Summary: Gul Ltd.’s claim for interest on its seized assets and money is justified under the provisions of the Income-tax Act, 1961. According to Section 132(2), income tax authorities cannot retain seized books of account and other documents for more than 180 days without a written record of reasons and approval from the Commissioner. Furthermore, the Commissioner’s approval cannot extend this retention beyond 30 days after the completion of all relevant tax proceedings. Regarding seized assets and money, Section 132B(4) mandates that the Central Government pay simple interest on any amount by which the total of the seized money and proceeds from sold assets exceeds the outstanding tax liabilities. This interest rate is specified at 15% per annum, or 1.25% per month or part of a month. The interest period begins the day after the expiration of 120 days from the last date of search or requisition and runs until the completion of the assessment. Since Gul Ltd.’s assessment was completed a year after the seizure, the company is entitled to claim interest for the duration specified by the Act.
QUESTION & ANSWER SERIES-SEIZURE UNDER IT ACT, 1961
QUESTION: Officers from Income Tax Department have seized some assets and money from Gul Ltd.’s premises. After one year of such seizure the assessment was completed by the Income Tax Department and the outstanding tax demands were met out from the sale of assets.
Gul Ltd. claims interest from the Income Tax Department for the assets and monies seized, as more than one year has elapsed from seizure.
In background of provisions of Income-tax Act, is the claim of the Company justified ?
| APPLICABLE PROVISIONS:
SECTION 132 (2) The books of account or other documents seized under sub-section (I) shall not be retained by the Inspecting Assistant Commissioner or the Income-tax Officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner for such retention is obtained : Provided that the Commissioner shall not authorities the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (II of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. SECTION 132B(4): (a) The Central Government shall pay simple interest at the rate of fifteen per cent per annum on the amount by which the aggregate of money retained under section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (iii) of sub- section (5) of that section exceeds the aggregate of the amounts 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 six months from the date of the order under sub- section (5) of section 132 to the date of the regular assessment or reassessment referred to in clause (i) of sub- section (1) or, as the case may be, to the date of last of such assessments or reassessments. |
ANSWER:
According to the provisions of Section 132(2) of the IT Act, 1961 any documents, books of account , assets seized by income tax authorities should not be kept more than 180 days from the date of search or seizure without written permission of of Commissioner of Income Tax for more than 30 days , it means than Income Tax Authorities cannot hold seized assets for more than 210 days from the date of seizure.
Interest on assets ceased According to Section 132B(4) of the Income-tax Act, 1961(the Act), the Central Government shall pay simple interest at the rate of @1.25% for every month or part of a month on the amount by which the aggregate amount of money seized under section 132 of the Act or requisitioned under section 132A of the Act, 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.
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 authorisations for search under section 132 of the Act or requisition under section 132A of the Act was executed to the date of completion of the assessment under section 153A of the Act or under Chapter XIV-B.
Hence, the claim of the Company is justified.
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