The procedure regarding the seizure of the promissory notes. - Income Tax - 226/CBDT

INSTRUCTION NO. 226/CBDT Dated: October 6, 1970 Section(s) Referred: 132 Statute: Income - Tax Act, 1961 In Boards circular of even number dated 4th June 1970 on the above subject the procedure regarding the seizure of the promissory notes was specified. It has been suggested to the board that an order merely restraining the lender from parting with promissory notes would be ineffective as the lender can realise the debt by issuing a receipt discharging the debtor from any further liability. This is a possibility which has to be kept in mind in dealing with such cases. 2. If the assessees have other tangible assets and the recovery of the demand can be secured in other ways, it may not be worthwhile to contact individual borrowers and restrain them u/s.132(3). In cases where there is any risk of demand becoming irrecoverable, action u/s.132(3) should be taken The best way to pass the order would be to qualify the order with the proviso that the lender may part with the promissory notes only on the condition that the borrower pays the money to the Income-tax department and not to the lender. Since section 132(3) empowers the authorised officer to take all necessary steps to ensure compliance of an order under this section, he can also issue an order to the borrower not to pay the amounts under the pronote to the lender but to the I.T.Department. 3. In suitable cases promissory notes themselves can be seized, order u/s.132(3) passed and the provision to second proviso to section 132(5) invoked to get a replacement in terms of money for the promissory notes before returning these to the assessee.