Garnishee Proceedings and Tax Recovery : Clause 416 of the Income Tax Bill, 2025 Vs. Section 226 of the Income-tax Act, 1961

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....dern framework through the Income Tax Bill, 2025, an in-depth examination of Clause 416 vis-`a-vis its predecessor, Section 226, is imperative to understand the continuity, reforms, and potential implications for taxpayers and enforcement agencies. This commentary systematically analyses Clause 416, elucidates its objectives, dissects its operative elements, and juxtaposes it with the existing Section 226 to highlight similarities, differences, and the practical ramifications of the proposed changes. Objective and Purpose The legislative intent behind both Clause 416 and Section 226 is to ensure the effective and expeditious recovery of tax arrears by providing the Assessing Officer and the Tax Recovery Officer with alternative or supple....

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.... act pre-certificate, while the Tax Recovery Officer can act post-certificate, using these alternative modes in addition to the principal recovery process. 2. Recovery from Salary (Sub-sections 3 & 4) * Clause 416(3) specifically addresses recovery from salary income. The Assessing Officer or Tax Recovery Officer may require any person paying salary to the assessee to deduct arrears of tax from subsequent payments. The recipient of such a requisition is statutorily bound to comply and remit the deducted amount to the Central Government. * Clause 416(4) carves out an exception for portions of salary exempt from attachment u/s 60 of the Code of Civil Procedure, 1908. This ensures that the statutory protection afforded to a portion of a d....

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....y attaches to the extent of the lesser of the recipient's liability to the assessee or the assessee's tax liability. * (g) Flexibility in Notice: The authority may amend, revoke, or extend the notice or payment timeline. * (h) Discharge and Indemnity: Payments made in compliance discharge the payer's liability to the assessee to that extent. * (i) Personal Liability for Non-compliance: If the recipient of the notice fails to pay, they are deemed an assessee in default, and recovery proceedings may be initiated against them as if the amount were their own tax arrear. The notice acts as an attachment of debt. 4. Recovery from Money in Court Custody (Sub-section 6) * Clause 416(6) allows the Assessing Officer or Tax Recove....

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....bsp;222 AO may recover if no certificate under section 413 Change in cross-reference reflecting new section numbering; no substantive change Authority post-certificate TRO may recover in addition to section 222 methods TRO may recover in addition to section 413 methods Same in substance; reflects updated statutory framework Recovery from salary AO/TRO may require deduction from salary; section 60 CPC protection Identical provision; section 60 CPC protection Continuity in protection and process Third-party recovery (Notice) Detailed mechanism for notice, compliance, objections, joint holders, etc. Replicates the detailed mechanism Substantially identical, with minor drafting refinements Money in c....

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....is suggests satisfaction with the existing framework's efficacy, perhaps with an eye toward incremental procedural improvements through subordinate legislation rather than wholesale statutory overhaul. Potential Ambiguities and Issues in Interpretation * Scope of "may become due": The phrase "money is due or may become due" is broad and may invite disputes about contingent or future claims. * Presumption of Equal Shares in Joint Accounts: While practical, this presumption may occasionally result in hardship where actual beneficial interests differ. * Personal Liability of Third Parties: The risk of being deemed an assessee in default for non-compliance may deter bona fide dealings with assessees, especially where the third party ....