2012 (4) TMI 475 - HC - Income Tax

Court finds no surviving order under Section 281B, allowing respondents to proceed as per law. Writ petition disposed.

The court concluded that there was no surviving order under Section 281B as of the date of the judgment. The respondents were given the liberty to proceed ... Provisional attachment under Section 281B - period of provisional attachment limited to two years and six months - provisional attachment ceases after the period specified in the order unless a fresh order is made - retrospective third proviso excluding stay period from computation of extension period - third proviso does not itself operate as a deeming continuation of the attachment orderProvisional attachment under Section 281B - period of provisional attachment limited to two years and six months - provisional attachment ceases after the period specified in the order unless a fresh order is made - Whether any order under Section 281B remained in operation after 24th January, 2008 - HELD THAT: - The original provisional attachment was ordered on 28th July, 2005 and, by the first extension dated 19th July, 2007, was extended up to 24th January, 2008. The Court examined the departmental file produced and found that no order under Section 281B was passed by the Revenue after 24th January, 2008. Consequently, there was no provisional attachment in operation as of the date of this judgment. The Court accepted the respondents' affidavit to that effect and recorded that the respondents admit that there is no order under Section 281B in operation; accordingly the relief claimed in the writ petition was disposed of with the limited modification that the petition would not be treated as dismissed. [Paras 9, 12, 16]No provisional attachment under Section 281B was in operation after 24th January, 2008; the respondents admit there is no operative order and the writ petition is disposed of (not dismissed).Retrospective third proviso excluding stay period from computation of extension period - third proviso does not itself operate as a deeming continuation of the attachment order - Whether the Court would decide the effect of the retrospective third proviso (Finance (No.2) Act, 2009) on continuation or extension of the provisional attachment in the present proceedings - HELD THAT: - The Court declined to decide the applicability or effect of the third proviso inserted with retrospective effect, observing that no order relying on that proviso has been passed by the Revenue in the present matter. The judgment explains that the proviso excludes stay periods from computation of the extension limit but does not itself deem an attachment order to continue beyond the period stated in the order. The Court therefore left the question open for adjudication if and when the Revenue passes any fresh order under Section 281B invoking the third proviso; it did not prohibit the Revenue from taking action in accordance with law. [Paras 11, 12, 15]The effect and applicability of the retrospective third proviso is not decided; the question is left open for determination if the Revenue passes a fresh order under Section 281B.Final Conclusion: The High Court found that the last extension under Section 281B expired on 24th January, 2008 and no subsequent provisional attachment order was in operation; the writ petition is disposed of with the recording that there is no operative Section 281B order, and the legal question regarding the retrospective third proviso is left undecided for consideration if the Revenue issues a fresh order. Issues Involved:1. Validity and extension of provisional attachment under Section 281B of the Income Tax Act, 1961.2. Entitlement to refunds claimed by the petitioner.3. Impact of the Supreme Court's stay on block assessment proceedings.4. Applicability of the third proviso to Section 281B inserted by Finance (No. 2) Act, 2009 with retrospective effect.5. Requirement of communication of extension orders under Section 281B.Issue-wise Detailed Analysis:1. Validity and Extension of Provisional Attachment under Section 281B:The petitioner challenged the order dated 28th July, 2005, which provisionally attached refunds due to the petitioner under Section 281B of the Income Tax Act, 1961. The initial order was valid for six months, expiring on 25th January, 2006. The petitioner contended that they were not informed about any extensions beyond this date. The court noted that the first attachment order was issued on 28th July, 2005, and the total period for which extension can be granted under Section 281B is two years and six months. Therefore, the provisional attachment period ended on 24th January, 2008. No further orders extending the provisional attachment were passed after this date.2. Entitlement to Refunds Claimed by the Petitioner:The petitioner claimed refunds amounting to Rs. 3,85,35,158/- for various assessment years. The court observed that the petitioner had not challenged the extensions of the provisional attachment and noted that the petitioner had not been communicated about these extensions. The court also highlighted that the petitioner argued the spirit behind Section 281B is not to deprive the assessee of the refund beyond the maximum period of attachment.3. Impact of the Supreme Court's Stay on Block Assessment Proceedings:The block assessment proceedings against the petitioner were stayed by the Supreme Court, and it was directed that no final assessment order would be passed until the disposal of the appeal. The court noted that the block assessment proceedings were to be completed by 25th August, 2007, but due to the stay granted by the Supreme Court, the proceedings were still pending. The court acknowledged the connection between the block assessment proceedings and the refunds due to the petitioner.4. Applicability of the Third Proviso to Section 281B Inserted by Finance (No. 2) Act, 2009:The third proviso to Section 281B, inserted by Finance (No. 2) Act, 2009, with retrospective effect from 1st April, 1988, states that the period during which assessment/reassessment proceedings are stayed by a court order shall be excluded from the period specified in the first proviso. The court noted that no order under Section 281B was passed after the insertion of the third proviso. Therefore, the court did not examine the applicability of the third proviso in detail, leaving it to be addressed in an appropriate case if a fresh order under Section 281B is passed by the Revenue.5. Requirement of Communication of Extension Orders under Section 281B:The petitioner argued that extension orders under Section 281B were required to be communicated, citing various judicial decisions. The court did not delve into this aspect as no extension orders were passed after 24th January, 2008. The court also noted that the Revenue did not argue that the third proviso incorporates a deeming provision for the continuation of the provisional attachment order beyond the stipulated period.Conclusion:The court concluded that there was no surviving order under Section 281B as of the date of the judgment. The court accepted the respondents' prayer that the writ petition should not be treated as dismissed but recorded that no order under Section 281B was in operation. The respondents were given the liberty to proceed in accordance with the law, and the writ petition was disposed of without costs.