2016 (12) TMI 1610 - HC - Income Tax

Validity of attachment orders u/s 281B - seeking release of amount pursuant to the SBLCs - confirmation of tax liability of non-resident (FOWC) having PE in India - Held that - The Court is of the opinion that in the light of the judgment delivered in Formula One World Championship Limited Jaiprakash Associates Ltd. Versus CIT International Taxation-3 & Anr. 2016 (12) TMI 123 - DELHI HIGH COURT the order impugned and the attachment appear to be prima facie warranted in law. In the light of this order the Court is of the opinion that the petitioner s bank is obliged to honour the direction of attachment by the Revenue and not to release any amount pursuant to the SBLCs as well as any consequential instruments and acts which would effectuate the commitments there under pending crystallization of the actual amounts by the revenue till further orders. Directed accordingly. Counsel for the revenue states that the actual amounts would be indicated in an appropriate consequential order within two weeks under Section 195 of the Income Tax Act 1961 and till further orders in these proceedings.

Summary

Issues Involved:
1. Conflict of interest due to judicial involvement in transactions with parties.
2. Provisional attachment of assets by the Revenue under Section 281B of the Income Tax Act, 1961.

Issue 1: Conflict of Interest
The judgment addresses a conflict of interest situation where one of the judges on the bench had a transaction with a party involved in the case. It was disclosed that both judges had booked residential flats from a company belonging to the respondent group. Despite this, none of the counsels objected to the bench hearing the matter. The court issued notices to the concerned parties, and the counsel for the revenue and the respondent accepted the notices. Further notices were directed to other respondents, with service to be effected through email by the court.

Issue 2: Provisional Attachment of Assets
The petitioner sought a direction for the Revenue to withdraw an order dated 29th/30th November 2016, following a judgment in certain writ petitions. The order restricted the drawings of Standby Letters of Credit (SBLC) to the liability to deduct tax from amounts payable to a specific entity. The court found the impugned order and attachment to be prima facie warranted in law based on a previous judgment. Consequently, the court directed the petitioner's bank to comply with the Revenue's attachment direction and not release any amounts under the SBLCs pending further orders. The revenue's counsel assured that the actual amounts would be indicated in a subsequent order under Section 195 of the Income Tax Act, 1961, within two weeks and until further orders in the proceedings.

In conclusion, the judgment dealt with a conflict of interest issue arising from judicial involvement in transactions with parties and the provisional attachment of assets by the Revenue under Section 281B of the Income Tax Act, 1961. The court addressed the conflict of interest situation transparently and proceeded with the case after receiving no objections from the counsels. Additionally, the court upheld the provisional attachment order, directing the petitioner's bank to comply and not release any amounts under the SBLCs until further orders, pending the Revenue's indication of actual amounts in a subsequent order.