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Income Tax Attachment & Recovery Proceedings under Income Tax Act (by Sonia Gambhir)

Income Tax Attachment & Recovery Proceedings under Income Tax Act

Income Tax Act, 1961, has laid down various provisions for collection and recovery of tax demand. Sections 220 to 232 of the Act, Schedules II & III of the Income Tax Act and Income Tax (certificate proceedings) Rules, 1962 are the relevant provisions which deal with various methods of collection of tax demand.

The assessing officer is responsible for recovery of tax, whether the demand represents tax assessed by him or is the result of any order passed by the Appellate Authority or the Commissioner of Income Tax. However, where the assessee is in default in making the payment of tax, the proceedings for recovery are carried out by the Tax Recovery Officer (TRO).

Collection & Recovery is the ultimate aim of an Assessing Officer and this is the fruits of our all action in implementing the Income tax law. The taxes so collected develops the society as ultimately develops the nation economically. As the process of our work start with filing of return of Income then assessment and ends with collection of taxes as Regular Assessment tax by way of collection & recovery in addition to collection by way of Advance tax, Self Assessment tax, TDS.

Taxpayer in India are required to e-file income tax return each year and pay advance tax. Failure to pay income tax or file income tax return could lead to income tax attachment and recovery. In this article, we look at income tax attachment and recovery process in detail.

Filing of Income Tax Return

In case of companies or entities subject to tax audit, the due date for filing income tax return is 30th September. Know more about business tax return filing. In case the taxpayer is a person other than a company, income tax return must be filed on or before 31st July of each year.

Before filing the income tax return, income tax on self-assessment has to be paid. In case of failure to pay income tax at time of filing of income tax return, the assessee is liable to pay mandatory penal interest @ 1% per month or part thereof for the delay in voluntary filing of the IT Return. Failure in filing income tax return could lead to a penalty of Rs.5000.

Procedure for Income Tax Assessment & Recovery

Failure to file income tax return and/or pay income tax return could lead to the issue of a notice of demand under Section 156 of the Income Tax Act. On receiving the notice, the taxpayer is required to pay the amount mentioned in the demand notice within 30 days of service and appear at the place and to the person mentioned in the notice. In rare cases, if the Assessing Officer believes that it is detrimental to the revenue to allow the full period of 30 days he/she may also demand that the taxpayer pay the amount due within a shorter period. The Assessing Officer also has the powers to extend the time of payment, if an application is received before the expiry of such period.

If the demand is not paid within the time mentioned in the demand notice, the assessee will be liable to pay simple interest at 1% per month. In rare cases, the Board can also reduce or waive the interest in suitable cases. If the taxpayer does not pay the demand within the extended period, the taxpayer will be deemed an assessee in default and could be liable for an additional penalty, not exceeding the total tax amount in arrears.

Where the taxpayer is deemed to be in default, the Assessing Officer would forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the taxpayer. The Tax Recovery Officer on receipt of such a certificate, will proceed to recover to tax amount due from the taxpayer using one or more of the following methods mentioned below:

  • Attachment and sale of the assessee’s movable or immovable property;
  • Arrest of assessee and his detention in prison;
  • Appointing a receiver for the management of the assessee’s movable and immovable properties.

In addition, Tax Recovery Officer’s are now empowered to start recovery proceedings on his own self. Finally, the Assessing Officer can also recover the tax due using the following method(s):

  • From an assessee from his “Salary”;
  • Requiring any of the debtors of assessee to pay to the Assessing Officer such sums as he may require towards arrears of tax;
  • Applying to the court in whose custody there is money belonging to the assessee for payment to him of the entire amount sufficient to discharge the tax; or
  • By distrait and sale of movable property if duly authorised by the Commissioner or Chief CIT.