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16. The provisions of Section 226(3) of the Act provide the machinery for enabling an Assessing Officer to recover the amount of income tax due from an assessee by recovering sums from any person who owes any money to the assessee or holds any money on his account. Section 226(3) of the Act confers upon an Assessing Officer a special jurisdiction to proceed directly against a person, other than an assessee, for recovery of income-tax demands due from the assessee. The power conferred under Section 226(3) of the Act is a special power that enables the Assessing Officer to reach beyond the assessee in order to appropriate amounts due to or held by third parties on account of the assessee. The proceedings under Section 226(3) of the Act are in the nature of garnishee proceedings whereby a garnishee is called upon to directly pay a debt to the creditor of a person to whom the garnishee is indebted. The Assessing Officer is similarly situated as a garnisher and is in a position to initiate action under Section 226(3) of the Act to reach out to the property of the assessee which is held by a third party or to any sum which is owed by a third party to the assessee. The Assessing Officer steps into the shoes of an assessee with respect to recovering sums owed to or held by the garnishee on account of the assessee. An Assessing Officer is not conferred with any additional rights in respect of any amount due from the garnishee other than that which are available to the assessee.

18. A Division Bench of the Calcatta High Court in the case of Shaw Wallace and Co. Ltd. v. Union of India: (2003) 262 ITR 528 (Cal.) also expressed a similar view and held as under:

"In the facts and circumstances of the case whether the decree had been put to execution by VCVL or not is immaterial. If the decree is offered, the Tax Recovery Officer is free to proceed upon it under section 226(3) of the Act. But by reason of clause (vi) thereof the judgment debtor/garnishee has a right to object. As soon as objected, to the Tax Recovery Officer cannot proceed to recover until discovery of falsity of the objection. If the executability of the decree is challenged, the Tax Recovery Officer cannot assume jurisdiction to decide a dispute between the garnishee and the assessee. He cannot usurp the jurisdiction of the executing court. The jurisdiction of the Tax Recovery Officer is confined within the dispute between the assessee and the income tax authority. He cannot assume jurisdiction in respect of any dispute between the assessee and the garnishee nor can he embark upon an exercise to determine any such dispute unless it appears to be false on the face of it. As soon there appears to be a dispute prima facie, the objection cannot be presumed to be false. The proceedings under section 226(3) of the Act would then be subject to the determination by the appropriate forum. Until determination, the Tax Recovery Officer has no scope of discovering the falsity of the objection. When the garnishee does not admit or denies that he owes the debt to the assessee, the Tax Recovery Officer cannot sit in judgment over the denial and come to his own conclusion. It was so held in Mohamedaly Sarafaly and Co. v. ITO [1968] 68 ITR 128, 131 (Mad) and P. K. Trading Co. v. ITO [1970] 78 ITR 427, 433 (Cal). Once on oath the garnishee denies the liability towards the assessee, the burden of showing the statement on oath is false in any material particular would be upon the Revenue. The Revenue has to disclose material particulars that led it to a definite conclusion. Then only the payment can be imposed on the garnishee under section 226(3)(vi) of the Act. The apex court had taken such a view in Beharilal Ramcharan v. ITO [1981] 131 ITR 129, 137- 38. It is only when the objection is altogether false and it is so apparent and is so discovered that the Tax Recovery Officer can proceed against the garnishee under section 226(3) of the Act. It is only the part, which cannot be objected to would come within its purview."

19. It is well settled that even in cases of garnishee proceeding under Order 21 Rule 46 of the Code of Civil Procedure (hereinafter referred to as the "CPC"), the Court may pass a garnishee order enabling a judgment creditor to obtain satisfaction of his claim only in those cases which are similar in scope as to judgments on admission under Order 12 Rule 6 of the CPC. A Court cannot issue garnishee order under Order 21 Rule 46 of the CPC against a debtor of the judgment debtor who disputes his indebtedness unless an issue in this regard is struck and tried as provided under Order 21 Rule 46C of the CPC. Unlike the CPC, Section 226(3) of the Act does not have any provision similar to Order 21 Rule 46C of the CPC which confers jurisdiction on the Assessing Officer to adjudicate the question regarding indebtedness of a third party to an assessee who disputes the same. Once the third party noticee has disputed that he owes any money or holds any money on account of the assessee, the Assessing Officer would not have any jurisdiction to proceed further against the third party. This is also abundantly clear from the language of clause (vi) of Section 226(3) of the Act.

20. The Supreme Court has in the case of Surinder Nath Kapoor v. Union of India: AIR 1988 SC 1777, observed as under:

"15. The object of serving a notice under clause (3)(vi) of section 226 is to give the garnishee an opportunity to admit or deny his liability for the amount mentioned in the notice. Under clause (i) of section 226(3), if the garnishee objects to the notice by a statement on oath that the sum demanded or any part thereof is not due to the assessee, then the garnishee will not be required to pay any such sum or part thereof, as the case may be."