TaxTMI 
TaxTMI 
Balancing Revenue Recovery and Taxpayer Rights : Clause 250 of the Income Tax Bill, 2025 Vs. Section 132B of the Income-tax Act, 1961
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.... administration's enforcement arsenal. The ability to seize and apply assets towards tax dues is a potent tool, but it must be balanced against the rights of taxpayers and the requirements of due process. The transition from Section 132B to Clause 250 marks an evolution in the legislative approach, seeking to harmonize efficiency in recovery with procedural fairness. Objective and Purpose The principal objective of Clause 250, like Section 132B, is to provide statutory authority for the application of assets seized or requisitioned during search and seizure or requisition proceedings towards the discharge of tax liabilities of the person from whom such assets are taken. The provision aims to: * Ensure prompt recovery of tax, penalty, and interest dues by empowering the Assessing Officer (AO) to appropriate seized assets. * Lay down clear procedures for the release of assets where the taxpayer satisfactorily explains the source and nature of acquisition and after liabilities are met. * Mandate the timely release of excess assets and provide for payment of interest to the taxpayer for prolonged retention beyond prescribed timeframes. * Clarify the scope of liabilities t....
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....s (or a portion thereof) to the person from whose custody they were taken, upon application within 30 days from the end of the month in which the asset was seized, subject to: * Satisfaction as to the nature and source of acquisition of the asset. * Recovery of any existing liability as per sub-section (1). * Prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner. Key Observations: - The procedural safeguard of requiring higher authority approval is retained. - The time limit for application and the requirement to explain the source/nature of the asset are consistent across both provisions. - The language in Clause 250 is clearer and more structured, potentially reducing interpretative disputes. 3. Timelines for Release [Clause 250(3)] Clause 250(3) mandates that assets eligible for release under sub-section (2) must be released within 120 days from the date of execution of the last authorization for search or requisition. Key Observations: - The statutory timeline is unchanged, ensuring prompt release and preventing undue retention. 4. Application of Money Seized [Clause 250(4)] Clause 250(4) provides that ....
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....[Clause 250(9)] Clause 250(9) specifies that interest runs from the day after expiry of 120 days from the date of execution of the last search/requisition authorization, until completion of assessment/reassessment/recomputation. Key Observations: - The period for which interest is payable remains consistent, reinforcing the importance of timely assessments. Other Notable Features - Coverage of Advance Tax: Both provisions exclude advance tax from the scope of "existing liability," as clarified by Explanation 2 to Section 132B and the language of Clause 250(1). - Reference to Settlement Mechanisms: Clause 250(1)(d) refers to the Interim Board of Settlement, reflecting the phasing out of the Settlement Commission and transition to new dispute resolution mechanisms. - Legislative Streamlining: Clause 250 omits references to defunct statutes (Wealth-tax, Expenditure-tax, etc.), aligning with contemporary legislative practice. Practical Implications The practical impact of Clause 250, as with Section 132B, is significant for taxpayers subject to search and seizure or requisition proceedings: * Swift Recovery: The tax department is empowered to promptly recover dues from sei....
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.... 132B: * Taxpayer can apply for release within 30 days from the end of the month of seizure; * AO must be satisfied about the nature and source of assets; * Release requires prior approval of senior officers; * Assets must be released within 120 days from the last authorization execution. Clause 250: * Replicates the same process and timelines as Section 132B; * Emphasizes the satisfaction of the AO and prior approval from senior officials; * Codifies the 120-day release period. Analysis: There is substantial continuity in the process, reflecting best practices and judicial pronouncements that have shaped the interpretation of Section 132B. 3. Application of Money and Other Assets Section 132B: * Money seized is applied first towards liabilities; * Non-monetary assets may be appropriated and are deemed under distraint, with sale conducted as per the Third Schedule. Clause 250: * Mirrors the approach for application of money and non-monetary assets; * Deems non-monetary assets under distraint, with recovery as prescribed (presumably by rules to be notified). Analysis: The approach remains the same, though Clause 250 references "as prescribed," possibly al....