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of <h1>High Court restrains encashment pending tax assessment, upholds property attachment as security.</h1> <h3>Mangal Corporation Versus State of Gujarat</h3> The Gujarat High Court ruled in a case where recovery proceedings were initiated without a finalized tax liability. The petitioners sought relief under ... Stay on recovery proceedings - Held that: - t is fairly conceded that as on today, neither any provisional assessment order is passed nor any final assessment order is made, hence, the proceedings are at the notice stage. Thus, the tax liability has not been crystallized till the date. Under the circumstances, the respondent no. 2 cannot deposit the cheques which are recovered from the petitioner - while continuing the attachment of the residential property, it is directed that the respondent no. 2 shall not deposit the said cheques which were recovered from the petitioners till a provisional assessment order and/or final assessment order is passed - petition allowed - decided in favor of petitioner. Issues: Recovery proceedings without due process of law, encashment of cheques, provisional assessment order, final assessment order, tax liability crystallizationIn this judgment by the Gujarat High Court, the petitioners sought relief through a writ petition under Article 226 of the Constitution of India. The petitioners claimed that the recovery proceedings initiated by the respondent without a finalized tax liability were arbitrary and ultra vires to the provisions of the VAT Act and Article 14 of the Constitution. The petitioners also requested the immediate return of cheques totaling to Rs. 33,27,999 and a stay on the encashment of these cheques. The respondent contended that the cheques were taken as security due to potential tax evasion found during a search at the petitioners' business premises. However, it was acknowledged that no provisional or final assessment order had been issued, and thus, the tax liability had not crystallized. The Court, while maintaining the attachment of a residential property worth Rs. 15 lacs put as security by the petitioners, directed that the cheques should not be deposited until a provisional or final assessment order is passed and the tax liability is crystallized, along with an additional one-month period from the date of the assessment order. Ultimately, the writ petition was disposed of with these directions and observations.
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