1978 (11) TMI 43 - HC - Income Tax

Summary

Issues: Challenge to State Bank's action in not paying amount, Provisional attachment under s. 281B of the I.T. Act, Validity of extension of attachment period, Mandamus to direct payment to new account, Restriction on operating new account until a specified date.

Analysis:
The petitioner challenged the State Bank of India's refusal to pay Rs. 56,000 in exchange for high denomination notes due to a provisional attachment under s. 281B of the I.T. Act. The petitioner, a diamond cutting business owner, deposited the amount with the bank and requested payment to her account. The Income Tax Officer (ITO) issued a prohibitory order preventing payment to the petitioner based on pending assessment proceedings. The petitioner argued that the attachment exceeded the permissible period under s. 281B(2) without valid extension by the Commissioner of Income Tax (CIT). The court found the extension lacking proper reasons as required by the proviso to s. 281B(2), leading to the attachment's expiration on September 26, 1978. Consequently, the court directed the State Bank to pay the amount to a new account opened by the petitioner at Bank of Baroda, Vania Sheri Branch, Surat, with a restriction on operating the account until January 1, 1979 to prevent future complications.

The court noted that the ITO's proposal for extension lacked sufficient reasoning, and the CIT did not pass a valid order extending the attachment period. As a result, the court held that the attachment ceased to be valid after September 26, 1978, requiring the State Bank to release the funds to the petitioner. The court issued a mandamus directing the State Bank to pay the amount to the petitioner's new account at Bank of Baroda, Vania Sheri Branch, Surat. Additionally, to prevent any issues, the court imposed a restriction on the petitioner from operating the new account concerning the Rs. 56,000 until January 1, 1979. The Special Civil Application was allowed, with no costs imposed, and the Bank of Baroda, Vania Sheri Branch, Surat, was to be informed of the court's decision.