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Calcutta High Court · body

2015 DIGILAW 377 (CAL)

Sarathi Majumdar v. Income Tax Officer

2015-04-27

SANJIB BANERJEE

body2015
JUDGMENT : The grievance of the petitioner is that the assessing officer while raising a demand for additional tax on the petitioning assessee has passed an order of provisional attachment of the petitioner’s bank accounts. The petitioner says that such order of attachment prevents the petitioner from paying off the amount demanded since he cannot operate his accounts. 2. By a notice of demand issued under Section 156 of the Income Tax Act, 1961, the concerned income tax officer has required the petitioner to pay a sum of Rs.22,05,020/- on the basis of an order passed under Section 143(3) of the Act. The amount was required to be paid to the authorised bank within 30 days of the service of the notice. The concerned official has reminded the petitioner that the failure of the petitioner to pay the amount within the time specified would render the petitioner liable to pay simple interest at one and one-half per cent for every month or part thereof after the expiry of the 30-day period. 3. The petitioner says that simultaneously with issuing the notice of demand to the petitioner on March 30, 2015, the income tax officer wrote to the petitioner’s bank directing it not to pay any amount to the petitioner or to any person out of the accounts maintained by the petitioner in such bank. The notice to the bank dated March 30, 2015 refers to Section 281B of the Act. The petitioner claims to have been made aware of the order of attachment by the concerned bank. 4. According to the petitioner, any demand for payment of tax under the said Act ordinarily affords the assessee a period of 30 days from the date of receipt of the demand to make the payment. The petitioner says that in this case the demand expressly gave the petitioner 30 days’ time to meet the demand. The petitioner refers to Section 281B of the Act and the authority to pass an order of provisional attachment thereunder. Section 281B(1) of the Act, without its explanation, provides as follows in its material part:- “281B. The petitioner says that in this case the demand expressly gave the petitioner 30 days’ time to meet the demand. The petitioner refers to Section 281B of the Act and the authority to pass an order of provisional attachment thereunder. Section 281B(1) of the Act, without its explanation, provides as follows in its material part:- “281B. Provisional attachment to protect revenue in certain cases.– (1) Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General, Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule.” 5. Sub-section (2) provides that an order of provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order. However, the provision also recognises that the order may be extended by officers of certain ranks indicating the reasons in writing, for a period not exceeding two years or sixty days after the date of order of assessment or reassessment, whichever is later. 6. The petitioner’s contention that the order of assessment and the order of provisional attachment could not have been made in the same breath does not appeal in view of the proviso to subsection (2) of Section 281B of the Act that permits the continuation of an order of provisional attachment beyond the date of the order of assessment or reassessment. 7. Every order of attachment, in the ordinary sense, implies that there is an apprehension that the person liable may not discharge his financial obligation and the assets of such person are frozen, so to say, in full or in part till the adjudication as to the obligation is completed and the obligation is discharged in accordance with law. It is in the light of such principle that Order XXXVIII Rule 5 of the Code permits an order of attachment to be sought and made long prior to the adjudication of the money claim in the concerned civil suit. It is in the light of such principle that Order XXXVIII Rule 5 of the Code permits an order of attachment to be sought and made long prior to the adjudication of the money claim in the concerned civil suit. It is also in acknowledgement of such principle that an order of attachment is not ordinarily discharged upon the suit being decreed, but it is more often than not extended till such time that the decretal debt is discharged. The Code of Civil Procedure, 1908 contemplates orders of attachment being passed both before judgment and after the decree till the decree is satisfied. 8. If the revenue authorities apprehend or perceive that circumstances exist that would justify the making of an order of provisional assessment against an assessee or the assets or bank accounts of an assessee, it would defy logic to raise a demand on the assessee and discharge the order of provisional assessment immediately thereupon. A demand is not the end of the exercise; the exercise is completed upon the demand being discharged by payment or upon the demand being annulled in accordance with law. If the object of Section 281B of the Act is to protect the interest of the revenue so that a dodgy assessee may not dissipate his assets without discharging his obligation to the revenue, Section 281B of the Act cannot be read to imply that the making of an order of assessment or reassessment would amount to the conclusion of the proceedings that would extinguish the order of provisional attachment notwithstanding the demand based on the assessment or reassessment not being discharged. An order of provisional attachment, in other words, is not coterminous with the order of assessment or reassessment being made; it will continue unless expressly discharged or unless it runs out by efflux of the time recognised in the relevant provision. 9. For the present purpose, the expression “during the pendency of any proceedings for the assessment of any income” appearing in the opening limb of Section 281B of the said Act would imply the period when the exercise of assessing the income is undertaken and till the meaningful culmination of such exercise either upon discharge of the demand by payment or the annulment of the assessment or the demand in accordance with law. The mere issuance of the demand upon the assessment will not render the order of provisional attachment made under Section 281B of the Act ineffective immediately thereupon. 10. The petitioner has referred to a Division Bench judgment of the Punjab and Haryana High Court rendered on November 26, 2012 in CWP 22229 of 2012 (Motorola Solutions India Pvt. Ltd vs. Commissioner of Income Tax, Faridabad). The issue that arose in such matter was whether an order of provisional attachment could be made under Section 281B of the Act prior to the assessee being in default within the meaning of the expression “assessee in default” under such statute. The court held, at paragraph 13 of the judgment, that the argument that “even after the passing of the assessment order, provisional attachment order shall still remain in force for six months, does not merit acceptance and is, thus, rejected.” With respect, the interpretation cannot be accepted since the very purpose of an order of attachment is defeated if the attachment dissolves upon the demand being made and not at a later time or upon the demand being satisfied or dislodged in accordance with law. 11. There is no merit in the petition as the assessing officer had due authority to pass the order of provisional attachment simultaneously with raising the demand upon completing the assessment of the petitioner’s income. Indeed, the concerned official must be commended for having taken the right step in protecting the interest of the revenue till such time that the demand is honoured. 12. However, notwithstanding this order, it will be open to the petitioning assessee to approach the concerned income tax officer for the limited purpose of allowing the bank to honour the cheque covering the payment demanded. 13. W.P. 8583 (W) of 2015 is disposed of with costs assessed at 200 GM. After the order is passed, a prayer is made for a direction on the appellate authority to dispose of the appeal expeditiously. If an appeal has been preferred against the order of assessment or the demand issued by the assessing officer, the appellate authority is requested to dispose of the same within a period of six months from the date of receipt of a copy of this order. 14. Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance with the requisite formalities.