2017 (8) TMI 419 - HC - Income Tax

Provisional attachment of bank account u/s 281B - search and seizure activity - even after expiry of period in excess of seven months, department did not take any action - Held that - since the pre-conditions for invoking Section 281B of the Act of 1961 are absent in the present case, the impugned notices are set aside. Significantly, the petitioner is enjoying an interim order since April 5, 2017. In spite of such interim order, the department has chosen not to initiate the assessment proceedings. The impugned order is set aside.

Summary

Issues: Application for extension of interim order, Interpretation of Section 281B of the Income Tax Act, 1961, Assessment proceedings initiation delay

Extension of Interim Order:
The Court treated the writ petition as on day's list for hearing since the application for extension of the subsisting interim order was filed. The parties consented to consider the writ petition along with the interim application, leading to a comprehensive review of the case.

Interpretation of Section 281B of the Income Tax Act, 1961:
The petitioner contended that the department issued two notices under Section 281B of the Income Tax Act, 1961, but the necessary ingredients for invoking the section were not fulfilled. The petitioner argued that there were no pending assessment proceedings, and the Assessing Officer had not determined any income escaping assessment warranting the bank account's attachment. Despite a search and seizure operation revealing a significant cash deposit in the petitioner's bank account, the department had not initiated assessment proceedings for the relevant years from 2011-12 to 2016-17. The court observed that the pre-conditions for invoking Section 281B were absent in this case, leading to the setting aside of the impugned notices.

Delay in Initiation of Assessment Proceedings:
The department acknowledged that assessment proceedings were yet to be initiated despite the search and seizure operation conducted months earlier. The court noted the department's failure to commence proceedings even after the petitioner had been enjoying an interim order since April 5, 2017. Consequently, the court set aside the impugned orders due to the absence of pre-conditions for invoking Section 281B and the department's inaction in initiating assessment proceedings. The writ petition was disposed of with no order as to costs, and the related application was also disposed of in light of the writ petition's disposal.