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CMA Final · Direct Tax Laws and International Taxation · Black Money Act, 2015

A debtor receives a notice under section 32(4) of the Black Money Act. The assessee's tax arrear under the Act is Rs 6,00,000. The debtor owes the assessee Rs 4,00,000 on the date of the notice, but pays the Rs 4,00,000 to the assessee after receiving the notice. What is the debtor's personal liability to the Assessing Officer?

The debtor is personally liable for Rs 4,00,000. Section 32(13) makes a person who pays the assessee after receiving the notice liable up to the lower of the liability he discharged and the assessee's dues. The lower of Rs 4,00,000 and Rs 6,00,000 is Rs 4,00,000.

  1. ARs 6,00,000, the full arrear
  2. BRs 2,00,000, the difference between arrear and debt
  3. CRs 4,00,000, the lesser of his own liability discharged and the assessee's liabilityCorrect
  4. DNil, because the payment was made to the assessee in the ordinary course

Explanation

Under section 32(13), a person discharging a liability to the assessee after receipt of the notice is personally liable to the extent of his own liability so discharged or the assessee's liability for sums due under the Act, whichever is less. The lesser of Rs 4,00,000 and Rs 6,00,000 is Rs 4,00,000. Rs 6,00,000 ignores the lesser-of rule.

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