Section 416 — Other modes of recovery. Successor to s.226 of the 1961 Act.
Section 416 is in Chapter XIX — Collection and Recovery of Tax, which runs from section 390 to section 430.
Sub-sections (1) and (2) decide who may use the section. Where no certificate has been drawn up under section 413, the Assessing Officer may recover the tax by one or more of the modes it provides; where a certificate has been drawn up, the Tax Recovery Officer may use those modes without prejudice to the modes in that section.
Sub-section (3) is recovery from salary: where an assessee receives income chargeable under the head "Salaries", the Assessing Officer or Tax Recovery Officer may require the payer to deduct arrears of tax from any payment after the requisition, and that person must comply and pay the sum to the credit of the Central Government or as the Board directs. Sub-section (4) protects the part of salary exempt from attachment in execution of a civil court decree under section 60 of the Code of Civil Procedure, 1908.
Sub-section (5) is the garnishee power and carries most of the section. Clause (a) lets the Assessing Officer or Tax Recovery Officer, by notice in writing, require any person from whom money is due or may become due to the assessee, or who holds or may hold money for or on account of the assessee, to pay so much of it as will meet the arrears — forthwith on the money becoming due or being held, or within the time specified. Clause (b) extends the notice to money held jointly with another, and clause (c) presumes joint holders' shares equal until the contrary is proved. Clause (d) requires a copy of the notice to go to the assessee and, in a joint account, to all joint holders at their last known addresses. Clause (e) binds every person served to comply and dispenses, for a post office, banking company or insurer, with production of a pass book, deposit receipt or policy before an entry or endorsement is made. Clause (f) voids any claim to the property arising after the date of the notice as against the demand in it. Clause (g) lets a person served object by a statement on oath that the sum is not due to the assessee or that he holds no money for him, and clause (h) makes him personally liable, if that statement is found false in a material particular, to the lesser of his own liability to the assessee on the date of the notice and the assessee's liability under the Act. Clause (i) allows the notice to be amended, revoked or its time extended, and clause (j) requires a receipt to be granted and discharges the payer from his liability to the assessee to that extent. Clause (k) makes a person who discharges any liability to the assessee after receiving the notice personally liable to the lesser of the amount so discharged and the assessee's liability. Clause (l) treats a person who simply fails to pay as an assessee in default for the amount specified, recoverable as an arrear of tax from him under sections 413 to 415, and gives the notice the effect of an attachment of a debt by the Tax Recovery Officer.
Sub-section (6) lets the Assessing Officer or Tax Recovery Officer apply to a court holding money of the assessee for payment of the whole of it, or of enough to discharge the tax if it is more. Sub-section (7) permits recovery of arrears by distraint and sale of the assessee's movable property in the prescribed manner, if authorised by general or special order of an income-tax authority not below the rank of Commissioner.
Recovery would be easy to defeat if the Department could only pursue the assessee's own hands, so this section reaches the money wherever it sits — with an employer, a bank, a debtor, or a court. The notice in sub-section (5) is deliberately made self-executing: it binds the recipient, voids later claims to the property, discharges him when he pays, and turns him into an assessee in default when he does not. The safeguards are correspondingly narrow — the exempt part of salary, a statement on oath, and copies to the assessee and joint holders.
A person served under sub-section (5) has exactly two safe courses: pay, and take the receipt under clause (j) which discharges him against the assessee to that extent; or object by a statement on oath under clause (g) that the money is not due or not held. Anything else is expensive. Paying the assessee instead makes him personally liable under clause (k), staying silent makes him an assessee in default under clause (l) with the notice operating as an attachment, and an oath found false in a material particular makes him liable under clause (h) — in each case capped at the lesser of his own liability to the assessee and the assessee's liability under the Act. For a joint account, clause (c) presumes equal shares until the contrary is proved, so the burden of showing a different split sits with the holders. Note that sub-section (5)(f) voids only claims arising after the date of the notice, and that the salary route in sub-section (3) is limited by sub-section (4) to the part of salary that is attachable in execution of a civil court decree under section 60 of the Code of Civil Procedure, 1908.
A company owes an assessee Rs. 30 lakh on a running account and receives a notice under sub-section (5) requiring it to pay Rs. 18 lakh of arrears to the Tax Recovery Officer. If it pays, it takes a receipt and is discharged of Rs. 18 lakh of its debt to the assessee. If it instead settles the whole Rs. 30 lakh with the assessee after receiving the notice, clause (k) makes it personally liable to the lesser of what it discharged and the assessee's liability; if it simply ignores the notice, clause (l) treats it as an assessee in default for the Rs. 18 lakh, recoverable from it as an arrear of its own tax.
The assessee meets this section as a copy of a notice sent to him under sub-section (5)(d), often after his bank or a customer has already been served. The person who actually acts on it is the third party — an employer asked to deduct from salary, a bank asked to pay out of an account, a debtor asked to pay what he owes.
Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.
he shall be deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear of tax due from him
the shares of the joint holders in the account, as referred in clause (b), shall be presumed, until the contrary is proved, to be equal
See the full 1961 to 2025 concordance.
See the circulars index.
See the notifications index.