Tax recovery attachment must cease when the appellate order is implemented and no enforceable tax demand remains outstanding.

Tax recovery attachment under Sections 222 and 225 of the Income-tax Act and Rule 12 of the Second Schedule depends on an enforceable demand and the assessee being in default. Where the ITAT has conclusively resolved factual issues, the appellate order has been implemented, and the resulting demand has been paid or reduced to nil, a pending or potential departmental appeal does not justify retaining the attachment. The Tax Recovery Officer must remove the attachment in accordance with applicable jurisdictional law. Revenue may commence fresh recovery proceedings if it later succeeds and a valid demand arises.

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Issues: Whether a tax recovery attachment must be lifted after the Income Tax Appellate Tribunal has conclusively decided the factual issues, the appellate order has been given effect to, and the tax arrears have been paid.

Analysis: Under Sections 222 and 225 of the Income-tax Act, 1961 and Rule 12 of the Second Schedule to the Income-tax Act, 1961, attachment is a recovery measure founded on the existence of an enforceable demand and the assessee's status as a defaulter. Once the Income Tax Appellate Tribunal, as the highest fact-finding authority, has conclusively disposed of the factual issues, its order has been given effect to, and the resulting demand has been paid or reduced to nil, the mere possibility or pendency of a further departmental appeal does not justify continuation of the attachment. The Tax Recovery Officer is bound by the applicable jurisdictional law and must lift the attachment, while the Revenue remains entitled to initiate fresh recovery proceedings in accordance with law if it subsequently succeeds and a valid demand is created.

Conclusion: The attachment order must be lifted.

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