Application of seized or requisitioned assets.

250(1)

The Assessing Officer may recover the tax liability (including penalty or interest payable other than advance tax) out of the assets seized under section 247 or requisitioned under section 248, and such liability shall be the aggregate of––

• (a) any existing liability under this Act, or under the Income-tax Act, 1961 or the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015;
• (b) any liability determined under this Act or under the Acts referred to in clause (a), up to the date of completion of the assessment or reassessment or recomputation in consequence to the search or the requisition;
• (c) any liability in respect of which such person is in default or deemed to be in default under this Act or under the Income-tax Act, 1961, determined on or after the completion of the assessment or reassessment or recomputation in consequence of the search or the requisition, and till the date of release of the assets; and
• (d) any liability arising on an application made before the Interim Board of Settlement under section 245C(1) of the Income-tax Act, 1961.

250(2)

The Assessing Officer may release the assets seized or portion of such asset to the person from whose custody the assets were seized, on an application made by the person concerned within thirty days from the end of the month in which the asset was seized, after fulfilment of the following requirements:––

• (a) satisfying himself about the nature and source of acquisition of any such asset;
• (b) recovering any existing liability referred to in sub-section (1);
• (c) obtaining prior approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

250(3)

The assets referred to in sub-section (2) shall be released within one hundred and twenty days from the date on which the last of the authorisations for the search or requisition was executed.

250(4)

If the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in sub-section (1) and the assessee shall be discharged of such liability to the extent of the money so applied.

250(5)

The assets, other than money, may also be applied for discharge of liabilities referred to in sub-section (1) as remains undischarged and shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or Tax Recovery Officer under authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner and the recovery of any liability out of such assets shall be effected in the manner as prescribed.

250(6)

The mode of recovery of liabilities under sub-section (1) shall not preclude the recovery of liabilities aforesaid by any other mode laid down in this Act.

250(7)

Any assets or proceeds thereof, which remain after the liabilities referred to in sub-section (1) are discharged shall be forthwith made over or paid to the concerned person.

250(8)

The Central Government shall pay simple interest at the rate of 0.5% for every month or part of a month for the period on the amount determined in accordance with the following formula:–– (A-B)+(C-D) where — A = the aggregate amount of money seized under section 247 or requisitioned under section 248; B = the amount of money, if any, released under sub-section (2); C = the proceeds, if any, of the assets sold towards the discharge of the liability under sub-section (1); and D = the aggregate amount required to meet the liabilities referred to in sub-section (1).

250(9)

The interest referred to in sub-section (8) shall run from the date immediately following the expiry of one hundred and twenty days from the date on which the last of the authorisations for the search under section 247 or requisition under section 248, was executed to the date of completion of the assessment or reassessment or recomputation.

Explanation

Section Summary:

Section 250 of the new income tax law outlines the rules for how the tax authorities can use assets seized or requisitioned during a search or requisition to recover tax liabilities, penalties, or interest. It also specifies the conditions under which these assets can be released back to the taxpayer and the interest payable by the government if the assets are held beyond a certain period.

Key Changes:

1. Expanded Scope of Liabilities: The section now includes liabilities under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, in addition to the Income Tax Act, 1961.
2. Interest on Held Assets: A new provision (sub-section 8) mandates the government to pay interest at 0.5% per month if assets are held beyond 120 days from the date of the last search or requisition authorization.
3. Release of Assets: The process for releasing seized assets is more structured, with a 120-day timeline for release and specific conditions to be met.

Practical Implications:

1. For Taxpayers: Taxpayers whose assets are seized or requisitioned can apply for their release within 30 days of the seizure. However, the release is contingent on proving the nature and source of the assets and settling any existing tax liabilities.
2. For Businesses: Businesses must ensure proper documentation of asset acquisition to facilitate the release process if assets are seized.
3. For Tax Authorities: The Assessing Officer must follow a structured process for recovering liabilities from seized assets and ensure timely release or sale of assets to avoid paying interest.

Critical Concepts:

1. Seized Assets: Assets taken into custody by tax authorities during a search operation under Section 247.
2. Requisitioned Assets: Assets taken under legal authority (Section 248) for tax recovery purposes.
3. Distraint: A legal process where assets are held as security for tax liabilities.
4. Interest Calculation: Interest is calculated using the formula:
   (A - B) + (C - D)
   Where:
   • A = Total money seized or requisitioned.
   • B = Money released to the taxpayer.
   • C = Proceeds from the sale of assets.
   • D = Total liabilities to be discharged.

Compliance Steps:

1. For Taxpayers:

   • Apply for the release of seized assets within 30 days of the seizure.
   • Provide proof of the nature and source of the assets.
   • Settle any outstanding tax liabilities to facilitate the release.

2. For Tax Authorities:

   • Ensure recovery of liabilities from seized assets within 120 days.
   • Release any remaining assets or proceeds to the taxpayer after liabilities are settled.
   • Pay interest at 0.5% per month if assets are held beyond 120 days.

Examples:

1. Asset Seizure and Release:

   • A taxpayer’s cash and jewelry worth ₹50 lakh are seized during a search. The taxpayer applies for release within 30 days, proving the source of the assets and settling a ₹10 lakh tax liability. The Assessing Officer releases the remaining ₹40 lakh within 120 days.

2. Interest Calculation:

   • If ₹20 lakh is seized, ₹5 lakh is released, and ₹10 lakh is used to settle liabilities, the interest is calculated on the remaining ₹5 lakh. If held for 6 months, the interest payable is ₹15,000 (0.5% of ₹5 lakh × 6 months).

This section ensures a balanced approach to asset seizure, recovery, and taxpayer rights, with clear timelines and accountability for both parties.