CMA Final · Direct Tax Laws and International Taxation · Black Money Act, 2015
A notice under section 32(4) is issued to a bank holding money for a defaulting assessee, Mr. Sethi. The bank holds Rs 3,00,000 for him, and the tax arrear is Rs 5,00,000. What is the maximum the bank can be required to pay under the notice?
The bank can be required to pay at most Rs 3,00,000. Under section 32(4) the amount demanded is what is sufficient to meet the arrear but cannot exceed the amount of the debt, and the debt here is lower than the arrear.
- ARs 5,00,000, being the full tax arrear
- BRs 2,00,000, being the arrear less the balance
- CRs 3,00,000, being the debt, since the amount cannot exceed the debtCorrect
- DRs 8,00,000, being the sum of both
Explanation
Section 32(4) allows the officer to require payment of an amount sufficient to meet the arrear but not exceeding the amount of debt. The bank's debt is Rs 3,00,000, which is less than the arrear of Rs 5,00,000, so the cap is Rs 3,00,000.
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