Garnishee notices under tax law cannot reach a petitioner's debtors for another assessee's liability on a benami allegation.

Section 226(3) operates only as a garnishee mechanism against a person from whom money is due, or may become due, to the named assessee, or who holds money for that assessee. It does not authorise notices to a petitioner's debtors for recovery of another assessee's tax liability merely because the petitioner is alleged to be benami for that other person. On this construction, notices issued to recover dues said to belong to Dunichand Sons & Co. from persons alleged to owe money to P. K. Trading Company were without statutory jurisdiction and liable to be quashed. The constitutional validity of section 226(3) was not examined because the matter was decided on statutory interpretation.

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Issues: Whether notices issued under section 226(3) of the Income-tax Act, 1961 could be served on the petitioner's debtors for recovery of the tax liability of a different assessee on the footing that the petitioner's business was benami for that assessee, and whether the validity of section 226(3) required decision.

Analysis: Section 226(3) authorises a notice only to a person from whom money is due or may become due to the assessee, or who holds money for or on account of the assessee. The provision operates as a garnishee mechanism tied to the tax liability of the named taxpayer whose debtor is proceeded against. On the facts, the taxpayer was Dunichand Sons & Co., whereas the notices were directed to persons alleged to owe money to P. K. Trading Company. Treating the petitioner as benami for Dunichand Sons & Co. did not enlarge the statutory power so as to permit recovery from the petitioner's debtors under this section. The constitutional challenge was not examined because the matter was decided on the statutory construction of section 226(3).

Conclusion: The impugned notices were without jurisdiction and were liable to be quashed; the challenge under section 226(3) succeeded in favour of the petitioner, and no decision was required on constitutional validity.

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