, that the respondent No. 1 had served a similar notice purported to be under Section 226(3) of the Income-tax Act, 1961, requiring it to pay all moneys due and/or held for and on account of the petitioner to the respondent-Income-tax Officer for the alleged tax liabilities of Messrs. Dunichand Sons & Co. As the said company did not forward a copy of the aforesaid notice to the petitioner no copy of such a notice could be annexed to the petition. By a letter dated March 27, 1968, the petitioner protested to the respondent-Income-tax Officer against the validity of the aforesaid notices and pointed out that it was not the taxpayer in default and no such notice could be issued in respect of any moneys due-and owing from its creditors to the petitioner firm. By letters dated April 3 and 4, 1968, the petitioner through its solicitors, Messrs. Jalan & Co., wrote to the respondents Nos. 4 and 5 pointing out that the said purported notices under Section 226(3) were illegal and ultra vires as the petitioner was in no way concerned with the said Dunichand Sons & Co., nor did it owe any money to the said firm and that the petitioner had no outstanding liability for income-tax. Similar letters dated April 6 and 8, 1968, were again addressed by the said solicitors tp respondents Nos. 4 and 5. On receipt of these letters Messrs. Andrew Yule & Co. wrote to the respondent-Income-tax Officer on the 8th April, wherein after referring to the letters written by Messrs. Jalan & Co., it was intimated to the respondent No. 1 that, unless a notice under Section 226(3) was issued in the name of Messrs. P. K. Trading Co. it would not be possible for the company to release any payment to the respondent No. 1 that might be due from the company to Messrs. P. K. Trading Co. In answer to the aforesaid letter the respondent No. 1 by his letter dated the 15th April, 1968, informed the company that, as the firm, Messrs. P. K. Trading Co., has been found to be a benami business of the partners of Messrs. Dunichand Sons & Co., the tax liabilityof the firm Messrs. Dunichand Sons & Co., could validly be realized from the benami business carried by the partners of the aforesaid firm as the liability of the firm is the liability of the partners. In the circumstances, the company was required to pay the amount due by it to Messrs. P. K. Trading Co.
3. The two notices under Section 226(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act), are impugned broadly on the twofollowing grounds, viz., (1) that the said Section 226(3) is ultra vires Articles 14 and 19 of the Constitution of India as the said Sub-section, confers an arbitrary and naked power on the Income-tax Officer to pick and choose the assessees in respect of whom action under the said section is to be taken. There is no right to appeal against the order made by the Income-tax Officer under the said section, and the provisions of the said section are discriminatory and impose unreasonable restriction on the right to hold property, and (2) that the respondent-Income-tax Officer has no jurisdiction, power or authority to issue the impugned notices as the petitioner is neither an assessee in default nor the taxpayer in respect of whose tax liabilities such notices could be issued on the debtors of the taxpayer; and, further, that the Income-tax Officer cannot by an unilateral decision as to the benami character of the petitioners' business give himself jurisdiction under Section 226(3) of the Act.
4. In the affidavit-in-opposition filed by one Nandanandan Mishra, the present incumbent to the post of Income-tax Officer, 'K' Ward, District 1(1), Calcutta, it is stated, inter alia, that the alleged partnership constituted by these two ladies was started with initial capital contributed from the sale of immovable properties which were originally acquired out of the funds provided by their respective husbands from the partnership business carried on under the name and style of Dunichand Sons & Co. and as such. the genuineness and/or authenticity of the partnership firm of the petitioners is denied. It is further stated in the said affidavit, that the assessments of the said Dunichand Sons & Co., Jaidayal Rateria and Dewanchand Rateria, for the assessment years 1962-63 and 1963-64 were completed before the assessment orders were passed in respect of the said two years on the petitioner-firm and could not be dealt with in these assessments. The-sums claimed to be the alleged income of the petitioner-firm were being or would be duly considered in the assessments of the said Jaidayal Rateria, Dewanchand Rateria and the said Dunichand Sons & Co. It is further asserted in paragraph 8 of the said affidavit that the business carried on under the name and style of P. K. Trading Company being found to be a. benami business of the said Jaidayal Rateria and Dewanchand Rateria and/ or the said Dunichand Sons & Co., the income and assets of the petitionersare in fact the income and assets of the said Raterias and/or the said firm, Dunichand Sons & Co., and as such the impugned notices were validly issued to realise the tax due from the said, firm Dunichand Sons & Co. Lastly, it is stated in paragraph 15, which is affirmed as information based on the records, that the petitioners and the said Dunichand Sons & Co, and/or its partners are and have been found to be the same persons or association of persons and as such the petitioner is bound to pay the tax lawfully due.
5. Before I consider the respective contentions of the learned counsel for the parties, it would be convenient to consider the relevant provisions of the repealed Income-tax Act, 1922, and the present Act. The corresponding provisions in the repealed Act was in Section 46(5A) which entitled the Income-tax Officer by notice in writing (a copy of which was to be forwarded to the assessee) to require any person from whom money was due or might become due to the assessee or any person who held or might subsequently hold 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 so much of the money as was sufficient to pay the amount due by the taxpayer in respect of arrears of income-tax and penalty or the whole of the money when it was equal to or less than that amount. Any person making any payment in compliance with a notice under this Sub-section would be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer would 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 liability to the assessee after receipt of the notice referred to in that Sub-section would be personally liable to the Income-tax Officer to the extent of the liability discharged or to the extentof the liability of the assessee for tax and penalties, whichever was less. Where a person to whom a notice under that Sub-section was sent objects to it on the ground that the sum demanded or any part thereof was not due to the assessee or that he did not hold any money for or on account of the assessee, then, nothing contained in that Sub-section should be deemed to require such person to pay any such sum or part thereof, as the case might be, to the Income-tax Officer.
6. Exactly similar provisions are to be found in Section 226(3) of the Act of 1961, the only addition being a provision contained in Clause (x) in that Sub-section providing that if the person to whom a notice under this subsection is sent fails to make payment in pursuance thereof to the Income-tax Officer, he shall be deemed to be an assessee in default in respect of that amount and further proceedings may be taken against him for realisation of the amount as if it were an arrear of tax due from him.
7. On behalf of the petitioner it was submitted that the assessment in respect of the years 1962-63 and 1963-64 were made on the petitioner as a protective measure and the assessment orders show that the Income-tax Officer has not finally made up his mind. In any event, it being an admitted fact that neither in the assessments of Dunichand Sons & Co. nor in the individual assessments of the two husbands has it been held that the income derived by the petitioner-firm was the benami income of either the firm or the two husbands and as such the income was liable to be included in the total income of the firm or of the husbands, there is nothing to support the contention raised by the respondent No. 1| that the business of P. K. Trading Company, the petitioner, has been found to be a benami business of the said Jaidayal Rateria and Dewanchand Rateria and/or of the said Dunichand Sons & Co. It is further submitted that while protective assessment might be permissible, realisation of tax in such a case from both the assessee on whom protective assessment has been made and the assessee in whose total income, the income assessed under the protective assessment is intended to be included, is not permissible. This has been settled since the decision of this court in Jagannath Hanumanbux v. Income-tax Officer,  31 I.T.R. 603 (Cal.).
8. On the wording of Section 226(3) itself it is clear that a garnishee order as contemplated in that sub-section can only be issued where any tax or penalty is due from a taxpayer on the persons from whom money is due or may become due to the said taxpayer. In this case the taxpayer is M/s. Dunichand Sons & Co. and merely by assuming that the business of the petitioner-firm is the benami business of the partners of M/s. Dunichand Sons & Co. no garnishee order contemplated by the above Sub-section could be issued to the debtors of the petitioner-firm. The payment by the persons on whom such order of notice has been served to the Income-tax Officer would not legally effect a discharge of the liability of such person to the petitioner who is not the taxpayer in respect of whose default the notices have been issued. A reference was made to the decision of a single judge of the Andhra Pradesh High Court in P. Rajeswaramma v. Income-tax Officer, Nellore,  39 I.T.R. 654 which was on Section 46(5A) of the repealed Act. The learned judge held that the provisions of that Sub-section were intended to apply only to an admitted liability. Where a person admitted by word or conduct that any money was due to the assessee or was held by him for or on account of the assessee, he became liable to pay it and might well be exposed to the penal provision which enabled the Income-tax Officer to take further proceedings for realisation of the amount. Where, however, the person on whom (the notice was sent denied that any money was due from him, then the Income-tax Officer could not take any further proceedings under that Sub-section though the denial might not be true. This decision was followed and similar observations were made by the Madras High Court in Mohamedaly Sarafaly & Co. v. Income-tax Officer, Central Circle III, Madras,  68 I.T.R. 128 in a case under Section 226(3) of the present Act, namely, that the Income-tax Officer would be powerless to proceed under that section where the third party did not admit or denied that the debt was owing to the assessee as the officer could not sit in judgment over the denial and come to his own conclusion. It was, therefore, submitted that the respondent-Income-tax Officer has thoroughly misappreciated the provisions of Section 226(3) in issuing the impugned notices and/or orders, and they should, accordingly, be quashed.
9. Mr. D. K. Sen, learned counsel for the respondents, pointed out that the impugned notices were issued in pursuance of the findings made in the assessment orders of the petitioner-firm. The department has all along proceeded on the basis that the petition is a benamidar for Dunichand Sons & Co. and/or its partners. Mr. Sen submits that if this contention of the department is accepted then P. K. Trading Company and Dunichand Sons & Co. are the same person trading in two different names and the income-tax liability of Dunichand Sons & Co. would also be the liability of the petitioner-firm and as such the respondent-Income-tax Officer was justified in issuing the impugned notices and/or orders. It is further contended by Mr. Sen that if there is some basis or reason for the department's finding or conclusion that the two firms are really one and the same this court would not go into the sufficiency of such reason. It is not necessary for me to consider the contention of the department as to whether the petitioner-firm is the benamidar of Messrs. Dunichand Sons & Co. or whether the two ladies were carrying on business in the benami of their husbands. In my opinion the words of Section 226(3) are clear and a notice or order thereunder can only be issued in respect of the income-tax liability of a taxpayer to persons from whom money is due or may become due to the assessee or who may subsequently hold money for or on account of the assessee. In this case the taxpayer and/or the assessee is Dunichand Sons & Co. and any such notice can be issued only on a debtor of the taxpayer, namely, of Dunichand Sons & Co. By treating some other firm as the benamidar of the assessee-firm or of the partners of the assessee-firm the Income-tax Officer is not entitled to issue notices under Section 226(3) on persons who might owe or hold money for and on behalf of the firm held to be the benamidar. The issue of the impugned notices do not seem to be justified by the provisions of Section 226(3) and must, therefore, be quashed.
10. In the view I have taken it is not necessary to deal with the constitutional validity of Section 226(3) and I do not express any opinion thereon.
11. The rule would, accordingly, be made absolute. The impugned notices and all proceedings thereunder would be quashed and the respondents Nos. 1, 2 and 3 would be directed to forbear from giving any effect to the said impugned notices. There would be no order as to costs. The operation of this order would be stayed for four weeks.