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High Court restrains encashment pending tax assessment, upholds property attachment as security. The Gujarat High Court ruled in a case where recovery proceedings were initiated without a finalized tax liability. The petitioners sought relief under ...
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High Court restrains encashment pending tax assessment, upholds property attachment as security.
The Gujarat High Court ruled in a case where recovery proceedings were initiated without a finalized tax liability. The petitioners sought relief under Article 226, claiming the proceedings were arbitrary and violated the VAT Act and Article 14 of the Constitution. The court directed that cheques totaling Rs. 33,27,999 should not be encashed until a provisional or final assessment order is issued, and the tax liability is determined. The court maintained the attachment of a residential property worth Rs. 15 lacs as security. The writ petition was disposed of with these directions.
Issues: Recovery proceedings without due process of law, encashment of cheques, provisional assessment order, final assessment order, tax liability crystallization
In 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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