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Seized Cash Flow: The Aftermath of Income Tax Raids



  Dec 14, 2023

Seized Cash Flow: The Aftermath of Income Tax Raids



Procedure Following the Seizure of Cash by Income Tax Authorities

Upon the confiscation of substantial monetary sums during income tax raids, a stringent protocol is followed. The seized funds are meticulously counted by bank officials, who act as independent witnesses to the procedure, thereby ensuring the transparency and integrity of the process.

Subsequently, the cash is deposited into a designated treasury account of the Income Tax Department, specifically maintained at the State Bank of India. This account serves as a secure holding point for the funds during the subsequent legal and administrative scrutiny.

The Income Tax Department then undertakes the preparation of an appraisal report, a document that must be finalized within a stipulated 60-day period post-raid. This report comprehensively details the seizures and delineates the tax obligations that the assessee has purportedly evaded.

The appraisal report is forwarded to the central circle of the department, where a thorough assessment ensues, taking into account all related cases of tax evasion by the concerned firm or individual. Throughout this assessment, the accused is afforded the opportunity to present their case and counter any claims made against them.

Upon completion of the investigation, the department issues an assessment order, enumerating the tax liabilities. The assessee may accept the order and settle the case, or choose to contest the findings through an appeal process that can ascend to the Supreme Court.

The funds remain in the treasury account for the duration of the trial. Conviction results in the attachment of the money, while acquittal warrants its return. It is notable that only the sum which the assessee cannot substantiate as legitimate earnings is seized.

The Income Tax Act, under Section 132B, entitles the assessee to appeal for the release of the seized assets within a 30-day window following the raid. The adjudicating income tax officer’s discretion, coupled with the satisfaction of certain criteria by the assessee, is pivotal in the decision to release the funds.

The comprehensive assessment subsequent to a raid typically concludes within 12 months from the close of the financial year in which the raid was conducted. While there is no definitive time frame for which the seized amount may remain unutilized in the treasury accounts, resolutions often materialize in accordance with the assessment order.

In instances where the entirety of the seized amount is unaccounted for, the income tax officer issues a notice to the assessee, demanding an explanation for the source of the funds. Notwithstanding the resolution of the tax assessment, the seized funds may also trigger concurrent investigations by other law enforcement agencies, such as the Enforcement Directorate, particularly if there is an insinuation that the funds constitute proceeds of crime.


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