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

A notice under section 32(4) of the Black Money Act is served on Mehta Finance, which owes the assessee ₹5,00,000. The assessee's arrear is ₹3,00,000. After receiving the notice, Mehta Finance pays the full ₹5,00,000 to the assessee. What is Mehta Finance's personal liability to the Assessing Officer?

Mehta Finance is personally liable for ₹3,00,000. Under section 32(13), a person who discharges a liability to the assessee after receiving the notice is liable to the extent of the liability discharged or the assessee's liability under the Act, whichever is less. Here the arrear is lower.

  1. A₹3,00,000, being the lower of its liability discharged and the assessee's arrearCorrect
  2. B₹5,00,000, being the amount paid to the assessee
  3. C₹2,00,000, being the excess of the debt over the arrear
  4. DNil, because the payment was made to the creditor

Explanation

Under section 32(13), a person discharging a liability to the assessee after receiving the notice is personally liable to the extent of his own liability to the assessee so discharged or the assessee's liability under the Act, whichever is less. The liability discharged is ₹5,00,000 and the arrear is ₹3,00,000, so the lower figure is ₹3,00,000. The ₹5,00,000 option takes the higher figure.

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