Section 226(3) , some questions
Querist :
Anonymous
(Querist) 17 October 2011
This query is : Resolved
(i) Section 226(3) is used by Income Tax Department for recovery of tax , however some questions may require answer
(a)-Main mode of recovery is notice u/s 156 , when it is cancelled , does 226(3) automatically get cancelled?
(b)When assessment itself is set aside , does 226(3)still stand?
(c)Sec226(3) along with sec 222 to sec 225 or for any notice requires specifice value demanded , does sec 226(3)applies to current amount witten in notice or it applies to future amount becoming due, then why should it be?
(d)Tax Department is no party to contract , the why should be payment made to them?
(e)If recovery can be made from third party , then why not from defaulter itself i.e why not third party pay to assessee , then recovery be made from him, also i.e unless defaulter assessee be declared absconding etc., no recoevry be made from third party?
Guest
(Expert) 17 October 2011
Dear Anonymous,
It seems you are confusing the two separate issues of "demand by issue of notice u/s 156" and "mode of recovery" by the Income Tax Department. Service of notice of demand u/s 156 does not represent main mode of recovery in any way, as you have presumed.
You have also included a third issue of "contract" in which TDS becomes due to be deducted out of the contract amount and remitted to the IT Department.
So, please give some background and the brief of the case to help the experts to understand the matter properly before some definite opinion is formed before replying your query.
Vineet
(Expert) 20 October 2011
Provisions of section 226(3) enable AO to serve garnishee notices on debtors of assessee to recover dues in case of default.
Notice u/s 156 is issued to assessee demanding the dues as a result of order under IT Act. If the assessee defaults in honouring the demand, recovery proceedings are initiated which include recovery from third party debtors u/s 226(3). So if notice u/s 156 is cancelled, the demands made u/s 226(3) automatically subside.
The AO may require third party debtors to pay the amount due in present as well as future dues to the extent of outstanding demand against the assessee.
This is not recovery from third party but enforcing recovery from the assessee being the amounts due to him from his debtors including bank accounts.
