Factual Matrix Explanation
Factual Matrix Explanation
Tarun Naidu
2014032
Semester 7
FACTUAL MATRIX EXPLANATION
Asst. Commissioner of Income Tax, Central Circle 1(3) Bengaluru, Income Tax
Department, Ministry of Finance, Government of India jad ordered for the following
:-
1. Provisional attachment u/s 28lB of Income Tax Act,1961 for tax demand
likely to be raised by the Income Tax Department on the following
shareholders of the Company:
(ii)V G Siddhartha
JUDICIAL APPROACH
EXPLANATION OF SECTION 281B OF IT ACT
In brief, Section 281B allows an Income Tax Assessing Officer to seize an asset
temporarily if he feels that it is necessary to do so for “protecting the interest of
revenue”. This provision allows for seizure right at the time of an assessment or
reassessment which has “escaped assessment”. Till the time that investigations are
pending the ownership of the asset is held in abeyance. That is the legal meaning of
the word ‘attachment’.To ensure that such attachments of sources of income, in this
case equity dividends, are not made at the whim of the Assessing Officer, it is
provided that at least four other senior authorities (including the Principal
Commissioner of Income Tax) consent to such an action. The duration for which the
asset can be kept in seizure at a time is 6 months. Further extension would again
require permission from higher authorities but the total duration cannot exceed two
years in any case.
This provision for turning an unsecured debt into a secured debt at the stage of
investigation caused a furore even when it was introduced in 1995 and then re-
enforced by a circular in 2004. There is a similar provision (Order 38, Rule 5) in the
Civil Procedure Code, 1908 which allows for attachment of assets in order to comply
with a judgement but courts have ruled in safeguards that mimic the situation in 281B.
Such orders for attachment enable drastic and extraordinary authority to a plaintiff.
They are to be used sparingly. 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.
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.
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."
CONCLUSION
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.
There is no merit in the CDEL’s objections 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