Last updated: February 15th, 2020 4:41 PM

Income Tax Attachment & Recovery

Attachment and recovery are legal proceedings initiated under Income Tax Law for failure to file returns and pay taxes. Taxpayers in India are required to file an income tax return each year and pay advance tax. Failure to pay income tax or file income tax return could lead to income tax attachment and recovery. In this article, we discuss the provisions of the Act which govern the income tax attachment and recovery process.

Filing of Income Tax Return

In the case of companies or entities subject to a tax audit, the due date for filing income tax return is 30th September. Know more about business tax return filing. In case the taxpayer is a person other than a company, income tax return must be filed on or before 31st July of each year. Before filing the income tax return, income tax on self-assessment has to be paid. In case of failure to pay income tax at the time of filing of income tax return, the assessee is liable to pay mandatory penal interest @ 1% per month or part thereof for the delay in the voluntary filing of income tax returns. Failure in filing income tax returns could lead to a penalty of Rs.5000.

Procedure for Attachment & Recovery

• Failure to file income tax return and/or pay income tax return could lead to the issue of a notice of demand under Section 156 of the Income Tax Act. On receiving the notice, the taxpayer is required to pay the amount mentioned in the demand notice within 30 days of service and appear at the place and to the person mentioned in the notice.
• In rare cases, if the Assessing Officer believes that it is detrimental to the revenue to allow the full period of 30 days the Income Tax Department may also demand that the taxpayer pay the amount due within a shorter period. The Assessing Officer also has the powers to extend the time of payment, if an application is received before the expiry of such period.
• If the demand is not paid within the time mentioned in the demand notice, the assessee will be liable to pay simple interest at 1% per month. In rare cases, the Board can also reduce or waive the amount of interest in suitable circumstances. If the taxpayer does not pay the demand within the extended period, the taxpayer will be deemed an assessee in default and could be liable for an additional penalty, not exceeding the total tax amount in arrears.
• Where the taxpayer is deemed to be in default, the Assessing Officer would forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the taxpayer. The Tax Recovery Officer on receipt of such a certificate will proceed to recover to the tax amount due from the taxpayer using one or more of the following methods mentioned below:
  • • Attachment and sale of the assessee’s movable and immovable properties;
    • Arrest of the assessee to ensure the assessee's detention in prison, under the supervision of a competent court; and
    • Appointing a receiver for the management of the assessee’s movable and immovable properties.

Suo-Motu Assessment Proceedings

Tax Recovery Officers are now empowered to start recovery proceedings on their own volition (suo-motu), without consulting the Board. Hence, the Assessing Officer can also recover the tax due using any of the following methods:

• Recovering any part of the amount due from an assessee from his “Salary” Income,
• Requiring any of the debtors of the assessee to pay to the Assessing Officer such sums as he may require towards arrears of tax,
• Applying to the court in whose custody there is money belonging to the assessee for payment of the entire amount sufficient to discharge the tax, or
• By carrying out attachment and sale of the assessee's movable and movable properties if duly authorised by the Commissioner or Chief Commissioner.

To know about the concept of tax audit turnover in Income Tax, click here.