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

The Assessing Officer serves a notice under section 32(4) on a bank, Mr. Iyer's debtor, to pay ₹4,00,000 towards his tax arrear. The bank pays ₹4,00,000 and receives a receipt. Later Mr. Iyer claims the bank still owes him that amount. What is the position?

The bank is fully discharged to the extent of ₹4,00,000. Section 32(12) requires the officer to grant a receipt for amounts paid under the notice, and the payer is discharged from liability to the assessee to that extent without needing the assessee's consent or documents.

  1. AThe bank remains liable to Mr. Iyer for the full amount
  2. BThe bank is fully discharged from its liability to Mr. Iyer to the extent of ₹4,00,000 paidCorrect
  3. CThe bank is discharged only if Iyer consents in writing
  4. DThe bank must produce the pass book before payment to be discharged

Explanation

Under section 32(12) the officer grants a receipt and the person paying is fully discharged to the extent of the amount paid. Section 32(7) makes production of pass book or deposit receipt unnecessary, and no consent of the assessee is required.

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