Court orders lifting of attachment on commercial property due to disproportionate tax demand.

The court directed the Income Tax Department to lift the attachment on the commercial property by a specified date. The court found that the attachment was disproportionate to the outstanding tax demand, as the value of the attached properties far exceeded the demand. Lifting the attachment on the commercial property would enable the petitioner to pay the tax under the resolution scheme without prejudicing the Income Tax Department, which was already secured by other assets. The petition was allowed, and no costs were awarded.

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Issues Involved:
1. Legality of attachment of immovable property and bank accounts by the Income Tax Department.
2. Proportionality of the attachment concerning the outstanding tax demand.
3. Petitioner's request for lifting the attachment to pay tax under the Direct Tax Vivad Se Vishwas Act, 2020.

Issue-wise Detailed Analysis:

1. Legality of Attachment:
The petitioner challenged the attachment of their commercial property and bank accounts by the Income Tax Department under Article 226 of the Constitution of India. The Tax Recovery Officer attached the properties under section 222 read with Rule 48 of the Second Schedule to the Income Tax Act, 1961, and the bank accounts under section 226(3) of the Act. The petitioner argued that the attachment orders were excessive and disproportionate to the outstanding tax demand.

2. Proportionality of Attachment:
The petitioner contended that the total outstanding demand was Rs. 1.08 crores, whereas the attached properties' fair market value was significantly higher. Specifically, the residential property alone was valued at Rs. 3.71 crores, and the commercial property was valued at Rs. 81.40 lakhs. The petitioner argued that the attachment was disproportionate, as the total value of the attached properties and bank accounts far exceeded the outstanding tax demand. The court noted that the Income Tax Department was fully secured with the attachment of the residential property and five bank accounts, which collectively had a value much higher than the outstanding demand.

3. Request for Lifting Attachment:
The petitioner sought the release of the attachment on the commercial property to sell it and use the proceeds to pay tax under the Direct Tax Vivad Se Vishwas Act, 2020, for a company where the petitioner is a director. The court found merit in the petitioner's argument, noting that lifting the attachment on the commercial property would not prejudice the Income Tax Department, as the department was already secured by the residential property and bank accounts. The court emphasized that lifting the attachment would enable the petitioner to pay the tax under the resolution scheme, thereby achieving the scheme's purpose.

Judgment:
The court directed the Income Tax Department to lift the attachment on the commercial property situated at World Trade Centre, Office No. 407, Udhna Darwaja, Ring Road, Surat, by 30th March 2021. The court reasoned that there was sufficient security against the outstanding demand, and lifting the attachment would allow the petitioner to pay the tax under the resolution scheme. The petition was allowed, and the rule was made absolute to the extent of lifting the attachment on the commercial property. No order as to costs was made, and direct service was permitted.

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