2016 (9) TMI 268 - HC - VAT and Sales Tax

Attachment of bank account - section 45(1) of the VAT Act purchases made from dealers whose registrations were cancelled genuinity of transactions of petitioner with such dealers - assessment proceedings in progress Held that - the entire assessment is yet to be completed and considering the possible tax liability even according to the department if all charges against the petitioner are proved, the condition of maintaining a minimum balance of ₹ 25 lakhs in the bank account imposed under the said interim order dated 28.04.2016 would require no further upward adjustment petitioner to continue to maintain minimum balance till the completion of assessment petition disposed off decided in favor of petitioner.

Summary

Issues:
Challenging an order attaching bank account under VAT Act, genuineness of purchases, prejudging tax liability, lifting of attachment condition, possible tax liability calculation, maintaining minimum balance, setting aside the order, continuation of minimum balance requirement.

Analysis:
The petitioner challenged an order attaching their bank account under the VAT Act, alleging purchases from dealers involved in bogus billing activities. The department believed the purchases were not genuine, leading to tax evasion suspicions. The petitioner argued the purchases were legitimate, and the dealers' cancellations did not prove otherwise. They contended that tax liability should be determined through proper assessment proceedings, rather than prejudged actions affecting their business operations.

The Court, upon hearing both parties, ordered the lifting of the bank account attachment on the condition that the petitioner maintains a minimum balance of ?25 lakhs. The attachment was subsequently lifted, allowing the petitioner to resume account operations. The respondents provided an estimate of the petitioner's potential tax liability, indicating a principal amount of ?33 lakhs, with additional interest and penalties as per the department's stance.

Considering the ongoing assessment process and the potential tax liability, the Court determined that the minimum balance requirement of ?25 lakhs should remain unchanged. Consequently, the impugned order attaching the bank account was set aside, but the petitioner was directed to maintain the minimum unencumbered balance of ?25 lakhs until the completion of assessments for the relevant years, subject to reassessment if applicable. The petition was disposed of, providing clarity on the maintenance of the minimum balance requirement during the tax assessment period.