JUDGMENT judgment of court was delivered by Tarun Agarwala J.-We have heard Sri S. P. Gupta, learned senior counsel assisted by Sri R. P. Agarwal, learned counsel for petitioner, Sri Bharatji Agarwal, learned senior counsel assisted by Sri Govind Krishna for Income-tax Department and Sri Rakesh Ranjan Agarwal, learned senior counsel assisted by Sri Suyash Agarwal for private respondent, M/s. Rich Capital and Financial Services Ltd. facts, which has been culled out from pleadings of parties is, that petitioner is public limited company incorporated under Companies Act and is engaged in business of financial services. Initially registered office of company was situated at Kanpur but with effect from March 1, 2006, registered office was shifted to Varanasi and since then for assessment year 2007-08 onwards, income-tax returns were being filed with Income- tax Department at Varanasi. It transpires that M/s. Rich Capital and Financial Services Ltd. became defaulter of income-tax dues with Income-tax Department and that demand of approximate Rs. 3.2 crores was raised against said assessee. said assessee alleged that petitioner is debtor and owed to him sum of Rs. 1.55 crores. On basis of this assertion made by said assessee to Tax Recovery Officer, it transpires that Tax Recovery Officer issued notice dated November 22, 2007, under section 226(3) of Income-tax Act, 1961 (hereinafter referred to as "the Act") to petitioner indicating that certain amount was due from garnishee (i.e. petitioner) to assessee and, accordingly, required garnishee to pay within time specified in notice so much of amount as was sufficient to pay amount due from assessee in respect of arrears of tax. This notice was alleged to have been sent at previous registered office of petitioner at Kanpur, which was not received by petitioner. Since no reply was received from petitioner nor any amount was deposited, Tax Recovery Officer issued notice dated March 17, 2008, treating assessee in default in respect of amount specified in notice holding that further proceedings would be taken against petitioner for realisation of amount as if it were arrears of tax due from it in manner provided under sections 222 to 225 of Act. It further transpires that Tax Recovery Officer attached 4,24,910 equity shares of Rs. 10 each of Jhunjhunwala Vanaspati Ltd. from demat account of petitioner held with Karvi Stock Broking Ltd., which was subsequently transferred to demat account of Tax Recovery Officer. petitioner also had savings bank account with ICICI Bank in which there was balance of Rs. 28,988.78. petitioner contended that said amount was also attached and transferred to Tax Recovery Officer's account. petitioner, upon coming to know of action taken by Tax Recovery Officer, wrote letter dated April 8, 2008, alleging that no notice under section 226(3) of Act was ever received or served upon petitioner and, consequently, contended that entire proceedings initiated by Tax Recovery Officer was void. In response to said letter, Tax Recovery Officer issued summons dated April 10, 2008, directing petitioner to appear on April 15, 2008, and produce books of account relating to financial years 2004-05, 2005-06, 2006-07 and 2007-08 as well as details of liability payable to M/s. Rich Capital and Financial Services Ltd. for financial years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. It transpires that upon receipt of summons petitioner appeared and produced relevant books of account as demanded by Tax Recovery Officer and submitted that no amount was due or payable to defaulter, namely, M/s. Rich Capital and Financial Services Ltd. On April 17, 2008, petitioner filed affidavit in terms of section 226(3)(vi) of Act stating specifically that petitioner company does not owe any sum to assessee, M/s. Rich Capital and Financial Services Ltd. and that acquisition of 4,24,910 equity shares of M/s. Jhunjhunwala Vanaspati Ltd. acquired by petitioner company was not from M/s. Rich Capital and Financial Services Ltd. In spite of this affidavit being filed, respondents continued to issue summons dated April 16, 2008, and again on May 1, 2008, directed petitioner to appear. Since petitioner feared that shares of Jhunjhunwala Vanaspati Ltd. held by petitioner, which was attached and, subsequently, transferred to demat account of Tax Recovery Officer could be sold, petitioner, at this stage approached writ court by filing present writ petition praying for writ of mandamus commanding respondents to restore 1,70,000 equity shares of Jhunjhunwala Vanaspati Ltd. in demat account of petitioner with Karvi Stock Broking Ltd. and further restore amount of Rs. 28,988.78 in bank account of petitioner with ICICI Bank, Chowk Branch, Varanasi, along interest, etc. petitioner also prayed for quashing of notice dated March 17, 2008, whereby Tax Recovery Officer treated petitioner as assessee in default. petitioner has also prayed for quashing of entire proceedings initiated under section 226(3) of Act. learned senior counsel for petitioner contended that initial notice under section 226(3) of Act was never served upon petitioner and, consequently, entire proceedings initiated by Tax Recovery Officer attaching bank account and demat account and, thereafter, transferring same in accounts of Tax Recovery Officer was wholly illegal and without any authority of law and was liable to be quashed. learned counsel further contended that order of Tax Recovery Officer treating assessee in default as consequence of nonappearance was also illegal and was liable to be set aside. learned counsel further contended that once petitioner had given affidavit in terms of section 226(3)(vi) of Act denying its liability to pay any amount and contending that no amount was payable to defaulter then no further proceedings could be initiated or proceeded by Tax Recovery Officer and that entire proceedings was liable to be dropped. learned counsel submitted that Tax Recovery Officer had no jurisdiction to decide any dispute, if any, arising out of business transaction between petitioner and defaulter, namely, M/s. Rich Capital and Financial Services Ltd. and that such dispute could only be adjudicated in appropriate forum such as civil court. learned counsel submitted that recovery proceedings against garnishee under section 226(3) of Act could only be initiated against admitted liability and not in relation to amount which is disputed or not payable. In support of his submission learned counsel for petitioner has placed reliance upon Division Bench decision of this court in Jitendra Kumar Shaw alias Aditya Kumar v. Union of India [2012] UPTC 547. On other hand, contention of learned counsel for Income- tax Department is, that notice under section 226(3) was sent by speed post at last known address available with income-tax authorities and same was deemed to be served upon petitioner. Since petitioner did not appear nor paid amount, it was treated to be assessee in default and, accordingly, Tax Recovery Officer proceeded to attach demat account and savings bank account of petitioner towards recovery of dues of defaulter. learned senior counsel submitted that question whether initial notice under section 226(3) of Act was served or not has now become irrelevant in view of fact that petitioner subsequently appeared and filed affidavit denying its liability. learned counsel submitted that in view of section 292BB of Act, initial notice under section 226(3) shall be deemed to be served to petitioner in accordance with provisions of Act and that petitioner is now precluded from taking any objection in proceedings initiated under section 226 of Act on ground that notice was not served upon him. learned counsel submitted that in view of provisions of section 226(3)(vi) of Act, Tax Recovery Officer has power and jurisdiction to make inquiry into genuineness of affidavit filed by petitioner and, if it was found that certain definite amount was due from garnishee to assessee, then Tax Recovery Officer could hold petitioner to be personally liable for payment under section 226(3)(vi) of Act. learned counsel contended that remedy of filing suit was barred under section 293 of Act and that Tax Recovery Officer was competent to decide dispute between garnishee and assessee. In support of his submission, learned counsel placed reliance upon decision of Supreme Court in Beharilal Ramcharan v. ITO [1981] 131 ITR 129 (SC); [1981] 3 SCC 473. defaulter, namely, M/s. Rich Capital and Financial Services Ltd., has filed impleadment application, which was disposed of permitting said applicant to be heard. defaulter has filed affidavit contending that it had advanced sum of Rs. 1,44,60,000 to petitioner through bank between period April 17, 2003, to August 21, 2004, which was payable by petitioner to it. It was also contended that they had delivered 1,05,000 shares of Jhunjhunwala Vanaspati Ltd. through their demat account to petitioner and that sale consideration has not been paid by petitioner to it till date and, therefore, petitioner company is debtor and amount can be recovered by Tax Recovery Officer from petitioner under section 226(3) of Act. petitioner has denied these allegations contending that alleged advance given by defaulter was in relation to purchase of shares of petitioner company for which requisite share certificates were issued to them. petitioner also denied any amount payable towards alleged shares transferred by them in demat account of petitioner in relation to shares of Jhunjhunwala Vanaspati Ltd. petitioner categorically submitted that no amount was payable to them. In order to appreciate rival contentions of parties, it would be essential to have look at provisions of section 226(3) of Act. For facility, said provision is extracted hereunder: "226. (3)(i) 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 assessee or any person who holds or may subsequently hold money for or on account of assessee to pay to Assessing Officer or Tax Recovery Officer either forthwith upon money becoming due or being held or at or within time specified in notice (not being before money becomes due or is held) so much of money as is sufficient to pay amount due by assessee in respect of arrears or whole of money when it is equal to or less than that amount. (ii) notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of assessee jointly with any other person and for purposes of this sub-section, shares of joint holders in such account shall be presumed, until contrary is proved, to be equal. equal. (iii) copy of notice shall be forwarded to assessee at his last address known to Assessing Officer or Tax Recovery Officer, and in case of joint account to all joint holders at their last addresses known to Assessing Officer or Tax Recovery Officer. (iv) Save as otherwise provided in this sub-section, every person to whom notice is issued under this sub-section, shall be bound to comply with such notice, and, in particular, where any such notice is issued to post office, banking company or insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for purpose of any entry, endorsement or like being made before payment is made, notwithstanding any rule, practice or requirement to contrary. (v) Any claim respecting any property in relation to which notice under this sub-section has been issued arising after date of notice shall be void as against any demand contained in notice. (vi) Where person to whom notice under this sub-section is sent objects to it by statement on oath that sum demanded or any part thereof is not due to assessee or that he does not hold any money for or on account of assessee, then nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to Assessing Officer or Tax Recovery Officer to extent of his own liability to assessee on date of notice, or to extent of assessee's liability for any sum due under this Act, whichever is less. (vii) Assessing Officer or Tax Recovery Officer may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend time for making any payment in pursuance of such notice. (viii) Assessing Officer or Tax Recovery Officer shall grant receipt for any amount paid in compliance with notice issued under this sub-section, and person so paying shall be fully discharged from his liability to assessee to extent of amount so paid. (ix) Any person discharging any liability to assessee after receipt of notice under this sub-section shall be personally liable to Assessing Officer or Tax Recovery Officer to extent of his own liability to assessee so discharged or to extent of assessee's liability for any sum due under this Act, whichever is less. (x) If person to whom notice under this sub-section is sent fails to make payment in pursuance thereof to Assessing Officer or Tax Recovery Officer, he shall be deemed to be assessee in default in respect of amount specified in notice and further proceedings may be taken against him for realisation of amount as if it were arrear of tax due from him, in manner provided in sections 222 to 225 and notice shall have same effect as attachment of debt by Tax Recovery Officer in exercise of his powers under section 222." From perusal of aforesaid provisions, it is apparently clear that section 226(3) deals with recovery and arrears of tax from assessee by requiring any person from whom money is due or may become due to assessee or any person who holds or may subsequently hold money for or on account of assessee, namely, garnishee to pay to Income-tax Officer so much of money as it sufficient to pay amount due by assessee in respect of arrears or whole of money when it is equal to or less than that amount. In such situation Income-tax Officer may issue notice requiring person to pay amount directly to Tax Recovery Officer or Assessing Officer instead of paying it to assessee. Sub-clause (iv) of section 226(3) of Act provides that every person to whom notice is issued is bound to comply with such notice. Sub-clause (vi) provides that in event amount is not payable, it would be open at that stage for garnishee to make statement on oath indicating that sum demanded or any part thereof is not due to assessee or that he does not hold any money for or on account of assessee. Sub-clause (x) of section 226(3) of Act provides that if person to whom notice is sent fails to make payment, he shall be deemed to be assessee in default in respect of amount specified in notice and further proceedings may be taken against him for realisation of amount as if it was arrears of tax due from him. Sub-clause (vi) further provides that in event arrears of tax due from him. Sub-clause (vi) further provides that in event affidavit is filed by garnishee denying any amount payable by him to assessee and if it is discovered subsequently that such statement was false in any material particular, in that event, such person shall be personally liable to Income-tax Officer to extent of his own liability to assessee. In view of assertions made by assessee that petitioner is debtor and, therefore, part of recovery can be recovered from him that Tax Recovery Officer issued notice dated November 20, 2007, under section 226(3) of Act to petitioner at Kanpur address. Admittedly, petitioner had shifted its registered office from Kanpur to Varanasi and, accordingly, said notice was not delivered or served upon petitioner. Subsequently, petitioner appeared before Tax Recovery Officer on April 15, 2008, and produced all relevant documents as demanded since there is no denial to that effect by respondents in their counter-affidavit. petitioner also filed affidavit on April 17, 2008, denying that it owes any amount to assessee. We also find that Tax Recovery Officer had issued notice dated March 17, 2008, treating petitioner to be assessee in default on account of non-payment of amount as per notice under section 226(3) of Act. This summons was apparently sent at Varanasi address. Consequently, we are of opinion that respondents knew about petitioner's address at Varanasi but chose to sent notice at Kanpur's address. initial notice sent under section 226(3) of Act was not served as it was not sent at appropriate address and, consequently action taken by respondents pursuant to notice under section 226(3) of Act without ensuring service becomes bad in law. However, proceedings initiated under section 226(3) of Act cannot be quashed now at this stage in view of provision of section 292BB of Act, which is reproduced hereunder: "292BB. Where assessee has appeared in any proceeding or cooperated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that notice was- (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in improper manner: Provided that nothing contained in this section shall apply where assessee has raised such objection before completion of such assessment or reassessment." From perusal of aforesaid provision, irregularity, if any, in nonservice of notice under section 226(3) of Act is deemed to be cured upon petitioner's subsequently appearing on April 15, 2008, and participating in proceedings by production of its books of account and filing affidavit of denial on April 17, 2008. We, accordingly, hold that proceedings under section 226(3) of Act cannot be quashed at this stage, on ground of non-service of notice under section 226(3) of Act inasmuch as invalidity of said notice was cured and defect, if any, was removed by petitioner by participating in proceedings subsequently. Under clause (vi) of section 226(3) of Act petitioner has objected to payment and has filed affidavit stating that sum demanded or any part thereof was not due to assessee nor payable by petitioner and that petitioner was not required to pay any such sum or any part thereof to Tax Recovery Officer in compliance with requisition contained in notice. Once that is done, no further proceeding for recovery can be made against petitioner. However, in view of decision of Supreme Court in Beharilal Ramcharan's case (supra), it is apparently clear that under clause (vi) of section 226(3) of Act limited enquiry can be conducted by Tax Recovery Officer to find out about genuineness of affidavit for which he is required to give notice to person giving affidavit that he is going to hold enquiry for purpose of determining whether statement made on oath on behalf of garnishee is correct or false. Income-tax Officer cannot discover on its own that statement on oath made on behalf of garnishee was false in any material particular and cannot subjectively reach to conclusion that in his opinion affidavit filed by garnishee was false in any material particular. Supreme Court held that such inquiry must be held after following principles of natural justice. It may be stated here that provisions of section 226(3) of Act is intended to apply only to admitted liability where person admits by word or by conduct that any money is due to assessee or is held by him for on account of assessee, he becomes liable to pay. Division Bench of this court in case of Jitendra Kumar (supra) held that power under section 226(3) of Act could not be invoked for effecting recovery of claim which is disputed and condition precedent for exercising power under section 226(3) of Act is that money is due and payable by person concerned to assessee. inquiry as contemplated by Supreme Court under sub-clause (vi) of section 226(3) of Act was only to find out genuineness of affidavit submitted by garnishee. authorities under garb of inquiry cannot adjudicate upon bona fide dispute between garnishee and assessee. Section 226(3) of Act is not charging section nor does it gives any power to Tax Recovery Officer to adjudicate dispute. This court is of opinion that bona fide disputes, if any, between garnishee and assessee cannot be adjudicated by authorities under section 226(3) of Act. Legislature could not have meant to entrust authority with jurisdiction to decide questions relating to quantum of such liability between garnishee and assessee, which matter is within purview of civil courts. powers under section 226(3) of Act have not been given to Assessing Officer or Tax Recovery Officer to adjudicate private disputes between garnishee and assessee. In instant case, we find that assessee, who has come up before court has contended that it had advanced certain sums of money to petitioner and, therefore, petitioner is its debtor but petitioner has denied this assertion. We find from perusal of affidavit that no steps have been taken by assessee, namely, M/s. Rich Capital and Financial Services Ltd. initiating any proceeding for recovery of that amount before any forum or any appropriate court of law. We also find that pursuant to affidavit filed by petitioner before Tax Recovery Officer denying its liability to pay any amount and further denying that any sum is or was payable to assessee, no steps have been taken by Tax Recovery Officer to cross check with assessee and/or inquire into genuineness of affidavit filed by petitioner. Since petitioner had appeared and participated in proceedings, order of Tax Recovery Officer treating petitioner as assessee in default cannot continue any longer. We are also of opinion that in view of categorical denial by petitioner to pay any amount, attachment made by Tax Recovery Officer cannot continue any further, especially when court finds that till date no inquiry has been made by respondents into genuineness of affidavits filed by petitioner. This court, by interim order, had restrained Income- tax Department from alienating shares, which were transferred to demat account of Tax Recovery Officer. We, accordingly, hold that order of Tax Recovery Officer dated March 17, 2008, treating petitioner as assessee in default cannot be sustained and is quashed. We further find no justification in continuing with attachment order and same is also quashed. writ of mandamus is issued commanding Tax Recovery Officer to ensure that 1,70,000 equity shares of Jhunjhunwala Vanaspati Ltd. is transferred again in demat account of petitioner with Karvy Stock Broking Ltd. within two weeks from date of production of certified copy of order. If any dividend was received by Tax Recovery Officer on these shares, said amount shall also be transferred to petitioner. We further quash direction attaching bank account of petitioner with ICICI Bank, Chowk Branch, Varanasi. We further issue mandamus directing Tax Recovery Officer to refund amount of Rs. 28,988.78 along with interest payable as per rates payable by bank in savings bank account during period in question, which amount shall be paid again by Tax Recovery Officer to petitioner within two weeks from date of production of certified copy of this order. In view of aforesaid, writ petition is allowed. In circumstances of case, parties shall bear their own costs. *** Uttar Pradesh Carbon and Chemicals Ltd. v. Tax Recovery Officer