Income Tax 2025

Appearance

Certificate by Tax Recovery Officer and Validity thereof. ​

413(1) ​

When an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may draw up under his signature a statement in such form as prescribed specifying the amount of arrears due from the assessee (such statement being hereafter referred to as “certificate”) and shall proceed to recover from such assessee the amount specified in the certificate by one or more of the modes mentioned below, as per the rules prescribed in this regard,—

  • (a) attachment and sale of movable property of the assessee;
  • (b) attachment and sale of immovable property of the assessee;
  • (c) arrest of the assessee and his detention in prison;
  • (d) appointing a receiver for the management of movable and immovable properties of the assessee.

413(2) ​

The Tax Recovery Officer may take action under sub-section (1), whether or not proceedings for recovery of the arrears by any other mode have been taken.

413(3) ​

The assessee shall not be entitled to dispute the correctness of any certificate drawn up by the Tax Recovery Officer on any ground.

413(4) ​

The Tax Recovery Officer may cancel the certificate if, for any reason, he considers it necessary so to do, or may correct any clerical or arithmetical mistake therein.

413(5) ​

In this section, the movable or immovable property of the assessee shall include any property—

  • (a) which has been transferred, directly or indirectly on or after the 1st June, 1973, by the assessee to his spouse or minor child or son’s wife or son’s minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the said persons; and
  • (b) so far as the movable or immovable property so transferred to his minor child or his son’s minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the movable or immovable property of the assessee for recovering any arrears due from the assessee in respect of any period prior to such date.
Explanation

Section Summary: ​

Section 413 of the Income Tax Act outlines the powers and procedures of the Tax Recovery Officer (TRO) to recover unpaid taxes from a taxpayer (assessee) who is in default. It specifies the methods of recovery, the validity of the recovery certificate, and the conditions under which the certificate can be canceled or corrected. The section also includes provisions to recover taxes from properties transferred to family members under certain conditions.

Key Changes: ​

  1. Expanded Scope of Recovery: The section explicitly includes properties transferred to family members (spouse, minor child, son’s wife, or son’s minor child) without adequate consideration as part of the assessee’s property for recovery purposes.
  2. No Dispute Allowed: Assessees cannot challenge the correctness of the certificate issued by the TRO, limiting their ability to contest the recovery process.
  3. Flexibility for TRO: The TRO can cancel or correct the certificate if necessary, providing administrative flexibility.

Practical Implications: ​

  1. For Taxpayers in Default: If a taxpayer fails to pay taxes, the TRO can recover dues through:
    • Attachment and sale of movable or immovable property.
    • Arrest and detention of the taxpayer.
    • Appointment of a receiver to manage the taxpayer’s properties.
  2. Impact on Transferred Properties: Properties transferred to family members (without adequate consideration) can still be targeted for recovery, even if the minor child attains majority.
  3. Limited Legal Recourse: Taxpayers cannot dispute the TRO’s certificate, making it crucial to ensure accurate tax payments and compliance to avoid recovery actions.

Critical Concepts: ​

  1. Certificate: A formal statement issued by the TRO specifying the amount of tax arrears due from the assessee.
  2. Adequate Consideration: Refers to a fair market value or reasonable payment for a property transfer. Transfers without such consideration can be treated as part of the assessee’s property for recovery.
  3. Movable and Immovable Property: Includes assets like cash, vehicles, jewelry (movable) and land, buildings (immovable), as well as properties transferred to family members under specific conditions.

Compliance Steps: ​

  1. Timely Tax Payments: Ensure all tax liabilities are paid on time to avoid default and recovery actions.
  2. Document Property Transfers: Maintain proper documentation for any property transfers to family members, ensuring adequate consideration is provided.
  3. Respond to TRO Notices: If a certificate is issued, cooperate with the TRO to resolve the arrears promptly.

Examples: ​

  1. Scenario 1: Mr. A defaults on his tax payment of ₹10 lakh. The TRO issues a certificate and attaches his bank account (movable property) to recover the dues.
  2. Scenario 2: Mr. B transferred a property worth ₹50 lakh to his minor son without adequate consideration. Even after the son turns 18, the TRO can attach this property to recover Mr. B’s tax arrears from prior years.
  3. Scenario 3: Ms. C disputes the TRO’s certificate, claiming the amount is incorrect. However, under Section 413(3), she cannot challenge the certificate’s correctness, and the recovery process proceeds.

This section strengthens the TRO’s authority to recover unpaid taxes while limiting the taxpayer’s ability to contest recovery actions, emphasizing the importance of timely compliance.