2013 (4) TMI 451 - HC - Income Tax

Proceedings under sub-section (5) of section 132 - Survey U/s 133A - Provisional attachment U/s 281B of the Income Tax Act, 1961 - Held that - If the petitioner is able to establish that the value of the property at Door No.31/32, Commander-in-Chief Road, Egmore, Chennai 600 008 is sufficient to cover the tax liability that may arise on final assessment, then it is incumbent on the part of the department to consider the release of the provisional attachment order insofar as the debts and security deposits due from the third parties - This is because the provision of Section 281B of the Act clearly provides for safeguarding the interest of the Revenue and that cannot be more than what is likely to arise - It cannot be taken as a mandate to attach all properties of the assessee or amounts due to the assessee indiscriminately. The petitioner is given an opportunity to make a detailed request to the competent authority enclosing the valuation report in respect of the property at Door No.31/32, Commander-in-Chief Road, Egmore, Chennai 600 008 at the earliest . If the petitioner is able to satisfy the authorities on the valuation and if the value of the said property is sufficient enough to safeguard the interest of the Revenue - Then the respondents shall consider and revoke the provisional attachment insofar as the debts and security deposit due from third parties - The petitioner is given one week time from the date of receipt of a copy of this order to submit his further request in this regard and the competent authority shall consider the same and pass appropriate orders within three weeks thereafter - These writ petitions are disposed of in the above terms.

Issues Involved:
1. Provisional attachment of property under Section 281B of the Income Tax Act, 1961.
2. Calculation of tax liability and valuation of attached properties.
3. Justification and reasonableness of the provisional attachments.

Issue-Wise Detailed Analysis:

1. Provisional Attachment of Property under Section 281B of the Income Tax Act, 1961:
The primary issue in these writ petitions is the provisional attachment made by the Income Tax Department under Section 281B of the Income Tax Act, 1961. This provision allows the Assessing Officer, with prior approval from higher authorities, to attach any property belonging to the assessee to protect the interests of the revenue during the pendency of assessment or reassessment proceedings. The provisional attachment shall cease to have effect after six months unless extended, but not exceeding two years in total.

2. Calculation of Tax Liability and Valuation of Attached Properties:
The petitioner, a private limited company, filed a return showing a loss for the assessment year 2011-2012. However, following a survey under Section 133A of the Act, the Income Tax Department impounded books of accounts and documents, leading to provisional attachment orders. The petitioner contended that the department erroneously calculated the built-up area of their property, resulting in a wrong assessment of profits and tax liability. The petitioner argued that the property at Door No.31/32, Commander-in-Chief Road, Egmore, Chennai, alone is sufficient to cover the tax liability, even if the department's calculation is correct.

3. Justification and Reasonableness of the Provisional Attachments:
The petitioner argued that the provisional attachments of debts and security deposits from third parties are arbitrary and unreasonable, given that the property at Egmore is sufficient to satisfy the tax liability. The department, on the other hand, justified the provisional attachments based on the findings of the survey and the probable tax liability of approximately Rs.6.70 Crores. The court noted that the provisional attachment should be commensurate with the claim of the department and should avoid arbitrariness. The court held that if the petitioner can establish the valuation of the Egmore property as sufficient to cover the tax liability, the department should consider releasing the provisional attachments on other properties.

Conclusion:
The court directed the petitioner to make a detailed request to the competent authority, enclosing the valuation report of the Egmore property. The competent authority is to consider the request on merits and, if satisfied with the valuation, revoke the provisional attachments on other properties. The petitioner was given one week to submit the request, and the authority was given three weeks to pass appropriate orders. The writ petitions were disposed of in these terms, with no costs.

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