Bank account restraint during pending tax appeal held unsustainable under the recovery scheme

The Gujarat HC considered whether a State Tax Officer could restrain a bank from permitting operation of a dealer's current account after the assessment order was challenged and the second appeal remained pending. It explained that recovery under the tax scheme follows a notice of demand under Section 42, Section 43 applies where appeals or other proceedings are pending, Section 44 is a garnishee-style recovery mechanism, and Section 45 allows provisional attachment only during assessment or reassessment. As the matter had moved beyond assessment and the Tribunal had not yet dealt with interim relief, the bank restraint was held unsustainable in law and was quashed.

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Issues: Whether the State Tax Officer could direct the bank not to permit the dealer to operate its current account when the assessment order had been challenged in appeal, the first appeal had been partly allowed, and the second appeal was pending before the Tribunal.

Analysis: The statutory scheme contemplates recovery after a notice of demand under Section 42, and Section 43 operates where an appeal or other proceedings are pending. Section 44 is a special mode of recovery in the nature of a garnishee provision, while Section 45 permits provisional attachment only during assessment or reassessment proceedings. In the present case, the dealer had already moved beyond assessment and the second appeal was pending before the Tribunal, which had not yet considered even the interim relief application. In that situation, the impugned bank restraint could not be sustained in law.

Conclusion: The bank restriction was illegal and was quashed. The writ application succeeded in favour of the assessee.

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