2016 (7) TMI 213 - HC - Income Tax

Attachment orders u/s 281B - Assessment u/s 153A in pursuance of Search is pending - estimated tax liability - Held that - Since the assessment pursuant to the search operations is pending, we would not comment on rival claims of the possible additions that may be made in the total income of the assessee. However, going by the rough formula presented by the revenue and in order to strike a balance between protecting the interest of the revenue and at the same time allowing the petitioner to carry on its normal business, we propose to provide for a formula. Even if the figure of addition of ₹ 60 and odd crores is taken for the purpose of roughly estimating the possible tax liability, the same cannot exceed ₹ 25 crores, at least of principal tax. As noted the contention of the counsel for the petitioner that number of immovable properties of the petitioner are unencumbered and free from any charge. Jantri value of such properties runs into several hundred crores of rupees. However, the petitioner company may be in the process of developing, constructing upon or selling such properties as part of its business activities. In view of such facts, the orders of attachment are directed to be lifted upon fulfillment of following conditions I. The petitioner shall keep immovable properties unencumbered, not creating any charge whose jantri value together shall not be less than ₹ 25 crores till the assessments pursuant to notice under section 153A are completed. II. The petitioner shall give a list of such properties to the department latest by 05.07.2016 alongwith which, the petitioner shall indicate the current jantry rate with supporting documents. The petitioner shall also file an affidavit stating that such properties are free from any encumbrance and that the petitioner shall not create any charge on such properties till the assessments are completed. III. As soon as this is done, the order of attachment qua rest of the properties shall automatically stand lifted. In other words, the petitioner would be free to deal with the rest of the properties. IV. Jayantibhai Dalsukhbhai Panchal, the director of the petitioner company, who has sworn this petition, shall file an undertaking before this Court latest by 05.07.2016 declaring that whatever the tax with interest and penalty liabilities are ultimately crystallized, company shall pay to the department.

Summary

Issues:
Challenge to orders dated 04.09.2015 and 22.02.2016 under section 281B of the Income Tax Act, 1961 - Attachment of immovable properties - Conditions for exercise of powers - Allegations of exceeding tax liability - Effect on business activities - Cooperation with assessment proceedings - Estimation of tax liability - Lifting of attachment orders.

Analysis:

1. Challenge to Orders under Section 281B:
The petitioner, a company engaged in realty development, challenged the orders dated 04.09.2015 and 22.02.2016 under section 281B of the Income Tax Act, 1961. The respondent Deputy Commissioner of Income-tax had attached various immovable properties of the petitioner following a search action. The petitioner contended that the conditions precedent for exercising such powers were not satisfied, and the orders were challenged on various grounds.

2. Allegations of Exceeding Tax Liability:
The petitioner argued that the total jantri value of the attached immovable assets far exceeded any potential tax liability that may arise from the assessment proceedings. Despite bringing this to the authority's notice, the attachment orders were not lifted, causing a standstill in the petitioner's business activities. The petitioner claimed that the department sought to seize the entire estimated onmoney receipts without considering the taxable profit element.

3. Estimation of Tax Liability and Cooperation:
The department contended that incriminating material collected during the search operation indicated potential onmoney receipts by the assessee, with estimated additions exceeding ?60.39 crores. It was argued that the petitioner might face a substantial tax demand, interest, and penalties. The petitioner's lack of cooperation with the assessment proceedings was also highlighted.

4. Judicial Intervention and Balancing Interests:
The Court refrained from commenting on the potential additions to the assessee's total income pending assessment. To balance revenue interests and allow the petitioner to continue normal business operations, a formula was proposed. Even with an estimated addition of ?60+ crores, the principal tax liability was capped at ?25 crores. The Court considered the unencumbered properties of the petitioner and issued conditions for lifting the attachment orders.

5. Conditions for Lifting Attachment Orders:
The Court directed the lifting of attachment orders upon the petitioner meeting specific conditions. These included maintaining unencumbered properties with a total jantri value of at least ?25 crores, providing a list of properties to the department, and submitting an affidavit confirming the absence of encumbrances. Additionally, the director of the petitioner company was required to file an undertaking regarding tax liabilities.

6. Conclusion:
The petition was disposed of accordingly, with the Court ordering the lifting of attachment orders upon the petitioner's compliance with the specified conditions. The judgment aimed to strike a balance between protecting revenue interests and enabling the petitioner to conduct its business activities without undue hindrance.