2013 (6) TMI 258 - HC - Income Tax

Provisional attachment u/s 281B - held that - The bank accounts of an assessee are provisionally attached to secure the interest of the Revenue pending assessment pro-ceedings to meet the eventuality of demand of tax to be raised against such assessee. Once the assessment has been completed, the Revenue would be justified to attach the account to the extent of demand raised against an assessee and not the entire amount standing to the credit of the assessee. We find that the action of the Revenue in extending the period of attachment in respect of the all the bank accounts of the petitioner and in respect of over ₹ 33 lakhs in these circumstances is wholly unjustified and illegal. Revenue directed to release provisional attachment except to the extent of tax demand raised against the petitioner. Such tax demand shall not be realized till such time, the appeal filed by the assessee is not decided by the competent authority. - Decided in favor of assessee.

Summary

Issues:
Challenge to provisional attachment of bank accounts under section 281B of the Income-tax Act, 1961.

Analysis:
The judgment delivered by the High Court addressed the challenge in a writ petition against the provisional attachment of bank accounts under section 281B of the Income-tax Act, 1961. The orders dated December 12, 2011, attaching the petitioner's bank accounts were contested. The amounts of Rs. 12,13,023, Rs. 16,87,031, and Rs. 5,35,481 were attached on different dates. A subsequent corrigendum corrected the period of attachment up to June 11, 2012, and was further extended in subsequent orders. The petitioner's counsel highlighted that a regular assessment had been framed, and a total tax demand of Rs. 9,62,378 was raised against the petitioner post the filing of the writ petition.

The court acknowledged the petitioner's argument that provisional attachment should only occur before assessment and that post-assessment, the Revenue should only attach the amount equivalent to the demand raised, not the entire credit amount in the bank accounts. The purpose of provisional attachment is to secure the Revenue's interest pending assessment proceedings. Once assessment is completed, the Revenue is justified in attaching the account only to the extent of the demand raised against the assessee. The court found the Revenue's action of extending the attachment period over Rs. 33 lakhs in all bank accounts of the petitioner post-assessment as unjustified and illegal.

Consequently, the High Court allowed the writ petition and directed the respondents to release the provisional attachment, except to the extent of the tax demand raised against the petitioner. The tax demand was not to be realized until the appeal filed by the assessee was decided by the competent authority.