2019 (4) TMI 1672 - HC - Income Tax

Provisional attachment of the property u/s 281B - notices u/s 147 and 148 - Provisional attachment in absence of final order or demand is permissible? - HELD THAT - A bare perusal of the provision of Section 281B of the Act would reveal that it provides for a provisional attachment of the property of the Assessee to protect the interest of the revenue, during the pendency of other proceedings for assessment or reassessment. The requirement of passing of the final order or reassessment order before issuing attachment under this provision is not envisaged in this section. Section 281B is akin to attachment before judgment provided under Order 38 of the Civil Procedure Code, where an attachment of the property of the defendant can be made even at any stage of suit, in order to protect the interest of a decree holder, when such decree is passed, later on. The Provisions contained under Sections 220 to 232 of the Act, are different from the provisions in Chapter XXIII of the Income Tax Act, 1961, which deals with 'Miscellaneous' in Sections 281 to 298. The provisions in Chapter XXIII under the head 'Miscellaneous' assist in the effective implementation of the other provisions of the Act. With great respect, appears to have erred in holding that provisional attachment u/s 281B also could not be made without serving a Notice for Demand u/s 156. To this extent, the contention of the learned counsel for the appellant/Revenue deserves to be accepted and the order under appeal deserves to be set aside. As far as the recovery of dues from the Assessee is concerned, since reassessment orders have already been passed by the ACIT on 25.10.2013 and 31.03.2015 against which, first appeals are also pending before the CIT (A), the parties are left free to have their respective course in those proceedings and the same is not required to be interfered with in any manner by this Court.

Summary

Issues:
Provisional attachment of property under Section 281B of the Income Tax Act, 1961.

Analysis:
The judgment involves a writ appeal filed by the Revenue against a learned Single Judge's order allowing the writ petition filed by the Assessee against the provisional attachment of residential flats under Section 281B of the Income Tax Act, 1961. The provisional attachment was challenged by the Assessee on the grounds of no notice under Section 143(2) of the Act or assessment order raising any demand. The appellant argued that provisional attachment is permissible even before assessment is framed, especially after a reassessment notice was issued. The respondent contended that the Tax Recovery Officer was unjustified in attaching the property without raising any demand against the Assessee, causing significant harm to the Assessee's real estate business. Subsequently, reassessment orders were passed, and appeals were pending before the Commissioner of Income Tax (Appeals).

The court examined Section 281B of the Act, which allows provisional attachment to protect revenue during assessment or reassessment proceedings. The provision does not mandate the final assessment or reassessment order before attachment, similar to attachment before judgment in civil cases. The judgment highlighted the distinction between provisions in Chapter XXIII of the Act dealing with 'Miscellaneous' and those assisting the implementation of other Act provisions. The court disagreed with the Single Judge's view that a demand notice under Section 156 was necessary for provisional attachment under Section 281B. Consequently, the court partially allowed the appeal, setting aside the Single Judge's order.

Regarding the recovery of dues, since reassessment orders were passed, and appeals were pending, the court allowed the parties to pursue their respective courses in those proceedings without interference. The writ appeal was partly allowed only to the extent indicated, with no order as to costs. The judgment provides clarity on the scope and application of provisional attachment under Section 281B, emphasizing the protection of revenue interests during assessment or reassessment proceedings.