Course of action to be followed in case of seizure of unaccounted stock held in benami names. - Income Tax - 1590/CBDT

INSTRUCTION NO. 1590/CBDT Dated: December 21, 1984 The cases have come to the notice of the board where assets in the form of unaccounted stocks have been restrained/seized by the Department apparently held in benami names. In some cases, the bank accounts have also been discovered which were operated in the names of fictitious persons. Normally in such cases, attempt is made to link up these transactions with the real owners. However such an attempt is beset with many difficulties as also the uncertainties of the final outcome in appeals. Besides, this also takes a very long time and in many cases resulting in substantial loss also in the value of goods restrained/seized. The Department is also not able to realise the taxes in such cases. It has been decided that the following course of action should be adopted in all such cases:- (i) The ITO having territorial jurisdiction at the address declared should issue a notice u/s.139(2) in the name of a person who is declared as an owner of the said assets. (ii) As the said person is not likely to be available at this address, the notice should be served by affixing a copy of the notice on the Notice Board of the ITO and a copy to the banker as also to the person such as port trust authorities, customs authorities, warehouses keepers etc., in whose custody the assets are lying at present. (iii) All the notices must be served by the Inspector only and no notice should be sent by Registered Post so that the acknowledgement/evidence of service by affixation is available. Proper formalities should be observed while serving the notice by affixation. (iv) If there is no response to the notice u/s.139(2) the assessment should be completed u/s.144 as soon as the time prescribed u/s.139(2) is over. No further opportunity should be given. In such cases, only the value of the investments should be taken as the income of the assessee by invoking the provisions of sec.68, 69 etc. and no ad-hoc addition should be made. (v)Penalty proceedings should be initiated simultaneously giving a week or 10 days time. The copies of the assessment order, demand notice, penalty notices should also be served in accordance with the procedure laid down above. (vi)As soon as the demand raised becomes due a recovery certificate should be issued to the TRO. If there are any deposits in the bank account, notices u/s.226(3) of the I.T.Act should be issued by the assessing officer. (vii)After the time given in the penalty notice has expired the penalty should be levied without giving any further opportunity. (viii)The TRO should immediately proceed to attach/auction on the assets which have been placed under restraint or have been seized by the department. (ix)No attempt should be made to transfer the jurisdiction to any officer except one who has the normal jurisdiction. 2. The Board desires that the progress of the cases should be supervised directly by the Director of Inspection/Commissioner of Income tax having jurisdiction on the main cases i.e. the persons whose benami properties these are suspected to. It may also be noted that assessments in the hands of benamis are of protective nature and appropriate action may continue to be taken against the real owners. These instructions may be brought to the notice of concerned.