The department has attached my bank account under s.226(3) because I did not pay the 20%. I say I have already paid more than that. Will the High Court interfere?
Not if the payment you point to was self-assessment tax paid against your own returned income, and not against the assessment demand. The Court upheld the garnishee notice to the bank: the assessee was obliged under the CBDT circulars to pay 20% of the outstanding demand, it had not done so, and the department was therefore justified in proceeding under s.226(3).
Decided by the High Court (S.C. Sharma J and Alok Verma J) on 2017-11-13, reported as Writ Petition No. 16010/2017 and Writ Petition No. 16009/2017 (High Court of Madhya Pradesh, Bench at Indore). It bears on section 226(3), section 220(6), section 156, section 154, section 143(3), section 143(2), section 142(1), section 80-IAB, section 40(a)(ia) of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
This is the Revenue-side authority on the 20%, and it is the one that reproduces both Office Memoranda in full - para 4 of the OM dated 29.02.2016 and the whole of the OM dated 31.07.2017 raising the standard rate from 15% to 20%. It also disposes of two arguments practitioners run: that self-assessment tax already paid can be counted towards the 20% of an assessment demand, and that demands on two group companies can be aggregated. Both were rejected, and the Court recorded that the assessee had misrepresented the position. Read against Bhupendra Murji Shah and Queen Agencies, it shows how much turns on whether the 20% has actually been paid.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, a company owned and controlled by the State of Madhya Pradesh which had developed industrial areas and special economic zones near Pithampur, returned income of Rs.57,01,03,020 for AY 2014-15. Assessment under s.143(3) on 28.04.2017 determined income at Rs.1,26,99,79,660 with additions on account of amounts accrued but not booked, land premium treated as a revenue receipt, a s.40(a)(ia) disallowance, disallowance of a Government grant and disallowance of the s.80-IAB deduction, and a demand notice under s.156 for Rs.48,71,99,640 was issued the same day. The demand was not paid. Letters of 14.08.2017 and 07.09.2017 went unanswered. On the stay application filed on 19.05.2017 the Assessing Officer passed an order on 25.09.2017 directing payment of at least 20% of the outstanding demand by 03.10.2017 in view of the revised CBDT instruction of 31.07.2017. On non-payment the bank accounts were attached by order under s.226(3) dated 04.10.2017 addressed to ICICI Bank. The petitioner claimed that Rs.12 crores paid through ICICI Bank on 11.12.2014 already exceeded 20%; the department showed that this was self-assessment tax paid against the returned income of the holding company, that credit for it had been given by a s.154 order dated 09.10.2017 reducing the demand to Rs.33,39,03,850, and that the petitioner had clubbed the demands of two separate legal entities, MPAKVN Ltd and SEZ Indore Ltd, the latter having paid nothing. ICICI Bank intervened, having permitted withdrawals from the frozen account after receiving a contempt notice from the petitioner's lawyer following an ex parte interim order of 05.10.2017.
Both writ petitions were dismissed and admission was declined. The assessee was under an obligation under the CBDT circulars to pay 20% of the outstanding dues; not having done so, the department was justified in issuing the demand notice and the letter dated 04.10.2017 under s.226(3), and no case for interference was made out (paras 22, 23 and 25). The lease-premium issue was left to the pending appeal before the CIT(A) (para 22). The intervention application of ICICI Bank was allowed and the department was left free to take appropriate steps against the bank in accordance with law for having permitted transactions in the frozen account (para 24).
The Court set out the return, the scrutiny notices and the assessment (para 16), then reproduced para 4 of the Office Memorandum of 29.02.2016 (para 17) and the Office Memorandum of 31.07.2017 in full (para 18). It then found on the facts that MPAKVN Ltd and SEZ Indore Ltd are separate entities separately assessed with separate demands, that the Rs.12 crores relied on was paid on 11.12.2014 as self-assessment tax against income declared in the return filed on 30.11.2014, and that against the assessment demand raised on 28.04.2017 not a single rupee had been paid (paras 19 to 21). Credit for the self-assessment tax had in any event been given by the s.154 order of 09.10.2017, but giving that credit is not payment of the assessment demand (para 21). Since the assessee had failed to pay 20% of the outstanding dues, the recourse to s.226(3) was justified, and the merits of the lease-premium addition were for the CIT(A) (paras 22 and 23).
as the assessee has failed to pay 20% of the outstanding dues, this Court is of the opinion that the Department was justified in issuing a demand notice and was also justified in issuing letter dated 04/10/2017.
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Handle my notice → Ask a CA on WhatsAppNot if the payment you point to was self-assessment tax paid against your own returned income, and not against the assessment demand. The Court upheld the garnishee notice to the bank: the assessee was obliged under the CBDT circulars to pay 20% of the outstanding demand, it had not done so, and the department was therefore justified in proceeding under s.226(3). This was decided by the High Court (S.C. Sharma J and Alok Verma J) and bears on section 226(3), section 220(6), section 156, section 154, section 143(3), section 143(2), section 142(1), section 80-IAB, section 40(a)(ia) of the Income Tax Act 1961. It is reported as Writ Petition No. 16010/2017 and Writ Petition No. 16009/2017 (High Court of Madhya Pradesh, Bench at Indore). This is the Revenue-side authority on the 20%, and it is the one that reproduces both Office Memoranda in full - para 4 of the OM dated 29.02.2016 and the whole of the OM dated 31.07.2017 raising the standard rate from 15% to 20%. It also disposes of two arguments practitioners run: that self-assessment tax already paid can be counted towards the 20% of an assessment demand, and that demands on two group companies can be aggregated. Both were rejected, and the Court recorded that the assessee had misrepresented the position. Read against Bhupendra Murji Shah and Queen Agencies, it shows how much turns on whether the 20% has actually been paid. If it applies to you, the first step is this: Before you claim the 20% is covered, reconcile it to the demand notice under s.156 for that assessment year and that entity - self-assessment tax paid with the return does not go against a later assessment demand.
The petitioner, a company owned and controlled by the State of Madhya Pradesh which had developed industrial areas and special economic zones near Pithampur, returned income of Rs.57,01,03,020 for AY 2014-15. Assessment under s.143(3) on 28.04.2017 determined income at Rs.1,26,99,79,660 with additions on account of amounts accrued but not booked, land premium treated as a revenue receipt, a s.40(a)(ia) disallowance, disallowance of a Government grant and disallowance of the s.80-IAB deduction, and a demand notice under s.156 for Rs.48,71,99,640 was issued the same day. The demand was not paid. Letters of 14.08.2017 and 07.09.2017 went unanswered. On the stay application filed on 19.05.2017 the Assessing Officer passed an order on 25.09.2017 directing payment of at least 20% of the outstanding demand by 03.10.2017 in view of the revised CBDT instruction of 31.07.2017. On non-payment the bank accounts were attached by order under s.226(3) dated 04.10.2017 addressed to ICICI Bank. The petitioner claimed that Rs.12 crores paid through ICICI Bank on 11.12.2014 already exceeded 20%; the department showed that this was self-assessment tax paid against the returned income of the holding company, that credit for it had been given by a s.154 order dated 09.10.2017 reducing the demand to Rs.33,39,03,850, and that the petitioner had clubbed the demands of two separate legal entities, MPAKVN Ltd and SEZ Indore Ltd, the latter having paid nothing. ICICI Bank intervened, having permitted withdrawals from the frozen account after receiving a contempt notice from the petitioner's lawyer following an ex parte interim order of 05.10.2017. The matter was decided on 2017-11-13 by the High Court (S.C. Sharma J and Alok Verma J). On those facts the High Court held as follows. Both writ petitions were dismissed and admission was declined. The assessee was under an obligation under the CBDT circulars to pay 20% of the outstanding dues; not having done so, the department was justified in issuing the demand notice and the letter dated 04.10.2017 under s.226(3), and no case for interference was made out (paras 22, 23 and 25). The lease-premium issue was left to the pending appeal before the CIT(A) (para 22). The intervention application of ICICI Bank was allowed and the department was left free to take appropriate steps against the bank in accordance with law for having permitted transactions in the frozen account (para 24).
The Court set out the return, the scrutiny notices and the assessment (para 16), then reproduced para 4 of the Office Memorandum of 29.02.2016 (para 17) and the Office Memorandum of 31.07.2017 in full (para 18). It then found on the facts that MPAKVN Ltd and SEZ Indore Ltd are separate entities separately assessed with separate demands, that the Rs.12 crores relied on was paid on 11.12.2014 as self-assessment tax against income declared in the return filed on 30.11.2014, and that against the assessment demand raised on 28.04.2017 not a single rupee had been paid (paras 19 to 21). Credit for the self-assessment tax had in any event been given by the s.154 order of 09.10.2017, but giving that credit is not payment of the assessment demand (para 21). Since the assessee had failed to pay 20% of the outstanding dues, the recourse to s.226(3) was justified, and the merits of the lease-premium addition were for the CIT(A) (paras 22 and 23). In the words reproduced by the source cited on this page: "as the assessee has failed to pay 20% of the outstanding dues, this Court is of the opinion that the Department was justified in issuing a demand notice and was also justified in issuing letter dated 04/10/2017."
It was decided by the High Court on 2017-11-13 and is reported as Writ Petition No. 16010/2017 and Writ Petition No. 16009/2017 (High Court of Madhya Pradesh, Bench at Indore). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 226(3), section 220(6), section 156, section 154, section 143(3), section 143(2), section 142(1), section 80-IAB, section 40(a)(ia), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. Both writ petitions were dismissed and admission was declined. The assessee was under an obligation under the CBDT circulars to pay 20% of the outstanding dues; not having done so, the department was justified in issuing the demand notice and the letter dated 04.10.2017 under s.226(3), and no case for interference was made out (paras 22, 23 and 25). The lease-premium issue was left to the pending appeal before the CIT(A) (para 22). The intervention application of ICICI Bank was allowed and the department was left free to take appropriate steps against the bank in accordance with law for having permitted transactions in the frozen account (para 24). It arises in Demand, Recovery & Stay matters, on section 226(3), section 220(6), section 156, section 154, section 143(3), section 143(2), section 142(1), section 80-IAB, section 40(a)(ia) of the Income Tax Act 1961, and was decided by S.C. Sharma J and Alok Verma J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If credit for self-assessment tax has been omitted from the s.156 notice, get it corrected under s.154 first; the revised demand is what the 20% is computed on. Never aggregate the demands of a holding company and its subsidiary. There is no provision for amalgamating demands raised against two separate legal entities, and asserting otherwise before a Court invites an adverse finding. If the bank has already been served under s.226(3) and you obtain an interim order, get the order communicated to the bank precisely - here the bank allowed withdrawals on a lawyer's contempt notice and the Court left the department free to proceed against the bank.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing for this judgment. A second search pairing the petitioner's name with section 226(3) returns 61 documents, none of which cites it - they are other Madhya Pradesh litigation involving the same corporation in lease, land-acquisition and service matters, together with the judgment itself. No decision applying, affirming, overruling or doubting it was found and no Supreme Court challenge is traceable. That is not surprising for a writ order refusing interim relief against a garnishee notice where the twenty per cent had not been paid: it turns on its own facts and lays down little that is citable. A practitioner should treat the stay position under section 220(6) as governed by the CBDT's instructions on the percentage to be deposited and by the general law, rather than by this order, and should check the instruction current for the year in hand, since the administrative percentage has been revised more than once. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to 26 numbered paragraphs. Paragraph 17 reproduces para 4 of the CBDT Office Memorandum dated 29.02.2016 and paragraph 18 reproduces the Office Memorandum dated 31.07.2017 in full, including its file number F.No. 404/72/93-ITCC and signature block; those are the Board's words, not the Court's, and the paragraph lettering (A) to (E) inside them belongs to the OM. Para 18 records the OM of 31.07.2017 as a partial modification of Instruction No.1914 'dated 21.3.1996', which differs from the date given for Instruction 1914 elsewhere in this batch. Para 5 refers to 'CBDT circulars dated 31/07/2017 and 25/09/2017'; the 25.09.2017 document is in fact the Assessing Officer's own stay order, not a circular. The figures in the order do not fully reconcile - para 4 records an outstanding demand of Rs.57,85,56,110 on the petitioner's calculation, para 9 records the demand raised on 28.04.2017 as Rs.48,71,99,640, and para 21 records the revised demand after the s.154 order of 09.10.2017 as Rs.33,39,03,850 - and they are reproduced here as printed. The order was passed at the admission stage with the consent of the parties. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both writ petitions were dismissed and admission was declined. The assessee was under an obligation under the CBDT circulars to pay 20% of the outstanding dues; not having done so, the department was justified in issuing the demand notice and the letter dated 04.10.2017 under s.226(3), and no case for interference was made out (paras 22, 23 and 25). The lease-premium issue was left to the pending appeal before the CIT(A) (para 22). The intervention application of ICICI Bank was allowed and the department was left free to take appropriate steps against the bank in accordance with law for having permitted transactions in the frozen account (para 24).
TaxSphere, “Madhya Pradesh Audyogik Kendra Vikas Nigam Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/mp-audyogik-kendra-vikas-nigam-226-3-garnishee-upheld-on-non-payment-of-twenty-per-cent/ (validity last checked 2026-09-08)
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