Taxpublishers.in - Monday Corner Answer to the Quiz for the week (18 Mar 2024)

Share via Whatsapp 192 Views

Back to Monday Corner


Quiz for the week (18 Mar 2024): Kite Jewellers (P) Ltd was subjected to a search under section 132 on 10.11.2023. Unaccounted jewellery of 5 kgs was found besides cash of Rs.201 lakhs. The search team seized entire cash on the same day even though the book balance of cash was Rs.39 lakhs. The search was also completed on the same day. The assessee has not paid advance tax of December, 2023 and March, 2024. Your opinion is sought in the third week of March,2024 as regards how to proceed further. What would you advise? Answer : The query given above requires reference to section 132 of the Income-tax Act, 1961. As per section 132(1) the authorised officer is eligible to seize any books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of search. However, the proviso says bullion, jewellery or other valuable article or thing if forms part of stock in trade of the business it shall not be seized and the authorised officer shall make a note or inventory of such stock in trade of the business. Therefore, when the assessee is engaged in jewellery business the authorised officer cannot seize bullion or jewellery. He can only make a note or inventory of such stock in trade of the business. The authorised officer is eligible to seize cash found as a result of search. However, reference is invited to section 132B which deals with assets seized under section 132 or requisitioned under section 132A. Section 132B(1) says that the assets seized may be dealt with in the following manner viz. the amount of existing liability under the Act and the amount of liability determined on completion of assessment, reassessment or recomputation 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 assessment including penalty and interest in connection with such assessment and in respect of which the assessee is in default or deemed to be in default. The proviso to section 132B(1) says that where the assessee makes an application to the Assessing Officer within 30 days from the end of the month in which the asset was seized, for release of asset explaining the nature and source of acquisition of such asset to the satisfaction of the Assessing Officer, the amount of any existing liability may be recovered out of such asset and the remaining portion if any, may be released with the previous approval of Pr.CCIT or CCIT or PCIT or CIT, to the person from whose custody the assets were seized. The further proviso says that such asset or any portion thereof shall be released within a period of 120 days from the date on which the last of the authorisations for search under section 132 was executed. If the asset consists solely of money, the Assessing Officer may apply such money in the discharge of liabilities and the assessee shall be discharged of his tax liability to the extent of the money so applied. In view of this, the seizure of cash of Rs.39 lakhs reflected in the books of account could not have been seized. Such seizure should be contested and in spite of the delay, it may get released within 120 days from the last of the authorisation for search under section 132 was executed. The balance cash seizure of Rs.162 lakhs (Rs.201 lakhs seized less the accounted balance Rs.39 lakhs) will have to be explained for release of the same. The non payment of advance tax in December, 2023 and March, 2024 cannot be adduced to such cash seizure and therefore the interest under section 234C for deferment in payment of advance tax would apply. The assessee may note that the Assessing Officer would proceed for reopening the assessment based on the material seized besides cash. The assessment consequent to search would be governed by sections 143, 148 to 153 of the Act.

Quiz for the week (18 Mar 2024):

Kite Jewellers (P) Ltd was subjected to a search under section 132 on 10.11.2023. Unaccounted jewellery of 5 kgs was found besides cash of Rs.201 lakhs. The search team seized entire cash on the same day even though the book balance of cash was Rs.39 lakhs. The search was also completed on the same day. The assessee has not paid advance tax of December, 2023 and March, 2024. Your opinion is sought in the third week of March,2024 as regards how to proceed further. What would you advise?

Answer :

The query given above requires reference to section 132 of the Income-tax Act, 1961. As per section 132(1) the authorised officer is eligible to seize any books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of search. However, the proviso says bullion, jewellery or other valuable article or thing if forms part of stock in trade of the business it shall not be seized and the authorised officer shall make a note or inventory of such stock in trade of the business.

Therefore, when the assessee is engaged in jewellery business the authorised officer cannot seize bullion or jewellery. He can only make a note or inventory of such stock in trade of the business.

The authorised officer is eligible to seize cash found as a result of search. However, reference is invited to section 132B which deals with assets seized under section 132 or requisitioned under section 132A.

Section 132B(1) says that the assets seized may be dealt with in the following manner viz. the amount of existing liability under the Act and the amount of liability determined on completion of assessment, reassessment or recomputation 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 assessment including penalty and interest in connection with such assessment and in respect of which the assessee is in default or deemed to be in default.

The proviso to section 132B(1) says that where the assessee makes an application to the Assessing Officer within 30 days from the end of the month in which the asset was seized, for release of asset explaining the nature and source of acquisition of such asset to the satisfaction of the Assessing Officer, the amount of any existing liability may be recovered out of such asset and the remaining portion if any, may be released with the previous approval of Pr.CCIT or CCIT or PCIT or CIT, to the person from whose custody the assets were seized.

The further proviso says that such asset or any portion thereof shall be released within a period of 120 days from the date on which the last of the authorisations for search under section 132 was executed.

If the asset consists solely of money, the Assessing Officer may apply such money in the discharge of liabilities and the assessee shall be discharged of his tax liability to the extent of the money so applied.

In view of this, the seizure of cash of Rs.39 lakhs reflected in the books of account could not have been seized. Such seizure should be contested and in spite of the delay, it may get released within 120 days from the last of the authorisation for search under section 132 was executed.

The balance cash seizure of Rs.162 lakhs (Rs.201 lakhs seized less the accounted balance Rs.39 lakhs) will have to be explained for release of the same. The non payment of advance tax in December, 2023 and March, 2024 cannot be adduced to such cash seizure and therefore the interest under section 234C for deferment in payment of advance tax would apply.

The assessee may note that the Assessing Officer would proceed for reopening the assessment based on the material seized besides cash. The assessment consequent to search would be governed by sections 143, 148 to 153 of the Act.