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

Ravi Menon has a tax arrear under the Black Money Act. The Assessing Officer serves a notice on Ravi's debtor, Kaveri Traders, requiring payment of the amount sufficient to meet the arrear. Kaveri Traders owes Ravi ₹4,00,000, and the arrear is ₹6,50,000. What is the maximum amount Kaveri Traders can be required to pay under the notice?

Kaveri Traders can be required to pay at most ₹4,00,000. The notice under section 32(4) can demand an amount sufficient to meet the arrear, but not exceeding the debt owed to the assessee. Since the debt is lower than the arrear, the debt is the ceiling.

  1. A₹6,50,000, being the full arrear
  2. B₹2,50,000, being the excess of arrear over the debt
  3. C₹4,00,000, being the amount of the debtCorrect
  4. D₹10,50,000, being the sum of the arrear and the debt

Explanation

Section 32(4) allows the officer to require the debtor to pay an amount not exceeding the amount of debt that is sufficient to meet the arrear. The debt is ₹4,00,000, which is less than the arrear of ₹6,50,000, so payment is capped at ₹4,00,000. The ₹6,50,000 option ignores the cap on the debt.

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