Amounts covered by garnishee orders. - Income Tax - 1152/CBDT

INSTRUCTION NO. 1152/CBDT Dated : February 23, 1978 Section(s) Referred: 226(3) Statute: Income - Tax Act, 1961 Recently a case was brought to the notice of the Board where in garnishee notice were issued to several debtors some years back but the Income-tax Officer did not take steps to realise amounts covered by garnishee orders, and the assessee was put to pecuniary loss on account of the operation of limitation. 2. It was seen from the Commissioner's report that no further action to realise the amount was taken against some of the garnishees as they had denied their liability to pay any amount to the assessee in default. Even though under the law there is no provision for intimating the defaulter assessee the details of persons who have denied their liabilities to the assessee in response to a notice issued under section 226(3), the Board have been advised that there would be no harm in doing so if the same is considered desirable. The Board have decided that from the point of view of the assessee as well as the Department so as to effectively implement the provisions of section 226(3), it will be necessary and desirable to intimate each case of denial of liability under clause (vi) thereof to the defaulter assessee so as to ensure that- (a) the debtor's denial can be promptly verified with the help of evidence of debt that may be produced by the assessee, and (b) no debtor delays or defeats the payment of his debt by filling a false statement on oath. Such an intimation to the assessee should clearly invite him to lead the evidence if any in his possession to disprove the denial by the garnishee so that prompt steps could be taken under section 226(3). 3. It may be ensured that no garnishee is allowed to delay or defer the payment of amounts covered by the garnishee proceedings except by filing a statement on oath as prescribed under clause (vi) Denial by means of either oral statement or by a mere letter should not be recognised and the garnishee should in such cases be advised to file a proper objection in the form of a statement on oath before he is allowed not to pay the taxes covered by the proceedings. If such statement is not forthcoming within about a fortnight after the due date, further steps in accordance with law must be taken to recover the amount due from the garnishee. 4. The above instructions would apply mutatis mutandis to garnishee notice issue under the corresponding provisions of the companies (Profit) Surtax Act, Gift Tax Act. Wealth tax Act and Estate Duty Act.