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Issues: (i) Whether the petitioners, being employees of the assessee-company, had locus standi to challenge the garnishee notice issued for recovery of the company's income-tax arrears. (ii) Whether the proviso to section 226(2) of the Income-tax Act, 1961, exempted the amount payable by the second respondent to the third respondent from garnishee attachment on the footing that it would ultimately be used to pay the petitioners' salaries.
Issue (i): Whether the petitioners, being employees of the assessee-company, had locus standi to challenge the garnishee notice issued for recovery of the company's income-tax arrears.
Analysis: The recovery notice was issued against the employer-company, which was the assessee in default. The petitioners were not the persons against whom recovery was initiated, and no material showed any adjudicated arrears of salary in their favour or any priority over the tax dues. In the absence of a direct grievance, employees of the defaulter could not obstruct statutory recovery proceedings taken against the employer.
Conclusion: The petitioners had no locus standi to challenge the garnishee notice, and the objection on maintainability failed.
Issue (ii): Whether the proviso to section 226(2) of the Income-tax Act, 1961, exempted the amount payable by the second respondent to the third respondent from garnishee attachment on the footing that it would ultimately be used to pay the petitioners' salaries.
Analysis: The proviso protects salary exempt from attachment only in recovery proceedings directed against an employee's salary. The impugned notice was not an attachment of the petitioners' salary and was not served on their employer in that capacity; it was a garnishee notice against money due to the assessee-company under a contract. Therefore, the statutory immunity for salary did not extend to the contractual amount payable to the employer, and any salary claim by the petitioners had to be pursued independently before the competent forum.
Conclusion: The proviso to section 226(2) did not apply, and no immunity from attachment was available.
Final Conclusion: The garnishee recovery proceedings were upheld, as the petitioners could not assert a legal right to defeat recovery of the employer-company's income-tax arrears.
Ratio Decidendi: Employees of an assessee-company cannot challenge garnishee recovery proceedings against their employer unless they establish a direct enforceable priority over the tax dues; the salary immunity under section 226(2) applies only to attachment of salary in recovery against the employee concerned, not to contractual payments due to the employer under section 226(3).
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