2021 (5) TMI 488 - HC - Income Tax

Seeking release of attachment over the commercial property - recovery proceedings - entitlement to the prayer for lifting the attachment in order to pay the tax payable under the Direct Tax Vivad Se Vishwas Act, 2020 Scheme - HELD THAT - As Income tax department is fully secured with attachment over the residential property of the petitioner together with five bank accounts with regard to the outstanding dues which is reflected in the portal of income tax department being ₹ 1.08 crores as on 9.2.2021. It is not disputed by the respondents that the valuation report dated 21.12.2018 of the Government Approved Valuer placed on record are not true and correct. Therefore, taking into consideration the value of the residential property which is valued at ₹ 7,42,40,000/ , 50% thereof belonging to the petitioner is about ₹ 3.71 crores which is much more than the outstanding demand of ₹ 1.08 crores as reflected in the portal of the income tax department. The petitioner has made an application for release of attachment over the commercial property in order to pay the amount of tax to the income tax department in case of M/s. Rahul Textiles Industries Private Ltd wherein the petitioner is one of the directors and as the said company has applied under the resolution scheme of Direct Tax Vivad Se Vishwas Act, 2020, we are of the opinion that if the attachment placed by the respondents on commercial property situated at World Trade Centre being Office No. 407, Udhna Darwaja, Ring road, Surat, is lifted, there would not be any prejudice to the respondents income tax department as it is fully secured by continuing the attachment over the residential property and five bank accounts. On the other hand, if the attachment is lifted, the petitioner would be in a position to pay the tax payable under the resolution scheme to the department. The contention raised on behalf of the respondents that the attachment cannot be lifted to permit the petitioner to pay the tax under the Direct Tax Vivad Se Vishwas Act, 2020 scheme in case of the company in which the petitioner is director, cannot be accepted because the petitioner is requesting to lift the attachment on the ground that there is sufficient security as against the outstanding demand and the reason for lifting the attachment is in addition to the prayer of the petitioner to lift the attachment to show his bona fide. In such circumstances, it cannot be said that the petitioner is not entitled to the prayer for lifting the attachment in order to pay the tax payable under the Direct Tax Vivad Se Vishwas Act, 2020 Scheme.

Summary

Issues Involved:
1. Legality of attachment of immovable property and bank accounts by the Income Tax Department.
2. Proportionality of the attachment concerning the outstanding tax demand.
3. Petitioner's request for lifting the attachment to pay tax under the Direct Tax Vivad Se Vishwas Act, 2020.

Issue-wise Detailed Analysis:

1. Legality of Attachment:
The petitioner challenged the attachment of their commercial property and bank accounts by the Income Tax Department under Article 226 of the Constitution of India. The Tax Recovery Officer attached the properties under section 222 read with Rule 48 of the Second Schedule to the Income Tax Act, 1961, and the bank accounts under section 226(3) of the Act. The petitioner argued that the attachment orders were excessive and disproportionate to the outstanding tax demand.

2. Proportionality of Attachment:
The petitioner contended that the total outstanding demand was ?1.08 crores, whereas the attached properties' fair market value was significantly higher. Specifically, the residential property alone was valued at ?3.71 crores, and the commercial property was valued at ?81.40 lakhs. The petitioner argued that the attachment was disproportionate, as the total value of the attached properties and bank accounts far exceeded the outstanding tax demand. The court noted that the Income Tax Department was fully secured with the attachment of the residential property and five bank accounts, which collectively had a value much higher than the outstanding demand.

3. Request for Lifting Attachment:
The petitioner sought the release of the attachment on the commercial property to sell it and use the proceeds to pay tax under the Direct Tax Vivad Se Vishwas Act, 2020, for a company where the petitioner is a director. The court found merit in the petitioner's argument, noting that lifting the attachment on the commercial property would not prejudice the Income Tax Department, as the department was already secured by the residential property and bank accounts. The court emphasized that lifting the attachment would enable the petitioner to pay the tax under the resolution scheme, thereby achieving the scheme's purpose.

Judgment:
The court directed the Income Tax Department to lift the attachment on the commercial property situated at World Trade Centre, Office No. 407, Udhna Darwaja, Ring Road, Surat, by 30th March 2021. The court reasoned that there was sufficient security against the outstanding demand, and lifting the attachment would allow the petitioner to pay the tax under the resolution scheme. The petition was allowed, and the rule was made absolute to the extent of lifting the attachment on the commercial property. No order as to costs was made, and direct service was permitted.