How to Apply for the Release of Seized Assets After an Income-tax Search
An application for the release of seized assets is a short document that is usually lost on one point: the explanation of where the asset came from. The statute gives a narrow window to apply, imposes a single substantive condition, and sets a period within which the asset is to be released. Whether that period obliges the department to hand the asset back is contested. The Allahabad High Court has held the provision directory, and the Gujarat High Court has referred the question to a larger bench. This guide sets out how to prepare and pursue the application so that it does not depend on the answer.
Which Act applies turns on when the search was conducted. Section 536 of the Income-tax Act, 2025 repeals the 1961 Act but saves what was done under it, and a search initiated before April 1, 2026 continues under the 1961 Act, where the provision is Section 132B. A search on or after that date falls under the 2025 Act, where it is Section 250. The steps below are the same under both.
Step 1: Establish What Was Seized and Under Which Authorisation
Every period in this exercise runs from the execution of the last of the authorisations for the search or requisition, not from the date of the panchnama you happen to hold or from the date the proceedings concluded at your client's premises. Obtain the authorisation dates for every connected premises before doing anything else.
Separate money from other assets while you are at it. Money can be applied directly to liability. Other assets are dealt with by a different route, and a prayer that does not distinguish between them is harder to grant.
Step 2: Calendar the Thirty Day Window
The application must be made within thirty days from the end of the month in which the asset was seized. Note the shape of that computation: the clock starts at the end of the month, not on the date of seizure, so a seizure on the third of a month carries a longer effective window than one on the twenty eighth.
Nothing in the provision extends the window, and an application made outside it puts the assessee in the position of asking for an indulgence rather than claiming an entitlement. Where the deadline is close, file on the material available and supplement it.
Step 3: Explain the Nature and Source of Acquisition
This is the substantive condition and the reason most applications fail. The asset is to be released where the nature and source of its acquisition is explained, and an assertion that the money is disclosed business receipts is not an explanation.
What answers the requirement is documentary and specific. Bank statements showing the withdrawal, cash books and ledgers for the relevant period, invoices or agreements that generated the receipt, returns and balance sheets of earlier years, and, for jewellery, earlier wealth or return disclosures and purchase bills. Tie each seized item to a document and annex a schedule that does the tying for the officer.
Do not omit the explanation on the view that it can be given later during assessment. One of the questions now before the larger bench in Gujarat is precisely whether an officer need deal at all with an application that does not disclose nature and source.
Step 4: Quantify the Existing Liability and Ask for the Excess
Seized assets may be applied to liability already existing and to liability determined on the completion of assessment or other proceedings. The application is therefore not an all or nothing claim.
Set out the demands outstanding against the assessee, deduct them, and ask for release of the balance. An application that concedes what the department may retain and asks only for the excess is materially harder to refuse than one that asks for the entire amount, and it also narrows what an adverse order can be about.
Step 5: Understand What the Hundred and Twenty Day Period Does
The asset, or the portion of it which exceeds existing liability, is to be released within one hundred and twenty days from the date on which the last of the authorisations was executed. Whether that is an obligation or a direction is unsettled.
The Allahabad High Court has held that the provision is directory and that the Assessing Officer's jurisdiction to decide the application does not lapse on expiry of the period. The Gujarat High Court has referred the question to a larger bench, doubting an earlier line of its own decisions. Plan on the footing that you may have to compel a decision rather than that the asset returns on its own.
Step 6: Claim the Interest Where Retention Runs Past the Period
Where money is retained beyond the one hundred and twenty days, the assessee is entitled to simple interest. Under Section 250 of the Income-tax Act, 2025 it runs at half a per cent for every month or part of a month, for the period beginning immediately after the expiry of the period and ending with the completion of the assessment. Section 132B of the 1961 Act is to the same effect.
This is frequently not paid unless it is claimed. Make the claim in the application itself, and repeat it in the reply to the draft assessment order, so that it is not treated as an afterthought once the assessment is framed.
Step 7: Press for a Reasoned Order, and Then Move
Where the application is not decided, the relief realistically available is a direction to decide it. That is what the Allahabad High Court granted, fixing two weeks and requiring a reasoned and speaking order after hearing the assessee.
Frame the petition accordingly. A prayer for a direction to dispose of the application within a stated period, with release of the excess as consequential relief, survives the argument that the period is directory. A prayer confined to release does not. Remember also that any asset remaining after the liabilities are discharged is to be made over forthwith to the person from whose custody it was seized, so the obligation does not end with the assessment order.
Common Pitfalls to Avoid
Computing the thirty days from the date of seizure: The period runs from the end of the month in which the asset was seized. Getting this wrong is the most common way a good application becomes a late one.
Treating the explanation as a formality: Nature and source is the condition on which release depends. An application without documents invites an order recording that no explanation was furnished.
Relying on the hundred and twenty day period alone: It has been held directory in Allahabad and is before a larger bench in Gujarat. It is an argument, not a guarantee.
Asking for the whole amount when a demand is outstanding: The provision permits the department to retain what answers existing liability. Deduct it in the application and claim the excess.
Forgetting the interest: Interest on money retained beyond the period is statutory and is often omitted from the assessment. Claim it in writing and keep the claim alive.
Key Statutory Provisions
Section 132B of the Income-tax Act, 1961: Application of seized or requisitioned assets, with the first proviso to sub-section (1)(i) allowing an application for release within thirty days from the end of the month of seizure where the nature and source of acquisition is explained, with the prior approval of the Chief Commissioner or Commissioner, the second proviso requiring release within one hundred and twenty days from the execution of the last authorisation, and sub-section (4) providing simple interest where money is retained beyond that period.
Section 247 of the Income-tax Act, 2025: Search and seizure under the recodified Act, corresponding to Section 132 of the 1961 Act, and the source of the authorisation from whose execution the periods are computed.
Section 536 of the Income-tax Act, 2025: Repeal and savings, under which the repeal of the 1961 Act does not affect its previous operation or anything duly done or suffered under it, so that a search initiated before the repeal continues to be dealt with under that Act.
Section 250 of the Income-tax Act, 2025: Application of seized or requisitioned assets, with sub-section (1) permitting application of the assets to existing liability and to liability determined on assessment, sub-section (2) allowing an application for release within thirty days from the end of the month of seizure where the nature and source of acquisition is explained and with the prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner, sub-section (3) requiring release within one hundred and twenty days from the execution of the last authorisation, sub-section (7) requiring any remaining asset to be made over forthwith to the person from whose custody it was seized, and sub-sections (8) and (9) providing simple interest at half a per cent for every month or part of a month until the assessment is completed.
Sources and References
Section 250 of the Income-tax Act, 2025: Application of seized or requisitioned assets
Section 132B of the Income-tax Act, 1961, Income Tax Department
Dipak Kumar Agarwal v. Assessing Officer, Allahabad High Court, Neutral Citation 2024:AHC:49600-DB
Income-tax Act, 1961, Sections 132 and 132B; Income-tax Act, 2025, Sections 247, 250 and 536
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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