Court quashes attachment orders due to lack of notice; petitioner not in default. Provisional attachment invalid.

The court quashed the attachment orders, ruling that without a notice of demand or notice under section 156, the petitioner could not be considered in default. Additionally, the provisional attachment under section 281B was deemed invalid due to the absence of a notice to pay arrears. The writ petition was granted, and the related miscellaneous petition was closed without costs.

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Issues Involved:
1. Legality of the order of attachment of property under section 281B of the Income-tax Act, 1961.
2. Requirement of a tax demand notice before passing an attachment order.
3. Validity of provisional attachment without prior notice and opportunity to appeal.
4. Compliance with procedural requirements under Schedule II of the Income-tax Act for provisional attachment.

Detailed Analysis:

1. Legality of the order of attachment of property under section 281B of the Income-tax Act, 1961:
The petitioner challenged the impugned order of attachment of their property under section 281B, which was issued by the second respondent. The petitioner argued that the attachment was made without any prior demand of income tax or prior notice, which is a violation of the legal procedure. The respondents contended that the provisional attachment was necessary to protect the interests of the Revenue during the pendency of assessment or reassessment proceedings.

2. Requirement of a tax demand notice before passing an attachment order:
The petitioner argued that for an attachment order to be valid, there must be a tax demand notice issued under section 156, and if such demand is not paid within the prescribed time, a reference to the Tax Recovery Officer (TRO) under section 222 must be made. The court agreed with this argument, stating that to term the petitioner as "assessee in default" or "assessee deemed to be in default," a demand notice under section 156 is essential. Since no such notice was issued, the petitioner could not be construed as a defaulter.

3. Validity of provisional attachment without prior notice and opportunity to appeal:
The petitioner contended that the attachment order was issued without any prior notice or opportunity to appeal, which is against the principles of natural justice. The court found that the respondents admitted to mistakes in issuing the impugned order and acknowledged the absence of any wilful intention. The court held that the absence of a notice of demand or notice under section 156 invalidated the provisional attachment order.

4. Compliance with procedural requirements under Schedule II of the Income-tax Act for provisional attachment:
The court examined section 281B and relevant rules in Schedule II, which mandate that even for provisional attachment, there should be a notice to pay arrears. Rule 51 of the Second Schedule specifies that attachment relates back to the date of the notice to pay arrears. The court concluded that without such notice, the provisional attachment under section 281B was not legally sustainable. The court emphasized that the attachment must stand the test of reasonableness and avoid arbitrariness, as held in the cited case of KDH Properties P. Ltd. v. Asst. CIT.

Conclusion:
The court quashed the impugned orders of attachment, stating that in the absence of a notice of demand or notice under section 156, the petitioner could not be termed as "assessee in default" or "assessee deemed to be in default." Additionally, without a notice to pay arrears, the provisional attachment under section 281B was invalid. The writ petition was allowed, and the connected miscellaneous petition was closed with no costs.

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