Income Tax Search and Seizure: Application of seized assets during the course of an Income Tax search towards the self-assessment tax liability of an assessee- whether permissible

Income Tax Search and Seizure: Application of seized assets during the course of an Income Tax search towards the self-assessment tax liability of an assessee- whether permissible

Introduction:

The application of assets seized during the course of search and seizure action is governed by the provisions of Section 132B of the Income Tax Act’1961.

Before digging deeper into the matter, let us go through the provisions of Section 132B in the statute as of the date which is reproduced herein under with relevant amendment notes:-

“ Application of seized or requisitioned assets.

132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:—

(i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) and the Interest-tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment [under section 153A and the assessment of the year relevant to the previous year in which search is the Tax Recovery Officer under the authorization from the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner under subsection (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the number of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule.

(2) Nothing contained in sub-section (1) shall preclude the recovery of the number of liabilities aforesaid by any other mode laid down in this Act.

(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.

Related Topic:
Income Tax Search and Seizure

(4) (a) The Central Government shall pay simple interest at the rate of [one-half percent for every month or part of a month] on the amount by which the aggregate amount of money6 seized under section 132 or requisitioned under section 132A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section.

(b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorizations for search under section 132 or requisition under section 132A was executed to the date of completion of the assessment [under section 153A or] under Chapter XIV-B.

[Explanation 1].—In this section,—

(i) “block period” shall have the meaning assigned to it in clause (a) of section 158B;

(ii) “execution of an authorization for search or requisition” shall have the same meaning as assigned to it in Explanation 2 to Section 158BE.]

[Explanation 2.—For the removal of doubts, it is hereby declared that the “existing liability” does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII.]

Therefore, Section 132B of the Income Tax Act 1961, provides for adjustment of seized assets/requisitioned assets against the amount of any existing liability under the Income Tax Act, 1961, the Wealth-tax Act, 1957, the Expenditure-tax Act, 1987, the Gift tax Act, 1958 and the Interest-tax Act, 1974, and the amount of the liability determined on completion of the assessment under section 153A of the Act and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV- B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default or the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C of the Act.

Related Topic:
Tax Liability on Issue of Gift Vouchers.

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