2019 (4) TMI 518 - HC - Income Tax

Provisional attachment of Bank Accounts and properties - undisclosed foreign investment - exercise of powers u/s 132(9B) - search proceedings - case of the petitioner is that he does not have any taxable income. He is a second account holder in bank accounts maintained at U.K. His son is a permanent resident of U.K. who earns sizable income. The balance in the accounts does not belong to the petitioner. The petitioner has inherited sizable funds and properties from which he makes investments - HELD THAT - Department has virtually prevented the petitioner for accessing his own funds in the bank accounts which would undisputedly cause great difficulty to the petitioner in meeting his day to day expenses, to meet with special requirements for medical attention for himself and his aged mother. While, therefore, without harming the interest of the Revenue, we would like to give limited relief to the petitioner against such action of the Department. Refereeing to valuation report of the Government registered valuer showing the approximate value of these flats at ₹ 10.81 Crores and 6.34 Crores respectively. Going by this valuation, combined value of the flats would be in excess of ₹ 17 Crores. We have also required the petitioner to state that the said immovable properties are unencumbered. Thus while maintaining the attachment of the two immovable properties of the petitioner, his bank accounts can be released from attachment. Even if the Department were to succeed substantially in its present stand, the petitioner s tax, interest and possible penalty liabilities are unlikely to exceed the valuation of the two immovable properties Attachment of the petitioner s two immovable properties is not disturbed. The petitioner is prevented from selling, transferring, creating any charge or encumbrances on the said two immovable properties till the present litigation is over or without leave of the Court.

Summary

Issues:
Challenge to provisional attachment orders under Section 132(9B) of the Income Tax Act, 1961 - Immovable properties and bank accounts provisionally attached - Allegations of sizable interest and dividend income without filing tax returns - Undisclosed foreign bank accounts and high-value share transactions - Petitioner's claim of no taxable income, inherited funds, and need for funds for daily expenses and medical treatment - Department's argument of substantial tax liability and opposition to lifting attachment orders.

Analysis:
The petitioner challenged the provisional attachment orders passed by the Deputy Director of Income Tax under Section 132(9B) of the Income Tax Act, 1961, attaching two immovable properties and bank accounts in Kotak Mahindra Bank, Central Bank of India, and Yes Bank. The Department collected material during a search indicating sizable interest and dividend income of the petitioner, along with undisclosed foreign bank accounts and high-value share transactions totaling &8377; 266.26 Crores. The Department believed the petitioner had undisclosed income and foreign investments, justifying the attachment to safeguard revenue interests.

The petitioner contended that he had no taxable income, being a second account holder in U.K. bank accounts belonging to his son, and having inherited funds for investments. The petitioner argued that the value of the attached properties was sufficient to cover any potential tax liability, emphasizing his need for funds due to age and medical expenses. In response, the Department opposed lifting the attachment, citing substantial tax, interest, and penalty liabilities estimated at &8377; 23.28 Crores.

The Court considered the arguments and ordered the release of the bank accounts from attachment while maintaining the attachment on the immovable properties. The petitioner declared ownership of the properties and their unencumbered status, with valuations exceeding the likely tax liabilities. The Court balanced revenue interests with the petitioner's financial needs, allowing access to bank funds while restricting property transactions until the litigation concluded. Ultimately, the Court disposed of the petition, setting aside the attachment on bank accounts but retaining it on the immovable properties to secure potential tax liabilities not exceeding the property valuations.