GANDHI TRADING VS ASSISTANT COMMISSIONER OF INCOME-TAX
2001 P T D 711
[239 I T R 337]
[Bombay High Court (India)]
Before Dr. B. P. Saraf and Mrs. Ranjana Desai, JJ
GANDHI TRADING
versus
ASSISTANT COMMISSIONER OF INCOME‑TAX and others,
Writ Petition No. 1454 of 1999, decided on 07/07/1999.
Income‑tax‑‑‑
‑‑‑‑Provisional attachment of property‑‑‑Provisional attachment of property during pendency of assessment or reassessment proceedings‑‑‑Condition precedent for provisional attachment‑‑‑Sufficient material on record to show that assessee would dispose of property in order to avoid payment of tax‑‑‑Attachment should be made as far as possible of immovable property‑‑ Attachment of Bank accounts and trading assets should be made only as a last resort‑‑‑Finding that value of immovable property according to departmental value was sufficient to cover anticipated demand‑‑‑Provisional attachment of Bank account and FDRs not valid‑‑‑Indian Income Tax Act, 1961, S.281B.
It is clear from a plain reading of section 281B of the Income Tax Act, 1961, that it is intended to empower the Assessing Officer to make a provisional attachment of any property of the assessee during the pendency of any proceedings or assessment or reassessment of any income, even though there is no demand outstanding against the assessee, if he is of the opinion that it is necessary to do so to protect the interests of the Revenue. To ensure that this power is not misused, a number of safeguards have been provided in the section itself. The power of attachment under this section is in the nature of attachment before judgment under the Code of Civil Procedure. It is a drastic power. It should, therefore, be exercised with extreme care and caution. It should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwarting the ultimate collection of the demand. Moreover, attachment should be made of the properties and to the extent it is required to achieve the above object. It should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. Attachment should be made as far as possible of immovable properties if that can protect the Revenue. Attachment of bank accounts and trading assets should be resorted to only as a last resort. In any event, attachment under section 281B should not be equated with attachment in the course of recovery proceedings:
Held, that the two properties of the assessee, which have been attached under section 281B of the Act, having been valued even by the departmental valuer at Rs.2.66 crores against the anticipated liability of Rs.2.68 crores there was no justification for allowing the continuation of attachment on the bank accounts and FDRs. The Income‑tax Department was directed to. lift the attachment forthwith.
F.B. Andhyrajina instructed by Desai and Diwanji for Petitioner.
R.V. Desai with P.S. Jetley for Respondents.
JUDGMENT
By this writ petition, the petitioners seek to challenge the provisional attachment of their (i) bank account and F.D.Rs. with the State Bank of India and the American Express Bank, Bombay, (ii) office premises situated at Mehtz House, Chowpaty, Bombay‑400, 007, and (iii) residential flat situated at Fionika, Walkeshwar, Bombay‑400, 006, by the Assistant Commissioner of Income‑tax, Circle 7(2), Mumbai, under section 281B of the Income Tax Act, 1961 ("the Act"), vide order, dated April 5, 1999. The petitioners contended that the impugned orders of attachment under section 281B of the Act are unlawful, unconstitutional, ultra vires, without authority of law, passed without due application of mind and are patently bad in law, misconceived and vitiated. It is prayed that these orders be set aside and quashed.
We have heard learned counsel for the parties. Rule returnable after eight weeks. Respondents waive service.
Heard Mr. F.B. Andhyrajina, learned counsel for the petitioners, on the prayer for interim relief. Also heard Mr. R.V. Desai, learned counsel for the respondents. Mr. Desai was also heard on earlier occasion when the petitioners prayed for ad interim relief pending admission. At that time, we were told by Mr. Desai that the attachment of the immovable properties and the bank accounts of the petitioners had been done under section 281B of the Act. He wanted time to obtain instructions. Thereafter, an affidavit of Shri P. Babaprasad, Joint Commissioner of Income‑tax, Special Range‑48, Mumbai, was filed wherein it was stated that as per the records, the total tax demand against the petitioners after finalisation of pending assessments was likely to be to the tune of, Rs.2.68 crores. In the said affidavit, the Joint Commissioner also furnished the details of the amounts lying with the bank, and the two premises which had been attached and their valuation. The details are as follows:
| | Rs. |
| (i) Money lying with the American Express Bank, D.N. Road Branch | 1,00,00,000 |
| (ii) Money tying with the State Bank of India, Diamond Market Branch | 1,06,91,460 |
| (iii) Premises at Fionika (book value as per balance‑sheet) | 2,07,500 |
| (iv) Premises at Mehta House (book value as per balance‑sheet) | 2,20,151 |
| | 2,11,28,111 |
The total value of the attached property, according to the Revenue, is over Rs.2.11 crores as against the anticipated liability of Rs.2.68 crores.
On a perusal of the above affidavit, learned counsel for the petitioners contended before us that the value of the premises mentioned at items Nos.3 and 4 in the list of attached properties was shown at Rs.2.74 lakhs and Rs.2.99 lakhs as against the actual market value of over Rs.6 crores, only to justify attachment of bank accounts and F.D.Rs. It was further contended that the attachment in this case under section 281B was illegal and without jurisdiction because the conditions precedent did not exist: It was stated that value of the immovable properties shown in the affidavit was ridiculously low. Learned counsel furnished a report of valuation of the two immovable properties attached by the Revenue made by Chawla Architects and Consultants (Pvt.) Ltd., who are approved valuers on June 17, 1999. As per the valuation report, the valuation of Room No. 106, Mehta House, is Rs.1.60 crores and Flat No.6 in Fionika is Rs.4.23 crores.
According to learned counsel, even if attachment under section 281B was justified, the attachment of the above two properties itself was more than sufficient. There was no need to attach the bank accounts and fixed deposits. According to him, the bank accounts and fixed deposits have been attached only with a view to harass the assessee. Such an attachment, learned counsel submits, is most arbitrary and illegal.
In reply, Mr. R.V. Desai, learned counsel for the Revenue, stated that the Revenue would not like to go by the valuation made by the valuer of the assessee even though he is an approved valuer. We asked learned counsel to get the two immovable properties under attachment valued by the departmental valuer. The matter was adjourned on that day for that purpose. On the next date, Mr. Desai produced the report of the departmental valuer. The departmental valuer has valued the two immovable properties, viz., Room No. 106, Mehta House, and Flat No.6 in Fionika at Rs.2,66,30,000. On the face of this valuation, we asked learned counsel for the Revenue to show us the justification for continuing the attachment of the bank accounts and F.D.Rs. of the assessee which obviously would very adversely affect the running of the business of the assessee. We also asked him to inform us why the Department, on the face: of the valuation report of their own valuer, has not lifted on their own the attachment on the bank accounts and the F.D.Rs. On the prayer of learned counsel for the Revenue, further time was granted to enable him to obtain instructions.
Today, when the matter was called out, Mr. Desai informed us that he has been instructed by the Joint Commissioner of Income‑tax concerned, that since the valuation of immovable properties were bound to fluctuate, the Department would prefer to have the provisional attachment under section 281B on the bank deposits and F.D.Rs. and for the shortfall of Rs.1,70,000 that remains thereunder between the amounts under attachment and the anticipated liability estimated at Rs.2.68 crores, accept any other security offered by the assessee and release the two immovable properties from attachment. The Joint Commissioner has advised learned counsel to make this suggestion to the Court and to submit to the orders of the court.
We have considered the suggestion of the Joint Commissioner of Income‑tax. We are, however, not impressed by the same. Attachment has been made in this case under section 281B of the Act which provides for provisional attachment only to protect the revenue in certain cases. This section reads as follows:
"281B. Provisional attachment to protect revenue in certain cases‑‑ (1) Where, the pendency of any proceeding for the assessment of any .income or for the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interest of the revenue it is necessary so to do, he may, with the previous approval of the Chief Commissioner, Commissioner, Director General or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule.
Explanation.‑‑‑For the purposes of this subsection, proceedings under section (5) of section 132 shall be deemed to be proceedings for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment.
(2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under subsection (1). "
It is clear from a plain reading of the above section that it is intended to empower the Assessing Officer to make a provisional attachment, of any property of the assessee during the pendency of any proceedings or assessment or reassessment of any income, even though there is no demand outstanding against the assessee, if he is of the opinion that it is necessary to do so to protect the interests of the Revenue. To ensure that this power is not misused, a number of safeguards have been provided in the section itself. It is not necessary for us, at this stage, to examine the same. One thing is clear that this power should be exercised by the Assessing Officer only if there is a reasonable apprehension that the assessee may thwart the ultimate collection of the demand that is likely to be raised on completion of the assessment. The power of attachment under this section is the nature of attachment before judgment under the Code of Civil Procedure. It is a drastic power. It should, therefore, be exercised with extreme care and caution. It should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwart the ultimate collection of the demand. Moreover, attachment should be made of the properties and to the extent it is required to achieve the above object. It should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. Attachment should be made as far as possible of immovable properties if that can protect the Revenue. Attachment of bank accounts and trading assets should be resorted to only as a last resort. In any event, attachment under section 281B should not be equated with attachment in the course of recovery proceedings.
In the instant case, attachment has been made by the Assessing Officer under section 281B to ensure the recovery of the anticipated demand, which is estimated at Rs.2.68 crores. There is no demand outstanding. Because the anticipated demand was estimated at Rs.2.68 crores and book value of the two immovable properties, which was the subject‑matter of attachment, was only Rs.4.27 lakhs, the bank accounts and fixed deposits were attached. The contention of the assessee vas that the two immovable properties attached by the Assessing Officer were worth Rs.5.83 crores as per the valuation of the approved valuer as against the estimated tax liability of Rs.2.68 crores. That being so, there was no justification for attaching she bank accounts and the F.D.Rs. of the assessee which has very seriously affected the day‑to‑day business of the assessee. The Revenue wanted time to get the two immovable properties valued themselves. They were allowed to do so. They have got them valued by the Department Valuer. The value, as per the Departmental Valuer, is Rs.2.66 crores. Obviously, the two immovable properties attached by the Assessing Officer which on their own valuation are Worth Rs.2.66 crores are sufficient to ensure the full recovery of the estimated liability of Rs.2.68 crores. Even in such a situation, insistence to keep the money belonging to the assessee with the bank to the tune of Rs.2.06 crores under attachment and offer to release the immovable properties is most unreasonable and irrational. In our view, after the valuation of the property by their own Departmental Valuer at Rs.2.69 crores, the Revenue should have on their own lifted the attachment from the money lying in the bank. We fail to understand this stand of the Revenue.
Admittedly, there is no demand in this case outstanding against the assessee. The Income‑tax Officer, in anticipation of the demand, which is estimated at Rs.2,68 crores, has attached the immovable properties, which, according to him, were not sufficient to protect the Revenue. It was in such circumstances, that the bank accounts and F.D.Rs. were also attached. Now, when he himself has found out that the immovable properties attached by him are worth over Rs.2.66 crores as against the total estimated liability of Rs.2.68 crores, he still wants to retain the attachment on the bank accounts and F.D.Rs., because, according to him, the value of the immovable properties night fluctuate. We do not appreciate this stand of the Revenue which, according to us, is unreasonable and unfair. The object of section 281B is to enable the concerned officer to take suitable measures to protect the Revenue. It is in the nature of attachment before judgment. It should be applied only to achieve that object. We were confident that having found that valuation of the immovable properties attached by him was Rs.2,66,30,000, as against the estimated liability of Rs.2,68,30,000, the Assessing Officer, on his own, would release the bank accounts and F.D.Rs. from attachment. We are sorry that he has not done so. On the other hand, he wants to retain attachment on the bank accounts and F.D.Rs. and release the immovable properties from attachment.
We have given our careful consideration to the facts and circumstances of the case. The two properties of the assessee, which have been attached under section 281B of the Income‑tax Act, having been valued even by the Departmental Valuer at Rs.2.66 crores against the anticipated liability of Rs.2.68 crores, we de not find any justification whatsoever for allowing the continuation of attachment on the bank accounts and F.D.Rs. We, therefore, direct the respondents to forthwith lift the attachment on the bank accounts and F.D.Rs. Attachment of the two immovable properties would, however, continue until further orders.
Certified copy expedited.
M.B.A./224/FCOrder accordingly.