Recovery from Persons Holding Money on Behalf of Assessee

Section 421 — - RECOVERY FROM PERSONS HOLDING MONEY ON BEHALF OF ASSESSEE

Section 421 of the Income-tax Act, 2025 corresponds to s. 226(3) of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Garnishee notice mechanism. AO/TRO directs banks, debtors, employers, tenants holding money for the defaulter to remit it to Government instead. Failure to comply renders the third party liable as assessee in default.

PRACTITIONER PLANNING NOTES

• Compliance risk for banks/employers: must pay to Govt on receipt of valid s. 226(3) notice.
• Notice typically captures bank balances above threshold + future credits; banks freeze account until released.

CROSS-REFERENCES

• s. 412 (default & demand timeline).
• s. 415 / 416 (TRO recovery).
• s. 220(6) / 416(6) (stay during appeal).