Section 132B - Application of Seized or Requisitioned Assets
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Provision: Section 132B - the manner in which assets seized under section 132 or requisitioned under section 132A are applied: towards existing liability and the liability determined on completion of assessment; first proviso - release on an application within 30 days explaining the nature and source; Explanation 2 (FA 2013) - 'existing liability' does not include advance tax; sub-section (4) - interest payable to the assessee on excess retained.
Chapter / Part: Chapter XIII, Part C - Powers.
FA 2026 status: Not amended by the Finance Act, 2026.
Nature: Governs the post-seizure life of the assets; litigated on adjustment against advance tax (pre/post FA 2013) and on interest under sub-section (4).
A. SECTION COMMENTARY
What happens to the seized assets
Section 132B answers the question that follows every search: what is to be done with the money and valuables seized. The assets are to be applied towards the amount of any existing liability under the Act and the allied Acts, and towards the liability determined on completion of the assessment (including any penalty and interest); any excess, with interest, is to be returned to the person. The first proviso provides an early-release mechanism: where, within thirty days of the end of the month of seizure, the person makes an application explaining the nature and source of the seized assets to the satisfaction of the Assessing Officer, the assets (or the part not required to meet existing liability) may be released with the prior approval of the senior authority, generally within 120 days of the search.
Adjustment against advance tax - the Explanation 2 watershed
A long-running controversy concerned whether seized cash could be adjusted, at the assessee's request, against his advance-tax liability (so as to stop the running of interest under sections 234B/234C). A line of High Court and Tribunal decisions had held that it could. The Finance Act, 2013 inserted Explanation 2 to section 132B, declaring that 'existing liability' does not include advance tax payable. The courts have held that Explanation 2 is prospective - it operates only from 1 June 2013 - so that for seizures before that date the earlier, assessee-favourable view holds; the Punjab & Haryana High Court so held in Spaze Towers, and the CBDT accepted that position in Circular No. 20/2017, directing that appeals not be filed on the point for pre-1 June 2013 cases.
Interest under sub-section (4)
Sub-section (4) entitles the assessee to simple interest on the amount by which the assets retained exceed the liability ultimately determined, for the period of excess retention. The Supreme Court in Chironjilal Sharma (HUF) explained the interface between this interest and the post-assessment interest under section 244A: interest runs under section 132B(4) up to the completion of the assessment, and under section 244A for the period thereafter. The High Courts have enforced the assessee's right to interest where seized assets are retained beyond what the determined liability warrants (Ajay Gupta).
B. STATUTORY POSITION (verbatim text)
Reproduced below is section 132B as it stands in the bare Act.
132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:—
(i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) 79a[the Interest-tax Act, 1974 (45 of 1974) and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015)], and the amount of the liability determined on completion of the assessment or reassessment or recomputation and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default, or the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C, may be recovered out of such assets :
Provided that where the person concerned makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of asset and the nature and source of acquisition of any such asset is explained to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, to the person from whose custody the assets were seized:
Provided further that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed;
(ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied;
(iii) the assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner under sub-section (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule.
(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act.
(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section
(1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.
(4) (a) The Central Government shall pay simple interest at the rate of one-half per cent for every month or part of a month on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section.
(b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was executed to the date of completion of the assessment or reassessment or recomputation.
Explanation 1.—In this section,—
(i) "block period" shall have the meaning assigned to it in clause (a) of section 158B;
(ii) "execution of an authorisation for search or requisition" shall have the same meaning as assigned to it in [Explanation to section 158B].
Explanation 2.—For the removal of doubts, it is hereby declared that the "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. 79a. Sub. for "and the Interest-tax Act, 1974 (45 of 1974)" by Act No. 15 of 2024, w.e.f. 1-10-2024.
C. AUTHORITIES
Cluster 1 - Adjustment of seized cash against advance tax; Explanation 2 is prospective
CIT v. Spaze Towers (P.) Ltd. (Punjab & Haryana High Court, 17 November 2016); accepted in CBDT Circular No. 20/2017
Forum / Citation: Punjab & Haryana High Court, order dated 17 November 2016; accepted by CBDT Circular No. 20/2017 dated 12 June 2017 (departmental appeals not to be filed for pre-1 June 2013 cases).
Facts: The assessee sought adjustment of seized cash against advance-tax liability for a period before 1 June 2013; the Department relied on Explanation 2 to section 132B.
Held: Explanation 2 to section 132B, inserted by the Finance Act, 2013, is prospective and operates only from 1 June 2013; for seizures before that date, seized cash could be adjusted against advance-tax liability on the assessee's request. The CBDT accepted the judgment and, by Circular No. 20/2017, directed that departmental appeals not be filed on the issue for pre-1 June 2013 cases.
Principle: Explanation 2 (advance tax excluded from 'existing liability') is prospective from 1 June 2013; earlier seizures are governed by the prior, assessee-favourable position.
Relevance: Settles the temporal operation of Explanation 2; reinforced by CBDT acceptance.
Cluster 2 - Interest on retained / refunded seized assets (s.132B(4) and s.244A)
Chironjilal Sharma (HUF) v. Union of India (2014) 360 ITR 237 (SC)
Forum / Citation: Supreme Court of India, 2013. Reported: (2014) 360 ITR 237 (SC); (2013) 263 CTR 625; (2013) 96 DTR 305; (2013) 222 Taxman 352.
Held: Section 132B(4)(b) provides for payment of interest by the Government to the assessee for the period commencing after the specified date up to the date of completion of the (regular/block) assessment; for the period thereafter, where a refund becomes due, interest is governed by section 244A. The two provisions operate in different periods and the assessee is entitled to interest accordingly on the seized amount.
Principle: Interest on seized money runs under section 132B(4) up to completion of assessment, and under section 244A thereafter; the two are distinct, successive regimes.
Relevance: The Supreme Court authority settling the interest entitlement on seized assets and the 132B(4)/244A interface.
Ajay Gupta v. CIT (2008) 297 ITR 125 (Del)
Forum / Citation: Delhi High Court, 2007. Reported: (2008) 297 ITR 125 (Del); (2007) 162 Taxman 296.
Held: Where seized assets are retained beyond the permissible period or wrongfully withheld, the assessee is entitled to interest for the period of such retention; the Department cannot retain seized cash without compensating the assessee, and a purposive reading of section 132B(4) supports the interest entitlement.
Principle: Wrongful or excess retention of seized assets attracts an interest liability in favour of the assessee.
Relevance: A High Court application enforcing the assessee's interest entitlement on retained seized assets.
Cluster 3 - Tribunal (ITAT): adjustment of seized cash against tax liability
The Tribunal benches have addressed the adjustment of seized cash against self-assessment and advance-tax liability, both before and after Explanation 2 (FA 2013).
ACIT v. Narendra N. Thacker (2017) 82 taxmann.com 64 (Kolkata - Trib.)
Forum / Citation: Income Tax Appellate Tribunal, Kolkata Bench. Reported: (2017) 82 taxmann.com 64 (Kolkata - Trib.).
Facts: The assessee sought to adjust seized cash against the self-assessment tax payable along with the return of income; the Assessing Officer resisted, relying on Explanation 2 to section 132B.
Held: Explanation 2 to section 132B excludes only advance tax from 'existing liability'; it does not bar adjustment of seized cash against self-assessment tax payable with the return. The assessee's request to so adjust the seized cash is in order and in accordance with section 132B.
Principle: Seized cash may be adjusted against self-assessment tax (as distinct from advance tax, excluded by Explanation 2 from 1 June 2013).
Relevance: A Tribunal authority delimiting the reach of Explanation 2 - it bites only on advance tax, not self-assessment tax.
Ram S. Sarda v. DCIT (Income Tax Appellate Tribunal, Rajkot Bench)
Forum / Citation: Income Tax Appellate Tribunal, Rajkot Bench (reported at itatonline.org). Pre-Explanation 2 (Finance Act, 2013) period.
Facts: Cash seized in a search and assessed as the assessee's income; the assessee asked that the seized cash be treated as payment of advance tax, but interest under sections 234A/234B/234C was levied on the footing that advance tax had not been paid.
Held: The expression 'existing liability' in section 132B(1) cannot be given a restricted meaning; the liability to pay advance tax is an existing liability, and so the seized cash ought to have been adjusted against the advance-tax liability from the date of seizure (for seizures before 1 June 2013, prior to Explanation 2).
Principle: Before Explanation 2 (prospective from 1 June 2013), seized cash was adjustable against advance-tax liability from the date of seizure.
Relevance: The Tribunal view that Explanation 2 (FA 2013) later displaced prospectively, consistent with Spaze Towers and CBDT Circular 20/2017.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the bare Act (Chapter XIII, ss. 116-138). Each authority is cited with its full parallel reporter citations as reported; Supreme Court, High Court and Income Tax Appellate Tribunal (ITAT) rulings are identified as such. Where a section has not been directly construed, that is stated candidly and the nearest governing authority is given. For professional reference; not legal advice.
CHAPTER XIII - INCOME-TAX AUTHORITIES
Section 132B - Application of Seized or Requisitioned Assets
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Provision: Section 132B - the manner in which assets seized under section 132 or requisitioned under section 132A are applied: towards existing liability and the liability determined on completion of assessment; first proviso - release on an application within 30 days explaining the nature and source; Explanation 2 (FA 2013) - 'existing liability' does not include advance tax; sub-section (4) - interest payable to the assessee on excess retained.
Chapter / Part: Chapter XIII, Part C - Powers.
FA 2026 status: Not amended by the Finance Act, 2026.
Nature: Governs the post-seizure life of the assets; litigated on adjustment against advance tax (pre/post FA 2013) and on interest under sub-section (4).
A. SECTION COMMENTARY
What happens to the seized assets
Section 132B answers the question that follows every search: what is to be done with the money and valuables seized. The assets are to be applied towards the amount of any existing liability under the Act and the allied Acts, and towards the liability determined on completion of the assessment (including any penalty and interest); any excess, with interest, is to be returned to the person. The first proviso provides an early-release mechanism: where, within thirty days of the end of the month of seizure, the person makes an application explaining the nature and source of the seized assets to the satisfaction of the Assessing Officer, the assets (or the part not required to meet existing liability) may be released with the prior approval of the senior authority, generally within 120 days of the search.
Adjustment against advance tax - the Explanation 2 watershed
A long-running controversy concerned whether seized cash could be adjusted, at the assessee's request, against his advance-tax liability (so as to stop the running of interest under sections 234B/234C). A line of High Court and Tribunal decisions had held that it could. The Finance Act, 2013 inserted Explanation 2 to section 132B, declaring that 'existing liability' does not include advance tax payable. The courts have held that Explanation 2 is prospective - it operates only from 1 June 2013 - so that for seizures before that date the earlier, assessee-favourable view holds; the Punjab & Haryana High Court so held in Spaze Towers, and the CBDT accepted that position in Circular No. 20/2017, directing that appeals not be filed on the point for pre-1 June 2013 cases.
Interest under sub-section (4)
Sub-section (4) entitles the assessee to simple interest on the amount by which the assets retained exceed the liability ultimately determined, for the period of excess retention. The Supreme Court in Chironjilal Sharma (HUF) explained the interface between this interest and the post-assessment interest under section 244A: interest runs under section 132B(4) up to the completion of the assessment, and under section 244A for the period thereafter. The High Courts have enforced the assessee's right to interest where seized assets are retained beyond what the determined liability warrants (Ajay Gupta).
B. STATUTORY POSITION (verbatim text)
Reproduced below is section 132B as it stands in the bare Act.
132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:—
(i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) 79a[the Interest-tax Act, 1974 (45 of 1974) and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015)], and the amount of the liability determined on completion of the assessment or reassessment or recomputation and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is deemed to be in default, or the amount of liability arising on an application made before the Settlement Commission under sub-section (1) of section 245C, may be recovered out of such assets :
Provided that where the person concerned makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of asset and the nature and source of acquisition of any such asset is explained to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, to the person from whose custody the assets were seized:
Provided further that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed;
(ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied;
(iii) the assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner under sub-section (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule.
(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act.
(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section
(1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.
(4) (a) The Central Government shall pay simple interest at the rate of one-half per cent for every month or part of a month on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section.
(b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was executed to the date of completion of the assessment or reassessment or recomputation.
Explanation 1.—In this section,—
(i) "block period" shall have the meaning assigned to it in clause (a) of section 158B;
(ii) "execution of an authorisation for search or requisition" shall have the same meaning as assigned to it in [Explanation to section 158B].
Explanation 2.—For the removal of doubts, it is hereby declared that the "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII. 79a. Sub. for "and the Interest-tax Act, 1974 (45 of 1974)" by Act No. 15 of 2024, w.e.f. 1-10-2024.
C. AUTHORITIES
Cluster 1 - Adjustment of seized cash against advance tax; Explanation 2 is prospective
CIT v. Spaze Towers (P.) Ltd. (Punjab & Haryana High Court, 17 November 2016); accepted in CBDT Circular No. 20/2017
Forum / Citation: Punjab & Haryana High Court, order dated 17 November 2016; accepted by CBDT Circular No. 20/2017 dated 12 June 2017 (departmental appeals not to be filed for pre-1 June 2013 cases).
Facts: The assessee sought adjustment of seized cash against advance-tax liability for a period before 1 June 2013; the Department relied on Explanation 2 to section 132B.
Held: Explanation 2 to section 132B, inserted by the Finance Act, 2013, is prospective and operates only from 1 June 2013; for seizures before that date, seized cash could be adjusted against advance-tax liability on the assessee's request. The CBDT accepted the judgment and, by Circular No. 20/2017, directed that departmental appeals not be filed on the issue for pre-1 June 2013 cases.
Principle: Explanation 2 (advance tax excluded from 'existing liability') is prospective from 1 June 2013; earlier seizures are governed by the prior, assessee-favourable position.
Relevance: Settles the temporal operation of Explanation 2; reinforced by CBDT acceptance.
Cluster 2 - Interest on retained / refunded seized assets (s.132B(4) and s.244A)
Chironjilal Sharma (HUF) v. Union of India (2014) 360 ITR 237 (SC)
Forum / Citation: Supreme Court of India, 2013. Reported: (2014) 360 ITR 237 (SC); (2013) 263 CTR 625; (2013) 96 DTR 305; (2013) 222 Taxman 352.
Held: Section 132B(4)(b) provides for payment of interest by the Government to the assessee for the period commencing after the specified date up to the date of completion of the (regular/block) assessment; for the period thereafter, where a refund becomes due, interest is governed by section 244A. The two provisions operate in different periods and the assessee is entitled to interest accordingly on the seized amount.
Principle: Interest on seized money runs under section 132B(4) up to completion of assessment, and under section 244A thereafter; the two are distinct, successive regimes.
Relevance: The Supreme Court authority settling the interest entitlement on seized assets and the 132B(4)/244A interface.
Ajay Gupta v. CIT (2008) 297 ITR 125 (Del)
Forum / Citation: Delhi High Court, 2007. Reported: (2008) 297 ITR 125 (Del); (2007) 162 Taxman 296.
Held: Where seized assets are retained beyond the permissible period or wrongfully withheld, the assessee is entitled to interest for the period of such retention; the Department cannot retain seized cash without compensating the assessee, and a purposive reading of section 132B(4) supports the interest entitlement.
Principle: Wrongful or excess retention of seized assets attracts an interest liability in favour of the assessee.
Relevance: A High Court application enforcing the assessee's interest entitlement on retained seized assets.
Cluster 3 - Tribunal (ITAT): adjustment of seized cash against tax liability
The Tribunal benches have addressed the adjustment of seized cash against self-assessment and advance-tax liability, both before and after Explanation 2 (FA 2013).
ACIT v. Narendra N. Thacker (2017) 82 taxmann.com 64 (Kolkata - Trib.)
Forum / Citation: Income Tax Appellate Tribunal, Kolkata Bench. Reported: (2017) 82 taxmann.com 64 (Kolkata - Trib.).
Facts: The assessee sought to adjust seized cash against the self-assessment tax payable along with the return of income; the Assessing Officer resisted, relying on Explanation 2 to section 132B.
Held: Explanation 2 to section 132B excludes only advance tax from 'existing liability'; it does not bar adjustment of seized cash against self-assessment tax payable with the return. The assessee's request to so adjust the seized cash is in order and in accordance with section 132B.
Principle: Seized cash may be adjusted against self-assessment tax (as distinct from advance tax, excluded by Explanation 2 from 1 June 2013).
Relevance: A Tribunal authority delimiting the reach of Explanation 2 - it bites only on advance tax, not self-assessment tax.
Ram S. Sarda v. DCIT (Income Tax Appellate Tribunal, Rajkot Bench)
Forum / Citation: Income Tax Appellate Tribunal, Rajkot Bench (reported at itatonline.org). Pre-Explanation 2 (Finance Act, 2013) period.
Facts: Cash seized in a search and assessed as the assessee's income; the assessee asked that the seized cash be treated as payment of advance tax, but interest under sections 234A/234B/234C was levied on the footing that advance tax had not been paid.
Held: The expression 'existing liability' in section 132B(1) cannot be given a restricted meaning; the liability to pay advance tax is an existing liability, and so the seized cash ought to have been adjusted against the advance-tax liability from the date of seizure (for seizures before 1 June 2013, prior to Explanation 2).
Principle: Before Explanation 2 (prospective from 1 June 2013), seized cash was adjustable against advance-tax liability from the date of seizure.
Relevance: The Tribunal view that Explanation 2 (FA 2013) later displaced prospectively, consistent with Spaze Towers and CBDT Circular 20/2017.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the bare Act (Chapter XIII, ss. 116-138). Each authority is cited with its full parallel reporter citations as reported; Supreme Court, High Court and Income Tax Appellate Tribunal (ITAT) rulings are identified as such. Where a section has not been directly construed, that is stated candidly and the nearest governing authority is given. For professional reference; not legal advice.