2009 (12) TMI 224 - HC - Income Tax

Recovery of Tax-Provisional attachment- (i) that the Deputy Director had conducted the search operation wherein a large number of incriminating documents and evidence regarding bogus credit entries were gathered and huge demand was likely to be raised under section 153A and 153C of the Act. The Deputy Director had expressed the apprehension and just to defer the payments of tax the assessee may transfer the properties and therefore, requested the Assessing Officer to attach the mentioned immovable properties to safeguard the interest of revenue. After the Assessing Officer received the letter, he passed the attachment order. However the search operation conducted by the Deputy Director of income tax and therefore, only he could bring the fact of the search to the notice of the Assessing Officer. When these bought to notice to the Assessing Officer, it was he who alone exercised discretion finding it to be fit case for attachment of property. The order of provisional attachment is valid. (ii) That the Assistant Commissioner of Income tax had addressed a letter dated July 24, 2009, to the Commissioner of Income Tax pointing out about the attachment orders passed by the Assessing officer with the prior approval of Commissioner of Income Tax. It was further mentioned in this communication that in many of the group cases, the order under section 127 of the Act were yet to be passed, the case record yet to be received, further notice is to be issued, inquiries, investigations to be made and thereafter assessment order could be passed. The request was, therefore, made for extension to the provisional attachment. On this, the Commissioner gave his approval. The extension of the order of provisional attachment was valid.

Summary

Issues Involved:
1. Legality of the provisional attachment orders dated February 6, 2009, under Section 281B of the Income Tax Act, 1961.
2. Legality of the extension orders dated August 3, 2009, under Section 281B of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Legality of the Provisional Attachment Orders Dated February 6, 2009:

Background:
The petitioners, Nimitya Properties Ltd. and Nimitya Promoters Ltd., challenged the provisional attachment orders dated February 6, 2009, issued under Section 281B of the Income Tax Act, 1961. These orders were passed following a search and seizure operation conducted on November 6, 2008, at the petitioners' office premises, wherein documents were seized.

Petitioners' Arguments:
- The attached properties were part of the stock in trade, and no tax was outstanding.
- No assessment proceedings were pending, as assessments for the years 2005-06 and 2006-07 had been completed, and the assessment for 2007-08 had abated due to the search.
- The order was passed without independent application of mind by the Assessing Officer, based on a proposal from the Deputy Director of Income Tax (Investigation).

Court's Analysis:
- Section 281B Provisions: The court examined Section 281B, which allows the Assessing Officer to provisionally attach property during the pendency of any assessment or reassessment proceedings, with the prior approval of higher authorities.
- Explanation to Section 281B: The explanation to Section 281B includes proceedings under Section 132 (search and seizure) as assessment proceedings. Therefore, the search conducted on November 6, 2008, justified the provisional attachment.
- Independent Application of Mind: The court found that the Assessing Officer had exercised his discretion independently, despite the proposal from the Deputy Director. The search and seizure operation's details were necessary for the Assessing Officer to make an informed decision.

Conclusion:
The court concluded that the provisional attachment orders dated February 6, 2009, were valid and legal.

2. Legality of the Extension Orders Dated August 3, 2009:

Background:
The petitioners also challenged the extension of the provisional attachment orders dated August 3, 2009, arguing that the extension was not authorized by the competent authority and that they were not confronted with the seized documents.

Petitioners' Arguments:
- The extension order should have been passed by the Commissioner, as per Section 281B(2).
- The petitioners were not confronted with the seized documents before the extension.

Court's Analysis:
- Competent Authority for Extension: The court reviewed the records and found that the Assistant Commissioner of Income Tax had requested the Commissioner for an extension, which was duly approved on July 31, 2009. The extension order explicitly mentioned the Commissioner's approval.
- Confrontation with Seized Documents: The court noted that the petitioners' argument regarding the confrontation with seized documents did not affect the validity of the extension order, as the primary concern was the protection of revenue.

Conclusion:
The court found that the extension orders dated August 3, 2009, were valid and legal.

Final Judgment:
The court dismissed the writ petitions, upholding the provisional attachment orders dated February 6, 2009, and the extension orders dated August 3, 2009. The court emphasized the need for the Revenue to complete the assessment proceedings by July 31, 2010, to avoid indefinite continuation of the provisional attachment. No order as to costs was made.