TaxTMI 
TaxTMI 
TaxTMI 
2005 (12) TMI 52
X X X X Extracts X X X X
X X X X Extracts X X X X
....poration, dated December 9, 2001, with the Registrar of Companies, U.P. and Uttaranchal, to carry on business in real estate and petitioner No. 2 who is the managing director is also doing business of kirana goods in the name and style of M/s. Chandra Kamal Agency. He is also the managing director of M/s. Kanhe Media Pvt. Ltd., which is engaged in publication of a daily newspaper known as Sri India. The case of the petitioners is that none of them are engaged in any manufacturing activities and as such the provisions of the Central Excise Act, 1944, are not applicable to them. The officials of the Central Excise Department searched the residential premises of the managing director of the company on June 8, 2002, and seized certain documents, computer and cash. The company is having a current account No. 28430 with the Union Bank of India in which the balance as on April 29, 2002, was Rs. 6,80,905 and also has four DRCs (fixed deposit account Nos. 7538 to 7541) in the aforesaid bank amounting to Rs. 44 lakhs. The pass book and the fixed deposit receipts were not seized by the officials of the Central Excise Department, but in the panchnama prepared at the time of search and seizure ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....petitioner-company. The Department has allotted a permanent account number to the petitioner-company, vide annexure 8 to the writ petition. The petitioner-company has filed its return of income for the assessment year 2002-03 which was accepted by the Department. For the assessment year 2003-04 assessment proceedings were completed under section 143(1) of the Act and a sum of Rs. 35,231 was refunded on account of the excess deduction of tax at source. Further, the case is that the amount in the aforesaid accounts is the share application money received by the petitioner-company. The two brothers of petitioner No. 2 are doing separate business of manufacturing gutkha and none of the petitioners have any concern with their business. No warrant of authorisation, requisition was served upon petitioner No. 2, namely, Chandra Mohan Sahu. The documents seized by the officials of the Central Excise Department do not relate to the petitioners and that is the reason that the income-tax officials in exercise of powers conferred under section 132A of the Act have called for the reply from (i) M/s. Chandra Kamal Corporation Pvt. Ltd; (ii) M/s. Chandra Kamal Agency; (iii) M/s. Chandra Kamal Gro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been passed by the Commissioner of Income-tax. In reply to the supplementary affidavit a counter affidavit affirmed by Shri Durga Prasad Agnihotri has been filed, annexing copies of two letters dated June 8, 2005 and June 7, annexures-1 and 2, where under the Assessing Officer has been informed that the Commissioner of Income-tax-2, Kanpur, has been pleased to extend the provisional attachment under section 281B for a further period of six months that is up to December 21, 2005. But copy of the actual order extending the period has not been enclosed. Heard Shri Rakesh Kumar, learned counsel for the petitioners, and Shri Govind Krishna, learned standing counsel for the contesting respondents Nos. 1, 2 and 3. Learned counsel for the petitioners submitted that exercise of power under section 281B by the Assessing Officer is wholly arbitrary and unwarranted in law. He submitted that there is no material in the possession of the Department to form an opinion that the petitioner-company which was incorporated on December 9, 2001, in whose name the bank accounts and fixed deposit receipts stand would not pay the income-tax dues which would be ultimately found due. Elaborating the arg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner, Commissioner, Director-General or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule... (2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1): Provided that the Chief Commissioner, Commissioner, Director-General or Director may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years. Provided further that where an application for settlement under section 245C is made, the period commencing from the date on which such application is made and ending with the date on which an order under sub-section (1) of section 245D is made shall be excluded from the period specified in the preceding proviso." A bare perusal of section 281B would show that two conditions are necessary for invoking it. Firstly, the existence of "opinion" of the Assessing Officer that for the purpose of protecting the interests of the Revenue it is necessary to provisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned by the Income-tax Department do not relate to the business activities of either of the petitioners. As a matter of fact the enquiries on the basis of these documents are directed by the Department against certain persons other than the petitioners. It may be noted here that the case was partly heard on November 30, 2005, and on that day it was ordered to be put up tomorrow, i.e., on December 1, 2005. On December 1, 2005, learned standing counsel for the Department has filed second supplementary affidavit sworn by Sri Ram Singh, Income-tax Inspector of ITO-6(2), annexing therewith copy of the order sheet relating to the assessment years 2002-03 and 2003-2004, with respect to the petitioner-company (annexure 1 to the supplementary affidavit). From a perusal of the order sheet it is clear that notice under section 153A read with section 153C was issued on December 22, 2004, and return for the assessment year 2002-03 was filed on January 27, 2005. The return for the assessment year 2003-04 was filed on March 31, 2004. Thereafter no date was fixed by the Assessing Officer. The contention of the petitioner which cannot be said to be wholly irrelevant, is that when he filed the sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essary to attach the property in order to protect the interests of the Revenue. The provisional attachment provided under section 281B of the Act is more like an attachment before the judgment under the Code of Civil Procedure. It is a liability on the property. However, the power conferred upon the assessing authority is very drastic, far-reaching power and that power has to be used sparingly and only on the substantive weighty grounds and reasons... One thing is clear that this power should be exercised by the Assessing Officer only if there is reasonable apprehension that the assessee may default the ultimate collection of the demand, i.e., likely to be raised on completion of the assessment, it should, therefore, be exercised with extreme care and caution. It should not be exercised unless there is sufficient and relevant material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of the property with a view to thwarting the ultimate collection of the demand. Moreover, the attachment should be made of the properties and to the extent it is required to be achieved the above object." The foremost legal requirement is that the pow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to invoke section 281B of the Act. The reason is simple. In every case where assessment has to take place it is the bounden duty of the Assessing Officer to make such enquiries as are necessary to complete the assessment apart from the above the petitioner-company is an assessee newly borne on the file of the Income-tax Department as it was incorporated only on December 9, 2001, and indisputably it filed returns of income up to the assessment year 2003-2004, which was finalised by the Department. There is no history of the petitioner-company to show that on any occasion earlier it failed to discharge its liability. Apart from the above as has been held by the Bombay High Court in the case of Gandhi Trading v. ACIT [1999] 239 ITR 337 that the attachment of the bank accounts is the last resort. The Department if it is of the opinion that the assessee is likely to dispose of its property to thwart the payment of income-tax dues, the Department should provisionally attach the immovable property of such assessee first. Resort to blanket attachment of the entire bank accounts of an assessee has serious consequence on its rights to carry on the business. The action of the Department in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. The Department was required to place on record before the court the reasons recorded by the Commissioner of Income-tax for granting approval for extension of the order passed under section 281B of the Act. The disclosure of reasons recorded by the Commissioner of Income-tax would have thrown some light on the controversy, i.e., it is a case of gossip or hearsay or something more than that. An adverse inference should be drawn against the Department for withholding the reasons, if any, recorded by the Commissioner of Income-tax. It is not out of place to refer to a case of the apex court, strongly relied upon by the petitioners, in a somewhat similar statutory set up while interpreting section 132(8) of the Act, wherein it was held as follows: "132. (8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner for such retention is obtained: Provided that the Commissioner shall not authorise the retention of the book....