Tax recovery notices under section 46(5A) require a subsisting relationship; speculative notices to strangers are invalid.

Section 46(5A) of the Indian Income-tax Act, 1922 was construed as a recovery provision directed only at persons in a subsisting relationship with the assessee, where money is due, may become due, or is held for the assessee. The Court rejected a broad reading that would permit speculative notices to strangers based only on a remote future possibility of liability, treating the objection clause as limited to denial of present indebtedness or possession. On that construction, the notice could not be enforced against the respondent in respect of amounts already paid to the assessee, and the demand was invalid; the appeal was dismissed and the High Court's view was sustained.

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Issues: Whether a notice issued under section 46(5A) of the Indian Income-tax Act, 1922 could validly reach money that may become due or may subsequently be held for an assessee only where there was a subsisting relationship between the noticee and the assessee.

Analysis: The provision was read as a recovery measure aimed at money due from, or held by, persons standing in a real and existing relationship with the assessee, comparable to a garnishee. The expressions "may become due" and "may subsequently hold money" were held not to authorise speculative notices to persons with whom the assessee had no present connection. The statutory objection clause was treated as confirming that the noticee need only deny present indebtedness or possession of the assessee's money, not merely a future possibility of such liability. A broader construction was rejected as impractical and capable of burdening an indeterminate class of persons.

Conclusion: The notice could not be enforced against the respondent for amounts already paid to the assessee in the absence of the requisite subsisting relationship, and the demand was therefore invalid.

Final Conclusion: The appeal was dismissed and the High Court's view that section 46(5A) did not authorise such speculative recovery was sustained.

Ratio Decidendi: A notice for recovery of tax arrears under section 46(5A) is valid only where there is an existing relationship from which money is due, may become due, or may be held for the assessee; it does not extend to mere speculative future dealings with strangers to the assessee.

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