Provisional attachment u/s. 281B: A. Y. 2008-09: Provisional attachment remains in operation only till the passing of the assessment order

In the course of the assessment proceedings for the A. Y. 2008-09, the Assessing Officer passed the provisional attachment order u/s. 281B and issued letters/ notices on 2-1-2012 to the Standard Chartered Bank and sundry debtors not to make payment to the assessee petitioner. The assessee challenged the validity of the order by filing a writ petition. In the mean while, on 8-11-2012, assessment order was passed raising a demand of Rs. 2,10,57,87,648/-. The Petitioner contended that the provisional attachment order u/s. 281B of the Act ceases to operate after passing of the assessment order on 8-11-2012. The contention of the Department was that the provisional attachment order will be in operation for a period of six months.

The Punjab and Haryana High Court accepted the contention of the Petitioner assessee and held as under:

“i) According to section 281B, during the pendency of any assessment proceeding or proceedings in pursuance to reassessment that in order to safeguard the interests of the Revenue, after recording the reasons for the same in writing and seeking the approval from the concerned authority, an order for provisional attachment can be passed. Circular No. 179 dated 30-9-1975 clearly envisages that where during the pendency of any proceeding for assessment or reassessment of any income, the raising of demand is likely to take time due to investigations and there is apprehension that the assessee may thwart the collection of that demand to be made. This supports the interpretation that it is only till actual demand is created by passing an assessment order that the provisional attachment order will remain in operation.

ii) There are sufficient provisions in the Act, like section 220(1), proviso to safeguard the interest of the Revenue in case the Assessing Officer has apprehension that the assessee by adopting extraneous method may thwart the recovery of the legitimate tax dues of the State. In view of the above, the interpretation put by the Revenue that even after passing of the assessment order, provisional attachment order shall still remain in force for six months, does not merit acceptance and is, thus, rejected.”