[Section 132B]-Application of Seized or Requisitioned Assets

Section 132B governs how assets seized under Section 132 or requisitioned under Section 132A are to be utilized, retained, or released by the Income Tax Department. This provision ensures proper handling of confiscated assets while protecting taxpayer rights.

1. Adjustment Against Tax Liability

• Seized/requisitioned assets can be adjusted against existing or pending tax duesof the taxpayer.
• The Assessing Officer (AO) can use the assets to settle:
  • Current tax demands
  • Penalties
  • Interest
  • Future tax liabilities(if assessments are pending)

2. Retention Period & Release of Assets

• Initial Retention: Seized assets can be retained for 30 dayswithout approval.
• Extended Retention: Requires approval from higher authorities(Principal Commissioner/Commissioner).
• Release of Assets:
  • If no tax liability is found, assets must be returned to the owner.
  • If partially used, the remaining amount/assetsmust be returned.

3. Interest on Retained Cash

• If cash is seized and retained beyond 120 days, the taxpayer is entitled to interest @ 0.5% per month(from the date of seizure).
• Interest is paid only if the cash is ultimately returned(not adjusted against tax dues).

4. Sale of Seized Assets

• Perishable Goods: Can be sold immediately with the owner’s consent.
• Other Assets:
  • If the taxpayer agrees, assets can be sold.
  • If the taxpayer does not agree, the department can sell them only after assessment is finalizedand dues are confirmed.

5. Refund of Excess Amount

• If the value of seized assets exceeds the tax liability, the balance must be refundedto the taxpayer.

6. Conditions for Forfeiture of Assets

• If the taxpayer fails to explainthe source of seized assets, they may be treated as undisclosed income and taxed under Section 115BBE (78-83% effective tax rate).
• In case of wilful evasion, prosecution under Section 276C/277(punishment up to 7 years) may apply.

7. Judicial Safeguards for Taxpayers

• Right to Appeal: The taxpayer can challenge illegal seizure/retentionbefore the CIT(A), ITAT, or High Court.
• Natural Justice: The AO must provide a fair opportunityto explain seized assets.
• Transparency: The department must maintain proper recordsof seized assets.

8. Comparison with Other Sections

9. Practical Implications

• For Taxpayers: Ensures fair treatmentof seized assets and prevents arbitrary forfeiture.
• For Tax Dept.: Provides a legal frameworkto utilize seized assets for tax recovery.
• For Legal Advisors: Helps in strategizing appealsif seizure is unjustified.