Garnishee recovery cannot reach an unused overdraft limit when the bank owes no money to the assessee.

Section 46(5A) recovery applies only where a third party is a debtor to the assessee or holds identifiable money for the assessee. An overdraft facility in continuous debit does not create such a debt merely because a credit limit exists, and the bank cannot be treated as holding money for the customer in those circumstances. The provision cannot be used to freeze the unused overdraft limit or to compel payment of the difference between the sanctioned limit and the amount drawn. The notice and consequential direction were therefore beyond the scope of the provision and were quashed, while the Department remained free to recover the arrears by lawful means.

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Issues: Whether a notice issued under section 46(5A) of the Income-tax Act, 1922 could be enforced against an unutilised overdraft limit maintained by the assessee with a bank, and whether the bank in such a case could be treated as a person from whom money was due or who held money for or on account of the assessee.

Analysis: Section 46(5A) authorises recovery only from a person from whom money is due or may become due to the assessee, or who holds or may subsequently hold money for or on account of the assessee. The provision is analogous to garnishee attachment and presupposes the existence of a debt or identifiable money belonging to the assessee. A bank maintaining an overdraft facility for a customer who remains continuously in debit is not a debtor to the customer merely because a credit limit exists. Nor does the bank, in such circumstances, hold money for or on account of the customer. The section cannot be stretched into a device for freezing the credit limit itself and compelling payment to the Department of the difference between the overdraft limit and the amount drawn.

Conclusion: The impugned notice and the consequential direction were beyond the scope of section 46(5A) and were quashed, but the Department was left free to recover the arrears by lawful means.

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