THE issue before the HC is - Whether when the case of the assessee is complicated and demand is not yet quantified, even then powers u/s 281B can be invoked for attaching property to safeguard the Revenue's interests. And the verdict goes against Revenue.
Assessee contended that the Department did not proceed to determine the liability, which should had been done only within 21 months from the date of getting the incriminating documents under the search and seizure operation in the financial year when the search was conducted u/s 132. Since the department did not take any steps to determine the liability and when the period of limitation was about to expire, Section 142(2A) was invoked, just 4 days before expiry of the limitation period for completion of the assessment. Even the first notice was given only after 17 months from conducting the search and seizure. Assessee contended that AO attached the various fixed deposits, bank accounts, insurance policies and immovable properties abusing the power u/s 281B and attached virtually the working capital by attaching the bills outstanding and in the order it was not mentioned how much of the amount of the assessee had been attached which was subsequently communicated to Rs. 17 crores. The assessee could not be blamed for delay in the proceedings as the revenue arbitrarily decided to proceed for attaching the immovable properly before even giving questionnaire to the assessee. The revenue did not look into the computer hard disk of the assessee to reach to the conclusion that the case involved more complex and complicated facts, which was required to be examined by sending it for special audit. Thus the Revenue could not have passed the order of attachment to the extent of valuation, which was not even known to the Revenue and the revenue admitted in the affidavit filed that they were not able to disclose the reason for attaching the property of crores of rupees. This was a case where at present there was no liability pending against the assessee and even the assessee was seeking refund of Rs.69.00 lakhs from the department. Therefore, there was no question of assessee's running away from the Department, who has duly co-operated in the matter all times.
Revenue contended that the power u/s 281B is very wide and the special provision had been made, where under the AO after forming opinion had passed the attachment order of the properties of the assessee to safeguard the Revenue's interest. In the case, even the former Chief Minister of Jharkhand State had direct links and there might be possibility of shifting out huge amount and the liability of the petitioner, though could not be assessed, due to larger magnitude. Revenue asked the assessee to furnish bank guarantee for withdrawal of the attachment order but the assessee did not submit the bank guarantee as demanded by the Revenue. Thus, to protect the interest of the revenue, the order was passed.
After hearing both the parties, the High Court held that,
Facts of the case
Assessment was made by the AO u/s 143(3) r.w.s 153A making additions in the returned income against which writ was filed and the High Court directed the CIT (A) to decide the appeal expeditiously and till then no coercive action be taken against the assessee. However, the appeals were disposed off as the post of the CIT (A) was lying vacant since long and the CIT (A) had not taken the charge. In the regular assessments the returned income was accepted and assessed. However in the search proceedings, the additions were made based on certain incriminating documents found during search.
Assessment was made by the AO u/s 143(3) r.w.s 153A making additions in the returned income against which writ was filed and the High Court directed the CIT (A) to decide the appeal expeditiously and till then no coercive action be taken against the assessee. However, the appeals were disposed off as the post of the CIT (A) was lying vacant since long and the CIT (A) had not taken the charge. In the regular assessments the returned income was accepted and assessed. However in the search proceedings, the additions were made based on certain incriminating documents found during search.
Assessee contended that the Department did not proceed to determine the liability, which should had been done only within 21 months from the date of getting the incriminating documents under the search and seizure operation in the financial year when the search was conducted u/s 132. Since the department did not take any steps to determine the liability and when the period of limitation was about to expire, Section 142(2A) was invoked, just 4 days before expiry of the limitation period for completion of the assessment. Even the first notice was given only after 17 months from conducting the search and seizure. Assessee contended that AO attached the various fixed deposits, bank accounts, insurance policies and immovable properties abusing the power u/s 281B and attached virtually the working capital by attaching the bills outstanding and in the order it was not mentioned how much of the amount of the assessee had been attached which was subsequently communicated to Rs. 17 crores. The assessee could not be blamed for delay in the proceedings as the revenue arbitrarily decided to proceed for attaching the immovable properly before even giving questionnaire to the assessee. The revenue did not look into the computer hard disk of the assessee to reach to the conclusion that the case involved more complex and complicated facts, which was required to be examined by sending it for special audit. Thus the Revenue could not have passed the order of attachment to the extent of valuation, which was not even known to the Revenue and the revenue admitted in the affidavit filed that they were not able to disclose the reason for attaching the property of crores of rupees. This was a case where at present there was no liability pending against the assessee and even the assessee was seeking refund of Rs.69.00 lakhs from the department. Therefore, there was no question of assessee's running away from the Department, who has duly co-operated in the matter all times.
Revenue contended that the power u/s 281B is very wide and the special provision had been made, where under the AO after forming opinion had passed the attachment order of the properties of the assessee to safeguard the Revenue's interest. In the case, even the former Chief Minister of Jharkhand State had direct links and there might be possibility of shifting out huge amount and the liability of the petitioner, though could not be assessed, due to larger magnitude. Revenue asked the assessee to furnish bank guarantee for withdrawal of the attachment order but the assessee did not submit the bank guarantee as demanded by the Revenue. Thus, to protect the interest of the revenue, the order was passed.
After hearing both the parties, the High Court held that,
++ the revenue stated that since the business of the assessee was in various sectors, all documents were required to be segregated and separated to club the mining operation activity and other activities for the purpose of deciding the liability. It is found that when material document itself were downloaded from the computer in the month of September, 2011 i.e. after almost 2 years from the search and seizure operation and next attachment order was passed even prior to it and time available to Revenue for completing of assessment was only 21 months, there may be complex and voluminous documentary evidence, which may have been obtained by the Revenue and though documents may be in haphazard manner, which may require skilled expert opinion, for which the special audit can be ordered and if the Department could have proceeded, it could have done so. The delay in the proceeding cannot be said to be fatal in all cases because of the reason that any time the Revenue may form opinion that there is possibility of shifting of money by the assessee;
++ regarding the justification of order of attachment of property and the amount of the money of the assessee lying with the JSEB, which is an amount of working capital of the assessee under business contracts at present Rs.17.00 Crores. This amount is an amount for which the assessee must have purchased something or must have obtained some services of some contractors also and he may require to pay amount to other parties also and there is no reason to believe that Rs.17.00 Crores of amount is amount of profit of the assessee. Though the powers are wide but should be exercised by the Assessing Officer only if there is reasonable apprehension that the assessee may thwart the ultimate collection of the demand, i.e., likely to be raised on completion of the assessment. The power of attachment under this section is in the nature of attachment before judgment under the C.P.C.. It should therefore, be exercised with extreme care and caution. It should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwart the ultimate collection of the demand. The revenue stated while passing the order that "there is likelihood of raising of substantial demand in this case" but the extent of the liability to the tune of the property sought to be attached and apprehension is that the assessee may dispose of the property is not there, anywhere. The order impugned does not disclose any reason for attachment and, therefore, for forming opinion requiring attachment of the property of the assessee and that too after attaching the assessee's fixed deposit and immovable property, there was no reason for proceeding to attach the working capital property of the assessee so as to justify and stop the business. Therefore, the order passed attaching the property of the assessee lying with the JSEB cannot be sustained and liable to be set aside.
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