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Recovery of Tax Dues – Black Money Act

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June 8, 2021

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15 mins read

PAYMENT OF TAX DURING PENDING APPEAL

Where any tax is due as per assessment made under the Black Money Act, such tax has to be paid  ,  irrespective of the fact that any appeal is being preferred to the High Court or the Supreme Court.

For example, where  any assessment order has been passed by the Appellate Tribunal on a case under the BMA,  which results in tax demand on the assesse, such demand shall be paid by the assessee even if any appeal is filed against such order of the Appellate Tribunal.

RECOVERY OF TAX DUES BY ASSESSING OFFICER -SECTION 30

Now when the assessment order is passed under the Black Money Act and demand is determined, the next step would be to recover taxes from the assessee. The recovery procedure under the Black Money Act is given hereunder :-

  • Any amount payable in notice of demand under the Black Money Act shall be paid within a period of 30 days from the service of notice of demand.

Let’s consider an example to understand this point. Suppose, the notice of demand is served on December 31, 2017, then such demand shall be paid till January 30, 2018.

  • The aforesaid period of 30 days may be reduced by the Assessing Officer, if he has reason to believe that allowing such time would be detrimental to the interests of revenue. However, such reduction will be made only with the previous approval of the Joint Commissioner.
  • The Assessing Officer may extend the time for payment of demand or allow payment by installment under the Black Money Act. However, an application for such purpose should be made by assessee before the expiry of the 30 days period or the reduced period. It may be noted here that the Assessing Officer may impose such conditions as he consider necessary.
  • An assessee shall be deemed as an assessee-in-default for failure to pay tax arrears within such specified period.

RECOVERY OF TAX DUES BY TAX RECOVERY OFFICER – SECTION 31

Where the assessee does not pay the tax dues of the under the Black Money Act , the recovery can be made by the Tax Recovery Officer , by drawing up Form 5, under his signature a ‘statement of tax arrears’ (Recovery certificate) of the assessee.

The Tax Recovery Officer may rectify any mistake apparent from the record, and extend the time for payment of tax or allow payment of tax by installments.

MODES OF RECOVERY OF TAX DUES – SECTION 32

Where the assesee does not have cash to pay the demand , or where he declines  to pay the demand, the tax recovery can make recovery by using any of the following methods :-

a) Deduction from salary :-

The Tax Department may ask employer of the assessee to pay such demand from the salary due to the assessee-employee. The employer will pay such demand and accordingly, reduce the salary of the employee.

b) Recovery from the debtor :-

The Tax Department may recover demand from the debtor of the assessee. Let’s understand this point with the help of an illustration. Suppose, demand is recoverable from Mr. L and he did not pay such demand. Mr. L has made credit sales to Mr. M.  The Tax Department can ask Mr. M to pay tax demand of Mr. L, from the sum of monies payable to Mr. L.

TAX RECOVERY OFFICER BY WHOM RECOVERY OF TAX DUES IS TO BE EFFECTED – SECTION 33

The Tax Recovery Officer , who is competent to recover tax dues of the assessee would be the officer, within whose jurisdiction –

  1. The assessee carries on business, or
  2. The principal place of business of the assessee is situated, or
  3. The assessee resides, or
  4. Any movable or immovable property of the assessee is situated .

RECOVERY OF TAX DUES IN CASE OF A COMPANY IN LIQUIDATION – SECTION 34

Where any company which is under liquidation, is liable to pay any demand under the BMA,  the tax recovery would be made via liquidator of such company. The detailed recovery mechanism in case of company under liquidation is given as under :-

  • The liquidator has to inform his appointment to the Assessing Officer having jurisdiction to assess the undisclosed foreign income and asset of the company.
  • Such appointment should be communicated by liquidator within a period of 30 days of his appointment
  • The Assessing Officer shall intimate to the liquidator the amount which would be sufficient to provide for any tax arrears or any amount which is likely to become payable thereafter, by the company under the Black Money Act.
  • The Assessing Officer shall intimate aforesaid amount within a period of 3 months from the date of receipt of information of appointment of liquidator .

LIABILITY OF MANAGER OF A COMPANY – SECTION 35

The company operates through its Directors or Managers, who manage the affairs of the company. Thus, in cases where the company is unable to pay it tax demand under the Black Money Act,

then every person , who is a manager of the company, would be liable for payment of any amount due under the Black Money Act.

The liability would arise on a person, who was a   manager at any time during the financial year (even for a single day in the FY ) in which the tax default has been made by the company under the Black Money Act.

For example, if   the company has defaulted in payment of tax under the Black Money Act during the FY 2017-18, and Mr. K was the manager of the company only during part of the month in April, 2017, he   would also be liable to pay tax under the Black Money Act for tax default made during the FY 2017-18.

Where  the company has appointed more than one manager, during the period of default, each manager would be jointly and severally liable for the payment of any amount due under the Black Money Act.

Exception to this provision : –

Where the Manager proves that non-recovery cannot be attributed to any neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, he would not be liable.

JOINT AND SEVERAL LIABILITY OF PARTICIPANTS OF AN UNINCORPORATED BODY -SECTION 36

Where amount of tax cannot be recovered from the unincorporated body under the Black Money Act,  then every person, being a participant, or the representative assessee of the deceased participant shall be liable for payment of tax under the Black Money Act. The liability of aforesaid person would arise,   if he is participant or representative in unincorporated body at any time during the financial year. Such participants or representative shall be jointly and severally liable along with the unincorporated body for payment of such tax under the Black Money Act .

Points to be considered :-

a) Exception to this Provision : –

In case of limited liability partnership, the Partner would not be liable, if he proves that non-recovery cannot be attributed to any neglect, misfeasance or breach of duty on his part in relation to the affairs of the partnership.

b) Participant means

In relation to a firm Partner thereof
In relation to a AOP/BOI Member thereof

RECOVERY THROUGH STATE GOVERNMENT- SECTION 37

If the recovery of tax in any area has been entrusted to a State Government under clause (1) of Article 258 of the Constitution, the State Government may direct, that tax has to be recovered therein with respect to that area or any part thereof.

The tax shall be recovered  as an addition to, any municipal tax or local rate, by the same person and in the manner as the municipal tax or local rate is recovered.

RECOVERY OF TAX DUES IN PURSUANCE OF DTAA OR TAX INFORMATION EXCHANGE AGREEMENT- SECTION 38

There may be cases where tax may be due from an assessee, who  has a property in a country or territory outside India, and the Central Government has entered into a Double Taxation Avoidance Agreement or Tax Information Exchange Agreement with that country or territory. In such a case, the Tax Recovery Officer may forward a certificate (i.e., hereinafter referred to as recovery certificate) to the CBDT for recovery of the tax arrears from the assessee. On receipt of recovery certificate from Tax Recovery Officer, the CBDT may take such action thereon as it may deem appropriate , having regard to the terms of the agreement with such country or a specified territory.

RECOVERY BY SUIT OR UNDER OTHER LAW NOT AFFECTED – SECTION 39

The several modes of recovery specified in this Chapter shall not affect in any way – any other law for the time being in force relating to the recovery of debts due to the Government ; or the right of the Government to institute a suit for the recovery of the tax arrears from the assessee.

It shall be lawful for the Assessing Officer, or the Government, to have recourse to any such law or suit, notwithstanding that the tax arrears are being recovered from the assessee by any mode specified in this Chapter. Thus, if there is any other method of recovery from the assessee, the same can be applied simultaneously along with the recovery provision specified under the Black Money Act.

For any queries, please write them in the Comment Section or Talk to our tax expert

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

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