2003 (1) TMI 54 - HC - Income Tax

Order for extension of attachment under section 281B(1) - the order relating to extension of provisional attachment must be taken to be illegal and non est. - Section 281B(2), proviso, makes it clear that an order for extension of attachment under section 281B(1) can be made only for reasons to be recorded in writing. In the absence of reasons being recorded by the Commissioner of Income-tax, such an order, contained in the file, must be taken to be illegal and without jurisdiction. - the order impugned is quashed and the writ petition is allowed.

Summary

Issues:
1. Validity of the order issued under section 281B of the Income-tax Act, 1961 for provisional attachment of refund due to the petitioner.
2. Authority of the Deputy Commissioner to pass such an order and the requirement of reasons to be recorded in writing for extension of the provisional attachment.

Analysis:
1. The petitioner, a public limited company engaged in the business of manufacture of paper and leasing of equipment, filed returns for the financial years 1994-95 and 1995-96. The Department initiated proceedings under section 132 of the Act and passed an order under section 158BC. Subsequently, refunds due to the petitioner were adjusted towards alleged dues of block assessment, which was later quashed by the Income-tax Appellate Tribunal. Notices were issued for the assessment years 1995-96 and 1996-97 under section 148, challenging which the writ petition was filed. The Assessing Officer then provisionally attached the refund amount under section 281B, which was challenged by the petitioner. The order in question, issued by the Deputy Commissioner, sought to attach the refund due to the petitioner for protecting the interests of revenue. The petitioner contended that the power to pass such an order is vested in higher authorities and reasons must be recorded in writing for the same.

2. Section 281B of the Income-tax Act provides for provisional attachment of property belonging to the assessee during the pendency of income assessment proceedings. The provision mandates that such an order can be passed with the approval of specified authorities and reasons must be recorded in writing. In this case, the petitioner argued that the Deputy Commissioner lacked the authority to issue the order and that no reasons were recorded for extending the provisional attachment. The file produced showed an endorsement approving the extension without recorded reasons. The court held that the absence of reasons rendered the order illegal and without jurisdiction. The subsequent communication by the Deputy Commissioner, providing reasons, was deemed insufficient as the Deputy Commissioner was not authorized under the provision. The court referred to a similar decision by the Gujarat High Court to support its conclusion. Consequently, the court quashed the impugned order and allowed the writ petition, emphasizing the necessity of complying with the statutory requirements for provisional attachment orders.