Section 250 Application of seized or requisitioned assets.

Income-tax Act, 2025

At a Glance

These documents are two textual versions of a provision governing the application of assets seized under search (section 247) or requisitioned (section 248). Document 1 is titled "Section 250 of Income-tax Act, 2025" (apparently a statutory enactment). Document 2 is titled "Clause 250 of Income Tax Bill, 2025 - Old Version" (a bill provision). The provision affects taxpayers from whose custody assets are seized, and the tax department (Assessing Officer/Principal Chief Commissioner etc.). Effective date or enactment date: Not stated in the document.

Statutory Provision Mode

Text & Scope

Clause 250 (Old Version) in the Income Tax Bill, 2025 provides statutory authority for application of assets seized u/s 247 or requisitioned u/s 248 to satisfy tax liabilities. The provision empowers the Assessing Officer to recover "the tax liability (including penalty or interest payable other than advance tax)" from seized assets and defines the aggregate of such liability in four sub-clauses: (a) existing liabilities under this Act or specified other Acts; (b) liabilities determined up to completion of assessment/reassessment/recomputation consequent to the search or requisition; (c) liabilities determined on or after completion of assessment and until the date of release of assets; and (d) liabilities arising from applications before the Interim Board of Settlement (u/s 245C(1) of the Income-tax Act, 1961). The provision thus covers liabilities pre-existing, determined during assessment consequent to search/requisition, and (in the Bill text) those subsequently determined until release.

Interpretation

The text indicates a legislative intent to allow seized or requisitioned assets to be a primary source for recovering tax liabilities connected to the search/requisition process. The inclusion of liabilities determined both up to completion of assessment and after completion until release suggests an intent to prevent dissipation of the asset pool by post-assessment findings or later determined defaults. The statutory mechanism couples recovery power with procedural safeguards (application by person seeking release; prior approvals) signalling a balance between revenue protection and procedural fairness.

Exceptions/Provisos

Not stated in the document: any explicit provisos limiting the use of seized assets in particular circumstances beyond the listed pre-conditions for release. The Bill does not provide thresholds, caps, or prioritisation among competing liabilities beyond the aggregate framing. Specific carve-outs for advance tax are made: interest and penalty other than advance tax are included, while advance tax is excluded.

Illustrations

• Example 1: A search yields cash and jewellery. The AO, under clause 250(1)(b), applies cash first towards liabilities determined upon completion of assessment consequent to the search; if remaining liabilities persist, non-monetary assets may be sold and proceeds applied. (Illustration consistent with text.)
• Example 2: After assessment completion, further discrepancies are discovered and additional tax is determined before the assets are released. Under clause 250(1)(c) the AO may apply seized assets to that additional liability until release. (Illustration consistent with Bill text.)
• Example 3: The person applies for release within 30 days after the seizure-month; the AO may release on being satisfied about nature and source, recovering any existing liability and obtaining prior commissioner-level approval. (Illustration consistent with clause 250(2).)

Interplay

The clause expressly connects to other statutory provisions: section 247 (search), section 248 (requisition), section 245C(1) (Interim Board of Settlement), and other Acts (Income-tax Act, 1961; Black Money Act, 2015). It also contemplates procedural convergence with distraint and recovery mechanisms under the Act by deeming non-monetary assets to be under distraint and allowing recovery "in the manner as prescribed," thereby interfacing with Chapter XVI recovery rules (and, in the enacted version, with section 416(7)). The Bill does not reference particular Rules or Notifications; thus operational details are left to subordinate legislation ("as prescribed").

Differences between the two provisions and practical impact

• Scope of recoverable liabilities (sub-section (1)): The Bill (Document 2) expressly includes in clause (c) "any liability in respect of which such person is in default or deemed to be in default ... determined on or after the completion of the assessment or reassessment or recomputation ... and till the date of release of the assets." The enacted Section (Document 1) does not contain an equivalent clause; instead its clauses are arranged as (a), (b), (c) with different text, and (b) expressly refers to liability determined on completion of assessment/reassessment/recomputation and for block period under Part B of Chapter XVI.
  • Practical impact: The enacted text appears narrower in explicitly covering liabilities arising after assessment completion up to release; the Bill's clause would have allowed continuing accruals determined after assessment to be recovered from seized assets until release. Removing that explicit clause reduces the revenue department's clear statutory authority to apply seized assets to liabilities determined post-assessment and may limit recovery in respect of liabilities that crystallise after assessment completion (unless covered elsewhere). This change shifts possible risk to the Department on post-assessment determinations and benefits taxpayers whose later liabilities might otherwise have been applied against seized assets.
• Reference to block assessment and Part B of Chapter XVI: The enacted Section (Document 1) explicitly includes "the assessment under Part B of Chapter XVI for the block period" within sub-clause (b). The Bill does not contain this specific phrasing.
  • Practical impact: Inclusion in the enacted text clarifies that liabilities from block period assessments under the specified Chapter are recoverable from seized/requisitioned assets; this may expand the practical recoverable pool in the enacted law compared to the Bill as printed in Document 2 (or merely clarifies an existing intended application).
• Wording on explanation/satisfaction (sub-section (2)(a)): The Bill requires the Assessing Officer to be "satisfying himself about the nature and source of acquisition of any such asset." The enacted Section requires being "satisfied on the basis of explanation furnished by such person that the nature and source of acquisition of such assets is explained."
  • Practical impact: The enacted provision places more explicit emphasis on the taxpayer's furnished explanation as the basis for satisfaction; this arguably shifts evidentiary emphasis onto the person from whose custody the assets were seized, making release conditional on the explanation provided. The Bill's phrasing could be read as permitting a more independent satisfaction by the AO (potentially with other material). The enacted wording may strengthen procedural protections by making the taxpayer's statement central, but could also be read to formalize a strict documentary burden for release.
• Authorisation and distraint mechanics (sub-section (5)): Both texts deem non-monetary assets to be under distraint and allow prescribed manner for recovery. The enacted Section explicitly references section 416(7) authorisation and says recovery shall be "effected in such manner as may be prescribed." The Bill uses nearly identical language ("in the manner as prescribed").
  • Practical impact: Largely semantic; the enacted text's explicit cross-reference to section 416(7) underscores reliance on distraint procedures and may tighten administrative linkage to existing recovery authorisations.
• Return of surplus assets (sub-section (7)): The Bill states surplus assets/proceeds shall be made over to the "concerned person." The enacted Section provides they shall be made over "to the person from where custody the assets were seized" (slightly different phrasing).
  • Practical impact: Insignificant in most cases, but enacted text links return specifically to the custodian from whom they were seized, which could have evidentiary or chain-of-custody significance if custody and beneficial ownership differ.
• General drafting and sequencing changes: Several clauses are reordered or subject-matter is slightly rephrased (for example, treatment of penalties/interest, precise linking to other Acts).
  • Practical impact: The substantive changes summarised above are likely most relevant; many drafting adjustments are clarificatory but could affect interpretation in close cases.

Practical Implications

• Compliance and risk areas: Under the Bill, assets seized may be applied to a wider temporal range of liabilities (including those determined after assessment until release). Taxpayers whose assets were seized should ensure prompt application for release and be prepared to furnish satisfactory explanations on nature and source to avoid application against newly determined liabilities. From the Department's perspective, the clause preserves recovery ability against later-determined defaults.
• Record-keeping/evidence points: The text places importance on "satisfying" the AO about nature and source (Bill) or furnishing explanations (enacted). Parties should retain documentary proof of acquisition, chain of title, receipts, bank records, valuations and any contemporaneous material to substantiate source and nature. Maintain chronological records of assessments, notices, and any settlement applications (section 245C) that may affect the claimed liabilities.

Key Takeaways

• Clause 250 permits recovery of tax liabilities (including penalty/interest, excluding advance tax) from assets seized or requisitioned under the Bill.
• The Bill expressly allowed application to liabilities determined after assessment up to release; the enacted version narrows or rephrases that temporal reach (difference of practical significance).
• Release of seized assets is permitted on application within thirty days, subject to AO satisfaction about nature/source, recovery of existing liabilities, and prior commissioner-level approval.
• Non-monetary assets may be treated as under distraint and sold or otherwise applied "in the manner prescribed" to meet liabilities.
• Simple interest at 0.5% per month is payable by the Central Government on specified net amounts for the statutory period between 120 days after last authorisation and the date of completion of assessment/reassessment/recomputation.
• Operational and evidentiary requirements are left to subordinate rules; parties should preserve acquisition/source documentation and monitor assessment timelines closely.

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Full Text:

Section 250 Application of seized or requisitioned assets.

Application of seized assets: assets may be applied to recover tax liabilities, subject to explanation-based release and distraint. The provision authorises recovery from assets seized or requisitioned under search or requisition to satisfy tax liabilities, including penalty and interest (excluding advance tax), aggregating liabilities arising before, during assessments consequent to the search, and those connected to settlement proceedings; the enacted text expressly includes block-period assessments under Part B of Chapter XVI. Release within the statutory period requires the Assessing Officer to be satisfied on the basis of the explanation furnished about nature and source, recovery of existing liabilities, and prior commissioner-level approval, while non-monetary assets are deemed under distraint and may be realised as prescribed.