Garnishee recovery and limitation: internal book-entry transfer did not defeat tax recovery under the old income-tax regime.

Recovery proceedings against a garnishee were treated as within time, as the limitation objection based on the old law and the attempted reliance on the 1961 Act failed on the facts and pleadings. Section 46(5A) of the Income-tax Act, 1922, protected a garnishee only where there was a genuine factual denial that any money was due or held for the assessee. A bank that admitted the deposit but relied on an internal book-entry transfer to its Pakistan branch did not raise a valid statutory objection, because the debt remained at Ludhiana and recovery could proceed against the bank as garnishee.

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Issues: (i) whether the recovery proceedings against the garnishee were barred by limitation; (ii) whether a garnishee's objection under section 46(5A) of the Income-tax Act, 1922, was sufficient to bar recovery where the bank admitted the deposit but claimed it had been transferred by book entry to its Pakistan branch.

Issue (i): Whether the recovery proceedings against the garnishee were barred by limitation.

Analysis: The demand against the assessee had been followed by a recovery certificate issued on 12 March 1953, and the subsequent proceedings against the bank were founded on that recovery action. The plea of limitation under the old Act, as well as the attempted reliance on the 1961 Act, could not succeed on the facts and pleadings. The argument under the 1961 Act was also not open consistently with the stand that the old Act governed the matter. On the record, the recovery proceedings were treated as having been commenced within time.

Conclusion: The limitation objection failed and the proceedings were not time-barred.

Issue (ii): Whether a garnishee's objection under section 46(5A) of the Income-tax Act, 1922, was sufficient to bar recovery where the bank admitted the deposit but claimed it had been transferred by book entry to its Pakistan branch.

Analysis: Section 46(5A) protected a garnishee only where there was a factual, unambiguous, and bona fide denial that any sum was due or held for the assessee. The bank's correspondence, read as a whole, amounted to an admission that the assessee's money had been deposited with it at Ludhiana and remained under its control, while the only defence was that the amount had been shifted by internal book entry to a defunct Pakistan branch. Such a book-entry transfer did not alter the situs of the debt, which remained at Ludhiana, and did not create a valid objection within the statutory exception. The authorities were therefore entitled to proceed against the bank as garnishee.

Conclusion: The objection under section 46(5A) failed and the bank remained liable to pay the amount as garnishee.

Final Conclusion: The writ petition was dismissed because neither the limitation challenge nor the garnishee objection defeated the recovery action, and the tax authorities were entitled to proceed against the bank for the assessee's arrears.

Ratio Decidendi: Under section 46(5A) of the Income-tax Act, 1922, a garnishee is protected only by a genuine factual denial that no money is due or held for the assessee; a mere internal book-entry transfer, without a bona fide dispute as to the existence of the debt, does not bar recovery.

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