TaxTMI 
TaxTMI 
2024 (3) TMI 605
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....titions filed under Article 226 of the Constitution of India. Facts in Writ Petition (L) No. 2633 of 2024 4. The Petitioner is a partnership firm. The Petitioner is engaged in the business of Gold Bullion trading since the last 80 years and is a holder of all requisite licenses. The Petitioner holds Gold License bearing No. 141/G/89. 5. Based on certain intelligence, a search operation came to be conducted on 29th April 2022 by the officers of Respondent Nos. 2 and 3 at the office premises of the Petitioner. Consequent thereto, a Panchnama dated 29th April 2022 was prepared. It is the case of the Petitioner that no incriminating evidence was found at the aforesaid premises, as also the stock available at the premises was tallying with the books of accounts. 6. At the time of the search, the Petitioner was informed that the said operation was being conducted due to intelligence received by Respondent No. 3 that a party namely M/s. SL. Creation was alleged to have been involved in the activity of smuggling gold into India. Later on, during the course of investigation, the officers of Respondent Nos. 2 and 3 also indicated that they were also investigating Gyanesh Jewel Go....
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....Ladulal Kanther, who is also a working partner in the partnership firm Maxis Bullion. On 28th April 2022, a search operation in the name of the firm Maxis Bullion was conducted at the Petitioner's office premises, which is the same as the premises of Maxis Bullion. Further, a search operation was also conducted at the residential address of the sole proprietor of the Petitioner at A 301, Flat No. 53, Mangal Tower, Sector No. 17, Vashi, Navi Mumbai, Maharashtra. A Panchnama dated 28th April 2022 was prepared pursuant to the search operation by the Respondents in the name of Maxis Bullion and also certain documents were seized. 13. At the time of the search, the Petitioner's Proprietor was present at the office premises and was informed that the said operation was being conducted due to purported intelligence received by the Respondent Authorities, that Maxis Bullion had entered into a domestic purchase transaction with an importer, namely Shubhang Enterprises, who had illegally smuggled Gold Bullion into India. 14. Thereafter, the Petitioner was informed by Respondent No. 5 - Kotak Mahindra Bank, by email dated 23rd January 2024, that the Bank account of the Petitioner was fro....
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.... Petitioner. In further course of business, the said two kgs of Gold Bullion came to be sold by the Petitioner into the local market. The Petitioner made payments to Shubhang Enterprises against the said invoices via banking channel i.e. RTGS / NEFT. 17. Thereafter, based on certain intelligence, a search operation came to be conducted on 28th April 2022, by the officers of Respondent Nos. 2 and 4, at the office premises of the Petitioner and also at the residential address of the partner of the Petitioner, Pallav Ladulal Kanther, located at A 301, Flat No. 53, Mangal Tower, Sector No. 17, Vashi, Navi Mumbai, Maharashtra. A Panchnama dated 28th April 2022 was prepared by the Superintendent of Customs (P), R & I, Mumbai Customs, pursuant to the said search operation. During the said search operation, certain documents were also seized and taken into custody by the Customs Authorities. A Panchnama in pursuance of the said search operation conducted at the residential premises of Pallav Ladulal Kanther was not provided. It is the case of the Petitioner that no incriminating evidence was found at any of the aforesaid premises. 18. At the time of the search, the Petitioner's partn....
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....nt No. 6 - ICICI Bank Ltd and Respondent No. 7 - Yes Bank vide emails dated 30th January 2024 and 1st February 2024 respectively, that the status of the Petitioner's bank accounts in the said banks was changed from 'No Freeze' to 'Debit Freeze'. Further, on the basis of the notices dated 11th January 2024 received by Respondent No. 6 and Respondent No. 7 respectively, they informed the Petitioner that its account had been frozen under the instructions received from the Ministry of Finance, Department of Revenue. 24. It is in these circumstances, that the Petitioner has filed the present Petition, under Article 226 of the Constitution of India, seeking the following final reliefs: "a. That this Hon'ble Court be pleased to hold and declare that freezing of the Petitioner's Current Account No. 8209963019 held with Respondent No. 5, pursuant to the direction of the Respondent authorities is bad in law; a-1) That this Hon'ble Court be pleased to hold and declare that freezing of the Petitioners Current Account No. 026105009854 held with Respondent No. 6 Bank and Current Account No. 018963700001635 held with Respondent No. 7 Bank, pursuant to the directio....
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....walla submitted that, in the said Judgment, it was held that the power to order a provisional attachment of the property of a taxable person, including a bank account, is draconian in nature, and the conditions which are prescribed by the statute for a valid exercise of that power must be strictly fulfilled. He further submitted that the exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue. He submitted that in the judgment Radha Krishan Industries (Supra), the Supreme Court had further observed that, before ordering provisional attachment, the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore it is necessary to order provisional attachment for the purpose of protecting the interest of the government revenue. Submissions on behalf of the Respondents 27. Mr. Mishra, the learned counsel for the Respondents, relied on the Affidavit in Reply filed on behalf of Respondent No. 3. Mr. Mishra first submitted that the le....
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....(5) of the Act. 33. Mr. Mishra submitted that, for all these reasons, these Writ Petitions ought to be dismissed. Analysis And Conclusion 34. We have heard the learned counsel for the parties and with their assistance, we have perused the documents on record. 35. Before dealing with the rival contentions of the parties, as the action as impugned is under Section 110(5) of the Act, it would be appropriate to set out the said which reads as under: "(5) Where the proper officer, during any proceedings under the Act, is of the opinion that for the purposes of protecting the interest of revenue or preventing smuggling, it is necessary so to do, he may, with the approval of the Principal Commissioner of Customs or Commissioner of Customs, by order in writing, provisionally attach any bank account for a period not exceeding six months: Provided that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform such extension of time to the person whose bank account is provisionally attached, before the expiry of the period so specified." ....
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....ficer and any such decision is required to undergo a rigorous scrutiny of the Principal Commissioner or the Commissioner. Each of these components of Section 110(5) are integral to a valid exercise of power. In other words, when the exercise of power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory pre-conditions by the Principal Commissioner of the Commissioner. While conditioning the exercise of power on the formation of an opinion of the Principal Commissioner / Commissioner that, "for the purpose of protecting the interest of revenue or preventing smuggling it is necessary so to do", it is evident that the statute has not left formation of the opinion to an unguided subjective discretion of the proper officer or for that matter the Principal Commissioner / Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of government revenue and / or preventing smuggling. 40. Further, such provisional attachment is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallised. Therefore, ....
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....s evident that the said provision was inserted in the statute with effect from 1st August, 2019. Besides, from the tone and tenor of the sub-section it is apparent that it is not a procedural provision per se; rather it is coercive in nature, though the procedure is also laid down for giving effect to the said provision. Being a coercive provision, there has to be strict compliance to the procedure laid down. In such circumstances and having regard to its very nature, such a provision can only have prospective operation and not retrospective operation. Infact, the concerned Finance Act makes it explicit by making the provision effective from a prospective date i.e. from 1st August, 2019. 30. Letter from the office of the Principal Commissioner of Customs to the Branch Manager of IDFC Bank was issued on 1st March, 2019 for freezing of the bank account of the petitioner. This was prior to insertion of sub-section (5) in Section 110 with effect from 1st August, 2019. Therefore, it is quite clear that this provision could not have been invoked for freezing the bank account of the petitioner. 31. Even otherwise, we find that the above provision can only be invoked in t....
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....so lays down a clear position in the context in hand would involve. The said judgment was delivered in the context of Section 83 of the Himachal Pradesh Goods and Service Tax Act, 2017, which also provided for provisional attachment. Paragraphs 41 to 51 of the said judgment are relevant and read as under: "41 Sub-Section (1) of Section 83 can be bifurcated into several parts. The first part provides an insight on when in point of time or at which stage the power can be exercised. The second part specifies the authority to whom the power to order a provisional attachment is entrusted. The third part defines the conditions which must be fulfilled to validate the power or ordering a provisional attachment. The fourth part indicates the manner in which an attachment is to be leveled. The final and the fifth part defines the nature of the property which can be attached. Each of these special divisions which have been explained above is for convenience of exposition. While they are not watertight compartments, ultimately and together they aid in validating an understanding of the statute. Each of the above five parts is now interpreted and explained below: (i) ....
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....son whose attendance is considered necessary to give evidence or produce a document or any other things in any enquiry in the manner which is provided in the case of a civil court under the CPC. 44. Section 74 is extracted below: "74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful mis-statement or suppression of facts. - (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful mis-statement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice alongwith interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice. (2) The proper officer shall issue the notice under s....
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....iod of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund. (11) Where any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent of such tax within thirty days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded. Explanation-1. - For the purposes of section 73 and this section,- (i) the expression "all proceedings in respect of the said notice" shall not include proceedings under section 132; and (ii) where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been concluded under section 73 or section 74, the proceedings against all the persons liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded. Explanation-2. - For the purpose of this Act, the expres....
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....eable to tax is authorized to determine the amount of tax, interest and penalty due and to issue an order. A period of five years is stipulated by sub-Section (10) for the issuance of an order in sub-Section (9). Sub-Section (11) stipulates that upon service of an order under sub-Section (9), all proceedings in respect of the notice shall be deemed to be concluded upon the person paying the tax with interest under Section 50 and a penalty equivalent to 50 per cent of the tax within thirty days of the communication of an order. These provisions indicate how sub-Sections (5), (8) and (11) operate at different stages of the process. 48. Now in this backdrop, it becomes necessary to emphasize that before the Commissioner can levy a provisional attachment, there must be a formation of "the opinion" and that it is necessary "so to do" for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency ....
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....equirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assesses can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make preemptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. 50. These expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportio....
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....nduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under Section 45 of the VAT Act." (emphasis supplied) 51. We adopt the test of the existence of "tangible material". In this context, reference may be made to the decision of this Court in the Commissioner of Income Tax v Kelvinator of India Limited (2010) 2 SCC 723. Mr Justice SH Kapadia (as the learned Chief Justice then was) while considering the expression "reason to believe" in Section 147 of the Income Tax Act 1961 that income chargeable to tax has escaped assessment inter alia by the omission or failure of the assessee to disclose fully and truly all material facts necessary for th....
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....make a mockery of the provisions of Section 110(5) and deprive the Petitioners of all the safeguards provided in Section 110(5) before the power of provisional attachment can be exercised. As stated hereinabove, in the present case, no order in writing records the opinion of the proper officer, namely that, for the purpose of protecting the interests of revenue or preventing smuggling, it had become necessary to provisionally attach the bank accounts of the Petitioners. In our view, there is a total non-compliance of the provisions of Section 110(5) of the Act while provisionally attaching the bank accounts of the Petitioners. For this reason, the provisional attachment on all the bank accounts of the Petitioners will have to be declared as illegal and lifting the impugned provisional attachment and defreezing of the bank accounts of the Petitioners will have to be directed. 48. As far as the issue of jurisdiction as raised by the Respondents is concerned, we are not at all inclined to accept the same. Although the letters to the banks directing them to provisionally attach the bank accounts have been issued from Rajasthan, the bank accounts which have been provisionally attache....