Income Tax Attachment and Garnishee Orders are both legal mechanisms that enable recovery of dues through attachment of funds held in banks. However, they differ significantly in terms of origin, procedure, and implications for banks. The following sections explain these distinctions in detail.
Garnishee Order
A Garnishee Order is issued by a Court attaching the funds of the judgment debtor held by a third party (such as a bank), directing payment to the judgment creditor. Upon receipt, the bank’s obligation to honour the customer’s cheques to the extent of the attached amount ceases immediately. The process involves two stages: (1) ‘Order Nisi’ – where the bank is asked to show cause why the funds cannot be paid, and (2) ‘Order Absolute’ – directing the bank to pay the attached amount to the judgment creditor or the Court.
Banks must carefully examine such orders for applicability—joint accounts, trust funds, uncleared cheques, or incorrect account details may render the order inapplicable. Before payment, the banker may exercise the right of set-off for any dues owed by the customer to the bank.
Income Tax Department’s Attachment Order
The Income Tax Department can attach a taxpayer’s bank balance under Section 226(3) of the Income-tax Act, 1961. Unlike a court-issued garnishee order, this attachment is direct and does not involve multiple stages. The bank can object only if the amount is not due to the assessee or if no funds are held on behalf of the assessee. The bank must respond to the Income Tax Department on oath. Joint account balances are presumed to be equally shared unless proved otherwise.
If the bank fails to comply, the Income Tax Officer can treat the arrears as recoverable directly from the bank. The right of set-off is limited to accounts under lien or where the bank has already exercised this right before receipt of notice.
Comparison Chart: Garnishee Order vs Income Tax Attachment
| Parameter | Garnishee Order | Income Tax Attachment Order |
| Issuing Authority | Civil Court (Code of Civil Procedure, 1908) | Income Tax Department (Section 226(3), Income-tax Act, 1961) |
| Nature of Liability | Private civil liability | Statutory liability for unpaid taxes |
| Stages | Two stages – Order Nisi and Order Absolute | Single-stage direct attachment |
| Right of Set-off | Available before payment under order absolute | Restricted; only if lien exists or exercised before notice |
| Applicability to Joint Accounts | Not applicable if order is in single name and account is joint | Presumed equal shares unless proven otherwise |
| Failure to Comply | Bank answerable to court | Bank treated as assessee in default; recovery from bank possible |
| Treatment of Future Credits | Funds realized after receipt of order not attachable | Only existing balance attachable at time of order |
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