46 Indian Minerals and Granite Co. vs. Dy. CIT [2021] 440 ITR 292 (Karn) Date of order: 12th August,2021 S. 281B of ITA, 1961
Recovery of tax — Provisional attachment u/s 281B — Condition precedent for attachment — Authority must form opinion on basis of tangible material that it is necessary to do so for protecting interest of government revenue and that assessee not likely to fulfil demand if raised — Order merely stating likelihood of huge liability being raised and necessary to provisionally attach fixed deposit of assessee — Cryptic, unreasoned, non-speaking and laconic — Specific assertion by assessee that it owned immovable property of substantial value — Apprehension that assessee might not make payment unfounded and without any basis — Orders liable to be quashed
Pursuant to the search said to have been conducted by the respondents in respect of the petitioner-assessees u/s 132 of the said Act of 1961, assessment proceedings were initiated u/s 153A by the Assessing Officer. During the course of the said proceedings, Assessing Officer passed orders u/s 281B, thereby provisionally attaching the fixed deposits of the petitioners.
The assessee filed writ petition and challenged the orders. The Karnataka High Court allowed the writ petition and held as under:
“i) Mere apprehension on the part of the Department that huge tax demands are likely to be raised on completion of the assessment is not sufficient for the purpose of passing a provisional order of attachment. Having regard to the fact that the provisional attachment order of a property of a taxable person including the bank account of such person is draconian in nature and the conditions which are prescribed by the statute for the valid exercise of power must be strictly fulfilled, the exercise of power for order of provisional attachment must necessarily be preceded by formation of an opinion by the authorities that it is necessary to do so for the purpose of protecting the interest of Government revenue. Before an order of provisional attachment is passed, the Commissioner must form an opinion on the basis of tangible material available for attachment that the assessee is not likely to fulfil the demand for payment of tax and it is therefore necessary to do so for the purpose of protecting the interest of the Government revenue. In addition, before passing the provisional attachment order, it is also incumbent upon the authorities to come to a conclusion based on tangible material that without attaching the provisional attachment, it is not possible in the facts of the given case to protect the revenue and that the provisional attachment order is completely warranted for the purpose of protecting the Government revenue.
ii) Except for merely stating that since there was a likelihood of huge tax payments to be raised on completion of assessment and that for the purpose of protecting the revenue, it was necessary to provisionally attach the fixed deposit of the assessee, the other mandatory requirements and preconditions had neither been complied with nor fulfilled or followed prior to passing the order. In view of the fact that the orders were cryptic, unreasoned, non-speaking and laconic, they deserved to be quashed.
iii) In the light of the undisputed fact that the proceedings u/s. 153A of the Act had already been initiated coupled with the fact that section 281 of the Act contemplates that any alienation of any property belonging to the assessee would be null and void, in addition to the specific assertion made by the assessee that it owned and possessed immovable property to the tune of more than Rs. 300 crores, the apprehension of the Department that in the event huge tax payments were to be raised as against the assessee, the assessee might not make payment thereof thus causing loss to the Revenue, was clearly unfounded and without any basis.
iv) The impugned orders dated 26th March, 2021 passed by respondent No. 1 are hereby quashed.”
