Section 416: other modes of recovery

Introduction

Section 416 provides recovery methods in addition to the tax-recovery certificate process. Without a section 413 certificate the Assessing Officer may use the listed modes; once a certificate exists the Tax Recovery Officer may also use them.

The provision includes salary interception and notices to a person who owes or holds money for the assessee. It contains limits, copy and objection rules, and consequences for false statements or failure to comply.

Key takeaways

When this section applies

Where no certificate has been drawn up under Section 413, the Assessing Officer may recover the tax by any one or more of the modes provided in this section.

Where a certificate has been drawn up under Section 413, the Tax Recovery Officer may, without prejudice to the modes specified in that section, also recover the tax by any one or more of the modes in this section.

Deduction from salary

If an assessee receives income chargeable under the head "Salaries", the Assessing Officer or Tax Recovery Officer may require the person paying that salary to deduct, from any payment made after the requisition, any arrears of tax due from the assessee, and pay the deducted sum to the credit of the Central Government (or as the Board directs). This does not apply to any part of the salary exempted from attachment under Section 60 of the Code of Civil Procedure, 1908.

Garnishee notice on a person who owes money to the assessee

The Assessing Officer or Tax Recovery Officer may, by written notice, 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 that money (or as much as is sufficient to cover the arrears) to the Assessing Officer or Tax Recovery Officer, either immediately or by a time specified in the notice.

• The notice can be issued even where the money is held jointly with another person; the joint holders' shares are presumed equal until proved otherwise
• A copy of the notice must be forwarded to the assessee, and to all joint holders in a joint account
• It is not necessary to produce any pass book, deposit receipt, policy or similar document before payment is made under the notice, regardless of any contrary rule or practice
• Any claim on the relevant property arising after the date of the notice is void as against the demand in the notice
• A person who objects on oath that the sum is not due to the assessee, or that he holds no money for the assessee, is not required to pay under the notice - but if that statement is later found false in a material particular, he becomes personally liable to the extent of his own liability to the assessee, or the assessee's liability under the Act, whichever is less
• The Assessing Officer or Tax Recovery Officer may amend, revoke or extend the time of any such notice at any time
• A receipt must be given for any amount paid, discharging the payer's liability to the assessee to that extent
• A person who discharges a liability to the assessee after receiving the notice becomes personally liable to the extent of that liability, or the assessee's liability under the Act, whichever is less
• If the person given the notice fails to pay as required, he is deemed to be an assessee in default for that amount, recoverable in the same manner as an arrear of tax under Sections 413 to 415, and the notice has the same effect as an attachment of a debt under Section 413

Application to a court and distraint of movable property

The Assessing Officer or Tax Recovery Officer may apply to the court in whose custody there is money belonging to the assessee, for payment of the entire amount of that money, or, if it exceeds the tax due, for an amount sufficient to discharge the tax.

The Assessing Officer or Tax Recovery Officer may, if authorised by an income-tax authority not below the rank of Commissioner by general or special order, recover arrears by distraint and sale of the assessee's movable property in the prescribed manner.

Step-by-step flow for other modes of recovery under Section 416

1. 1

   Has a certificate been drawn up under Section 413?

   • No: The Assessing Officer may use any one or more of the modes in this section (Section 416(1)). Go to the next step.
   • Yes: The Tax Recovery Officer may use these modes in addition to the Section 413 modes (Section 416(2)). Go to the next step.
2. 2

   Does the assessee receive income chargeable under the head "Salaries"?

   The officer may require the person paying the salary to deduct arrears from payments after the requisition and pay them to the credit of the Central Government or as the Board directs (Section 416(3)). The part of salary exempt from attachment under section 60 of the Code of Civil Procedure, 1908 cannot be touched (Section 416(4)).

3. 3

   Does anyone owe or hold money for the assessee?

   A notice under Section 416(5) can require that person to pay enough to cover the arrears, or the whole of the money if it is equal to or less than the arrears. It can go to a joint holder; joint shares are presumed equal until the contrary is proved. A copy goes to the assessee and to all joint holders.

4. 4

   How does the person served respond?

   If he objects on oath that the sum is not due or he holds no money, he need not pay; a false statement makes him personally liable up to the lower of his own liability to the assessee or the assessee's liability (Section 416(5)(g) and (h)). Payment earns a receipt and discharges him to that extent. Paying the assessee after the notice, or failing to pay, makes him personally liable or deemed an assessee in default (Section 416(5)(k) and (l)).

5. 5

   Are other modes needed?

   The officer may apply to a court that holds the assessee's money (Section 416(6)). If authorised by an income-tax authority not below the rank of Commissioner, he may recover by distraint and sale of movable property in the prescribed manner (Section 416(7)).

Practical checklist

Glossary

Garnishee-style notice

A written notice under subsection (5) to a person who owes or holds money for the assessee, directing payment toward tax arrears.

Tax Recovery Officer

The officer who may use these modes once a section 413 recovery certificate has been drawn up.

Frequently asked questions