Court sets aside attachment order, directs removal of assets & bank accounts attachment, expedites pending petition disposal

The court allowed the writ petition, setting aside the provisional attachment order dated 15th January 2019 and ordering the removal of the attachment of the petitioner's assets and bank accounts. The court also directed the Principal CIT to expeditiously dispose of the petitioner's pending petition challenging the demand. The court found the respondents' actions, including continuing the attachment post-assessment completion and substantial tax collection, unjustified.

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Issues Involved:
1. Legality of the provisional attachment order dated 15th January 2019 under Section 281-B of the Income Tax Act, 1961.
2. Legality of the order dated 19th June 2019 declining to stay the demand and release the bank accounts and other assets from attachment.
3. Validity of the assessment and reassessment proceedings and the treatment of option money and sale consideration as business income.

Detailed Analysis:

1. Legality of the provisional attachment order dated 15th January 2019 under Section 281-B of the Income Tax Act, 1961:
The petitioner, M/s Dabur Invest Corp, challenged the provisional attachment order issued by the Additional Commissioner of Income Tax under Section 281-B of the Income Tax Act, 1961, which ordered the assets of the petitioner to be kept under provisional attachment for six months. The petitioner argued that the attachment was illegal and contrary to Section 281-B, as it was meant only to protect the revenue during the pendency of assessment proceedings and prior to the final tax demand determination. The court noted that the Assessing Officer (AO) must form an opinion that provisional attachment is necessary to protect the revenue's interest, which was not evident in the impugned order. The court referenced the decision in Motorola Solutions India Pvt. Ltd. v. CIT, which clarified that provisional attachment should not continue once the assessment is complete. Consequently, the court set aside the provisional attachment order.

2. Legality of the order dated 19th June 2019 declining to stay the demand and release the bank accounts and other assets from attachment:
The petitioner also challenged the order dated 19th June 2019, which declined to stay the demand and release the bank accounts and other assets from attachment. The court observed that over Rs. 185 crores had already been collected from the petitioner against a total demand of Rs. 873.4 crores, with significant percentages of the demand collected for various assessment years. The court found no justification for continuing the attachment of assets and bank accounts under Section 226 (3) of the Act, given the substantial amount already collected. Therefore, the court ordered the removal of the attachment of the petitioner’s assets and bank accounts.

3. Validity of the assessment and reassessment proceedings and the treatment of option money and sale consideration as business income:
The petitioner disclosed long-term capital gains on the sale of a 23% stake in Aviva Life Insurance Company India Limited in the Assessment Year (AY) 2017-2018. The AO treated the option money received annually as business income and reassessed the returns for several assessment years, raising significant tax demands. The petitioner appealed against these reassessment orders, and the ITAT ruled in favor of the petitioner for AYs 2013-2014 and 2014-2015, holding that the option money was refundable and linked to capital contribution. The court noted that the ITAT had stayed the demand for AY 2015-2016 and that the petitioner had succeeded in appeals for AYs 2013-2014 and 2014-2015, making the tax paid refundable. The court found that the continuation of the attachment was not justified, especially since the assessments were complete and a substantial amount had already been collected.

Conclusion:
The court allowed the writ petition, set aside the provisional attachment order dated 15th January 2019, and ordered the removal of the attachment of the petitioner’s assets and bank accounts. The court also directed the Principal CIT to expeditiously dispose of the petitioner's pending petition challenging the demand. The court found the actions of the respondents, including the continuation of the attachment after the assessment's completion and the substantial collection of tax, to be unjustified.

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