2007 (7) TMI 380 - HC - Income Tax

Recovery of Tax Provisional Attachment On the writ petition filed by the assessee contending that by the attachment of three fixed deposits amounting to Rs. 1 Crore, the assessee was deprived of his opportunity to complete the transaction of fresh purchase of agricultural land with in two years from the date of transfer of agricultural land in question which resulted in capital gain. In this case Rajasthan High Court held that the provisional attachment order of three FDRs (annexure 11) dated April 17, 2007 is quashed and it is directed that the FDRs in question may be released within a period of 15 days from today. It is expected that the appeal pending before the learned Commissioner of Income-tax (Appeals) would be expeditiously decided within a period of three months from today. This writ petition is disposed of with no order as to costs.

Summary

Issues Involved:
1. Quashing of the impugned attachment order and release of FDRs.
2. Extension of the period for purchasing agricultural land under Section 54B of the Income-tax Act.
3. Quashing of the impugned orders and keeping recovery proceedings in abeyance.
4. Awarding costs of the writ petition.

Issue-wise Detailed Analysis:

1. Quashing of the Impugned Attachment Order and Release of FDRs:
The petitioner challenged the provisional attachment of three FDRs worth Rs. 1 crore by the income-tax authorities under Section 281B of the Income-tax Act, 1961. The attachment was made despite the capital gains demand being only Rs. 30,97,103. The petitioner argued that the excessive attachment deprived him of the funds necessary to complete the purchase of new agricultural land, thereby losing the exemption benefit under Section 54B of the Act. The court acknowledged that the attachment of FDRs of Rs. 1 crore was excessive and directed the respondents to release the FDRs, provided the petitioner pays 30% of the disputed demand (Rs. 15,48,550) and furnishes a solvent security for the remaining amount to safeguard the revenue's interest.

2. Extension of the Period for Purchasing Agricultural Land under Section 54B of the Income-tax Act:
The petitioner sought an extension of the two-year period prescribed under Section 54B for purchasing agricultural land, arguing that the attachment of funds prevented him from completing the transaction within the stipulated time. The court referred to the Gauhati High Court's judgment in CIT v. Rajesh Kumar Jalan, which held that possession of the property within the stipulated period entitles the assessee to exemption from capital gains. However, since the issue of exemption from capital gains was pending before the appellate authority, the court refrained from expressing a final opinion and directed the appellate authority to consider the issue in accordance with the law.

3. Quashing of the Impugned Orders and Keeping Recovery Proceedings in Abeyance:
The petitioner also sought to quash the impugned orders dated May 1, 2007, and May 16, 2007, and to keep the recovery proceedings in abeyance until the disposal of the first appeal pending before the Commissioner of Income-tax (Appeals). The court noted that the Commissioner of Income-tax-III, Jaipur, had already directed the petitioner to pay 50% of the demand until the appeal's disposal, with the recovery of the balance demand kept in abeyance. The court's decision to release the FDRs and require the petitioner to pay 30% of the disputed demand aligned with this directive, ensuring that the revenue's interest was safeguarded while providing relief to the petitioner.

4. Awarding Costs of the Writ Petition:
The petitioner sought costs for the writ petition to meet the ends of justice. The court disposed of the writ petition with no order as to costs, implying that each party would bear its own legal expenses.

Conclusion:
The court directed the release of the FDRs from attachment, provided the petitioner pays 30% of the disputed demand and furnishes a solvent security for the remaining amount. The court refrained from expressing a final opinion on the exemption from capital gains issue, leaving it to the appellate authority to decide. The writ petition was disposed of with no order as to costs, and the court expected the appeal to be decided expeditiously within three months.