Section 132B of ITA, 1961 : Section 132B: Application Of Seized Or Requisitioned Assets

Explanation using Example

Imagine a scenario where Mr. Sharma is a business owner and the Income Tax Department conducts a search operation at his premises under Section 132 of the Income Tax Act, 1961. During the search, they seize ₹10 lakh in cash and some valuable paintings. Mr. Sharma has an outstanding tax liability of ₹5 lakh.

Under Section 132B, the Income Tax Department can use the seized cash to settle Mr. Sharma's tax liability. Mr. Sharma can request the release of the paintings by proving their legitimate source within 30 days of the seizure. If he does this successfully and there's still cash left after settling his tax dues, the remaining money will be returned to him.

If the paintings are not proven to be legitimately acquired or if Mr. Sharma does not make the request in time, the department can sell the paintings to recover the tax liability. If there's any surplus from the sale after settling the tax dues, it will be returned to Mr. Sharma.

If the entire tax liability is not covered by the seized assets, the department may still pursue other recovery methods. Moreover, if the department holds the seized cash longer than 120 days without completing the assessment, they must pay Mr. Sharma interest on the amount that exceeds his tax liabilities.