Release of cash deposited in the PD Account. - Income Tax - Instruction No. 11/2006

INSTRUCTION NO. 11/2006 Dated: December 1, 2006 Subject: Release of cash deposited in the PD Account - reg. Section 132B of the IT Act lays down the procedure for application and release of assets seized u/s 132 or requisitioned u/s 132A of the IT Act. As per the provisions of clause (i) of Section 132B (1), such assets have to be applied for recovery of any existing liability under the Income-tax Act, the Expenditure Tax Act, the Wealth Tax Act, the Gift Tax Act and the Interest-tax Act and the liability determined on completion of the search and seizure assessment, including any penalty levied or interest payable in connection with such assessment. The balance, if any, remaining after such adjustment, has to be forthwith released to the person from whose custody such asset was seized in accordance with the provisions of Section 132B(3). On such release of money (lying in the PD Account), the Government is also under obligation to pay interest in accordance with the provisions of Section 132B(4). 2. Instances have come to the notice of the Board where cash deposited in the PD Account have not been released to the assessee even after several years of completion of assessment on the ground that the Department has preferred an appeal before the ITAT and higher appellate authorities and/or penalty proceedings, connected with the search and seizure assessment, have been kept in abeyance till the decision of the higher appellate authorities. 3. Instances have also come to notice where the cash deposited in the PD Account was not adjusted against the existing liability and the demand raised in the search and seizure assessment. In such cases, seized cash was not released, even though the demand raised after the search and seizure assessment became Nil or was reduced to an amount which was less than the amount of cash seized after decision of first appellate authority, on the ground that the Department had preferred an appeal before the ITAT and the penalty proceedings were kept in abeyance till the decision of the ITAT. If such adjustment had been made immediately after raising the demand in the assessment, the Department would have issued a refund in the normal course after giving effect to the decision of the first appellate authority. 4. The above scenario has resulted in a situation where seized cash remains in the PD Account for several years after completion of assessment, causing extreme hardship to the persons from whom such cash was seized. Further, no interest is paid for the period beyond the date of completion of assessment. 5. In light of the above, it has been decided that cash deposited in P.D. Accounts be strictly dealt with as under:- (a) Where an application is made in accordance with first proviso to Section 132B(1)(i) for release of seized cash and the nature and acquisition of such cash is explained to the satisfaction of the Assessing Officer, the seized cash should be released within the time limit provided under that section after adjustment of any existing liability. (b) Where seized cash or part thereof was not released under first proviso section 132B(1)(i), the amount lying in PD account should be released within one month of passing the (search and seizure) assessment order after - (i) adjusting the seized cash against any existing liability and the amount of liability determined on completion of the search and seizure assessment; and (ii) in cases where penalty proceedings, connected with such assessment, have been initiated, retaining out of the balance an amount to meet the expected liability on account of the penalty imposable. (c) Where assessee is in appeal against the assessment order and the penalty has not been imposed up to the date of the order of the CIT(Appeals), the position regarding the amount lying in the PD Account should be reviewed at the time of giving effect to the order of the CIT(Appeals). Only such amount thereof should be retained which is sufficient to meet the expected amount of penalty imposable on the assessment as revised in appeal effect. The balance should be released within one month from the order under Section 250, after recovery of any existing demand at that time, (d) The amount, which was retained after the assessment order or the order of the CIT(Appeals) for the amount of penalty imposable, should be released within one month from passing of the penalty order, after recovery of demand arising out of the penalty order and any other demand existing at that time. (e) Where assessment was made before issue of this Instruction and cash in PD account has not yet been dealt with or partly dealt with, all the Assessing Officers should examine such cases and amount lying in the PD Account be released within one month from the date of this Instruction, after adjusting against- (i) any existing demand; and (ii) expected amount of penalty, if any, imposable on the basis of assessment order [if no appeal has been filed before CIT(Appeals) or the case has not yet been decided by CIT(Appeals)] or assessment order as revised under Section 250 or, as the case may be, under Section 254. 6. It may be noted that any violation in this regard shall be viewed seriously by the Board. All CsIT should review the amounts lying in their PD Accounts and they should ensure that no amount in their PD Accounts is retained merely because of the reason that Department is in appeal before the ITAT/HC/SC. Further, the amount to be retained on account of expected penalty demand should not exceed the amount of penalty imposable on the basis of assessment order [if no appeal has been filed before CIT(Appeals) or the case has not yet been decided by the CIT(Appeals)] or assessment order as revised under Section 250 or, as the case may be, under Section 254. 7. The above Instruction may be brought to the knowledge of all income-tax authorities working in your Region. F.No.286/138/2006-IT (Inv. II) (Vikram Sahay) Deputy Secretary to the Govt. of India