2001 (5) TMI 28 - HC - Income Tax

Validity of provisional attachment upheld under Income-tax Act for FDR account; balance revenue protection & procedural fairness.

The court upheld the validity of the provisional attachment order under section 281B of the Income-tax Act, 1961, regarding a petitioner's FDR account. It ... Recovery Of Tax, Provisional Attachment Issues involved:1. Validity of the order passed under section 281B of the Income-tax Act, 1961 for provisionally attaching a petitioner's FDR account.2. Interpretation of the provisions of section 281B regarding the duration of provisional attachment and extension of such attachment.Analysis:Issue 1: Validity of the order under section 281BThe judgment addresses the challenge raised by the petitioner against an order passed under section 281B of the Income-tax Act, 1961, provisionally attaching the petitioner's FDR account in a bank. The petitioner contended that as of the date of the order, there were no pending proceedings for the assessment or reassessment of their income. In response, the respondent justified the order by stating that proceedings initiated under section 148 of the Act were pending at the time of provisional attachment. The court examined the provisions of section 281B, which allow for provisional attachment to protect revenue during pending income assessment or reassessment proceedings. The court emphasized the necessity of protecting the interests of revenue and the authority of the Assessing Officer to attach property belonging to the assessee in such cases.Issue 2: Interpretation of section 281B provisionsThe judgment delves into a detailed analysis of the provisions of section 281B of the Income-tax Act, particularly focusing on the duration of provisional attachment. It highlights that as per the statutory provisions, a provisional attachment order ceases to be effective after six months from the date of issuance. The court also notes that the competent authorities, such as the Chief Commissioner or Commissioner, have the discretion to extend this period for up to two years, provided they record reasons in writing for such extensions. In the absence of an extension order, the maximum duration for a provisional attachment would be two years and six months. The judgment concludes by declaring that in the specific case at hand, the provisional attachment of the petitioner's FDR account will cease to operate from a specified date in line with the statutory provisions, subject to any further orders issued under section 148 of the Act and any remedies pursued by the petitioner against such orders.In summary, the judgment provides a comprehensive analysis of the legal issues surrounding the validity of the provisional attachment order under section 281B of the Income-tax Act, 1961. It interprets the statutory provisions governing provisional attachment duration and underscores the authority of the Assessing Officer to protect revenue interests. The court's decision to declare the cessation of the provisional attachment underscores the adherence to statutory timelines and procedural safeguards while balancing the interests of the revenue authorities and the assessee.