Provisional attachment of property to protect revenue as per the provisions of Section 281B of the Income Tax Act, 1961

The Taxation Laws (Amendment) Act, 1975, with effect from 01.10.1975 has inserted a section 281B with a view to empowering the Assessing Officer to make a provisional attachment of any property of the assessee during the pendency of any proceeding for assessment or reassessment of any income (even though there is no demand outstanding against the assessee), if he is of the opinion that it is necessary to do so to protect the interests of the revenue. It was stated that this new provision has been made in order to protect the interests of the revenue in cases where the raising of demand is likely to take time because of investigations and there is apprehension that the assessee, may thwart the ultimate collection of that demand .

Section 281B of the Income Tax Act, 1961 provides that the Assessing Officer may provisionally attach any property of the assessee during the pendency of assessment or reassessment proceedings, for a period of six months with the prior approval of the income- tax authorities specified therein, if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. Such attachment of property is extendable to a maximum period of two years or sixty days after the date of assessment order, whichever is later.

Text of Section 281B

PROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES.

281B. (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 or Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule.

Explanation.—[Omitted by the Finance Act, 2016, with effect from 01.06.2016]

(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 Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director 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 or sixty days after the date of order of assessment or reassessment, whichever is later.

(3) Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the fair market value of the property provisionally attached under sub-section (1), the Assessing Officer shall, by an order in writing, revoke such attachment:

Provided that where the Assessing Officer is satisfied that a guarantee from a scheduled bank for an amount lower than the fair market value of the property is sufficient to protect the interests of the revenue, he may accept such guarantee and revoke the attachment.

(4) The Assessing Officer may, for the purposes of determining the value of the property provisionally attached under sub-section (1), make a reference to the Valuation Officer referred to in section 142A, who shall estimate the fair market value of the property in the manner provided under that section and submit a report of the estimate to the Assessing Officer within a period of thirty days from the date of receipt of such reference.

(5) An order revoking the provisional attachment under sub-section (3) shall be made—

 (i)  within forty-five days from the date of receipt of the guarantee, where a reference to the Valuation Officer has been made under sub-section (4); or

 (ii)  within fifteen days from the date of receipt of guarantee in any other case.

(6) Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay that sum within the time specified in the notice of demand, the Assessing Officer may invoke the guarantee furnished under sub-section (3), wholly or in part, to recover the amount.

(7) The Assessing Officer shall, in the interests of the revenue, invoke the bank guarantee, if the assessee fails to renew the guarantee referred to in sub-section (3), or fails to furnish a new guarantee from a scheduled bank for an equal amount, fifteen days before the expiry of the guarantee referred to in sub-section (3).

(8) The amount realised by invoking the guarantee referred to in sub-section (3) shall be adjusted against the existing demand which is payable by the assessee and the balance amount, if any, shall be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of the Reserve Bank of India or the State Bank of India or of its subsidiaries or any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of sub-section (1) of section 45 of the Reserve Bank of India Act, 1934 (2 of 1934) at the place where the office of the Principal Commissioner or Commissioner is situate.

(9) Where the Assessing Officer is satisfied that the guarantee referred to in sub-section (3) is not required any more to protect the interests of the revenue, he shall release that guarantee forthwith.

Explanation.—For the purposes of this section, the expression "scheduled bank" shall mean a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).

Section 281B of the Act allows the Assessing Officer to attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. Legally “attachment” would mean imposing restriction upon some kind of property by the Court or some other competent, statutory authority. The order of “attachment” as such tells the owner of the property, the custodian of the property and the world at large not to deal with the property attached.

Power given to the authorities under Section 281B must be exercised with extreme care and caution

The Andhra Pradesh High Court in the case of Society for integrated Development in Urban and Rural Areas v. CIT observed that the power given to the authorities under Section 28 1B must be exercised with extreme care and caution. It should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. Attachment of bank accounts and the trading assets should be resorted to only as a last resort. In any event, attachment under section 281B should not be equated with attachment in the course of recovery proceedings. In this case the Hon’ble Court has recognized difference in the proceedings under Section 222 and Section 281B. – [Society for integrated Development in Urban and Rural Areas v. CIT (2001) 252 ITR 642 (AP)]

Release of attached property on submission of a bank guarantee

Under Section 281B of the Act, the Assessing Officer has the power to provisionally attach the assets, with the approval of the CIT/CCIT. Such an attachment is supposed to be temporary, with a limit of six months, extendable to a maximum of 24 months. However, in many cases, the taxpayer challenges the validity of the proceedings itself by a writ, wherein the proceedings for an assessment may be stayed, or opts for an AAR ruling and obtains a stay on the assessment till the AAR decision, which can further prolong the duration of the attachment under this section. As the attachment of its property can obstruct its business reorganisation plans, it can become the primary source of its grievance with the tax authorities.

Revocation of property attached on furnishing of Bank guarantee

The Income Tax Simplification Committee (Easwar Committee) has recommended that provisional attachment of property could be substituted by a bank guarantee subject to fulfilment of certain conditions. Having considered this recommendation, it is proposed that the Assessing Officer shall revoke provisional attachment of property made under sub-section (1) of the aforesaid section in a case where the assessee furnishes a bank guarantee from a scheduled bank, for an amount not less than the fair market value of such provisionally attached property or for an amount which is sufficient to protect the interests of the revenue.

Clause 108 of Finance Bill 2016

Clause 108 of the Bill seeks to amend section 281B of the Income-tax Act relating to provisional attachment to protect revenue in certain cases.

The aforesaid section provides that the Assessing Officer has the power to provisionally attach any property of the assessee during the pendency of assessment or reassessment proceedings, for a period of six months, with the prior approval of the income-tax authorities specified therein, if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. Such attachment of property is extendable by the said income-tax authorities to a maximum period of two years or sixty days after the date of assessment order, whichever is later.

Explanation to sub-section (1) of section 281 B provides that proceedings under sub-section (5) of section 132 shall be deemed to be proceedings for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment. Sub-section (5) of section 132 stands omitted from 1st June, 2002. Therefore, it is proposed to omit the said Explanation.

In order to help the Assessing Officer to determine the fair market value of the property, the Assessing Officer may, make a reference to the Valuation Officer, who may be required to submit the report of the estimate of the property to the Assessing Officer within a period of thirty days from the date of receipt of such reference.

In order to ensure the revocation of attachment of property in lieu of bank guarantee in a time bound manner, it is provide that an order revoking the attachment be made by the Assessing Officer within fifteen days of receipt of such guarantee, and in a case where a reference is made to the Valuation Officer, within forty-five days from the date of receipt of such guarantee.

It is further provided that where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay such sum within the time specified in the notice, the Assessing Officer may invoke the bank guarantee, wholly or partly, to recover the said amount.

In a case where the assessee fails to renew the bank guarantee or fails to furnish a new guarantee from a scheduled bank for an equal amount fifteen days before the expiry of such guarantee, the Assessing Officer may in the interests of the revenue, invoke the bank guarantee. The amount realised by invoking the bank guarantee shall be adjusted against the existing demand which is payable and the balance amount, if any, be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of Reserve Bank of India or the State Bank of India or of its subsidiaries or any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of sub-section (1) of section 45 of the Reserve Bank of India Act, 1934 at the place where the office of the Principal Commissioner or Commissioner is situated.

It is also provided that in a case where the Assessing Officer is satisfied that the bank guarantee is not required anymore to protect the interests of the revenue, he shall release that guarantee forthwith.

 Periods of Limitation

Section	Nature of compliance	Limitation of time
281B(2)	Provisional attachment of assets of assessee	Attachment shall cease to have effect after expiry of six months (extendable up to 2 years or 60 days after date of order of assessment or reassessment, whichever is later) from date of order
281B(4)	Submitting valuation report by the Valuation Officer estimating fair market value of property provisionally attached	Within 30 days from the date of receipt of such reference [Applicable from 01.06.2016]
281B(5)	Revoking provisional attachment order under section 281B(3)	Within 45 days of receipt of guarantee [where reference is made to Valuation Officer under section 281B(4)] or within 15 days of receipt of guarantee [in any other case] [Applicable from 01.06.2016]
281B(7)	Invoking bank guarantee if assessee fails to renew guarantee referred to in section 281B(3)	Within 15 days before the expiry of guarantee referred to in section 281B(3) [Applicable from 01.06.2016]

Properties which can be attached

In case of jointly owned property, only undivided share of assessee can be attached provisionally and not entire property

It was held that where the property is coowned by the assessee, in case of arrears to tax in the hands of the individual, the assessee’s share in the HUF property can be attached to the extent of his possession / share in the joint property under section 281B of the Income tax Act. Fixed deposit in the name of HUF, only share of assessee can be attached and not entire fixed deposit. Provisional attachment was held to be invalid. – [S. Subramanian v. CIT (2004)186 CTR 286 : 136 Taxman 653 (Mad)

Fixed deposit in the name of HUF, only share of assessee can be attached and not entire fixed deposit. Provisional attachment was held to be invalid. – [Satyabir Singh v. CIT (2001) 248 ITR 785 (P&H)]

Properties which cannot be attached

As per Rule 10(1) of the second Schedule of the Income tax Act, all such property as is mentioned by the Code of Civil Procedure, 1908, (section-60 exemption from attachment and sale in execution of a decree of a Civil Court) shall be exempt from attachment and sale under the said schedule.

Text of Rule 10(1) of Second Schedule, Income-tax Act, 1961

PROPERTY EXEMPT FROM ATTACHMENT.

10. (1) All such property as is by the Code of Civil Procedure, 1908 (5 of 1908), exempted from attachment and sale in execution of a decree of a civil court shall be exempt from attachment and sale under this Schedule.

(2) The Tax Recovery Officer's decision as to what property is so entitled to exemption shall be conclusive.

Membership right in the Stock Exchange is not property of the assessee and therefore it cannot be attached under section 281B

It was held that on plain and combined reading of rules relating to membership of the Ahmedabad Stock Exchange, it is clear that the right of membership is merely a personal privilege granted to a member, it is not transferable and incapable of being alienation by the member or his legal representatives and heirs except to the limited extent as provided in the rules on the fulfilment of conditions provided therein. Hence, the garnishee notice against stock exchange was set aside. – [Stock Exchange v. ACIT (2001) 248 ITR 209(SC) & Vinay Bubna v. Stock Exchange (1999) 97 (Company Cases) 874 (SC)]

Only remedy against the provisional attachment is to file a writ petition under Article 226 of the Constitution of India.

The power of attachment gets more draconian as there is no provision for appeal against the order of attachment, unlike other orders like assessment order, which can be challenged before the CIT(A) and ITAT. The only remedy for the taxpayer is resort to writ petition before the High Courts.

CBDT’s Instruction No. 1884, dated 07.06.1991 — reference under section 226, 220, 281B — Provisional attachment of property under section 281B of the Income-tax Act, 1961.

Subject : Provisional attachment of property under section 281B of the Income-tax Act, 1961-regarding

Section 281B was inserted in the Income-tax Act, 1961 with effect from 01.10.1975 in order to protect the interest of revenue in cases where the raising of demand is likely to take time because of investigations and there is apprehension that the assessee may thwart the ultimate collection of demand.

2. This section provides that where, during the pendency of any proceeding for assessment or reassessment of any income including the proceedings under section 132(5) of Income-tax Act, the Assessing Officer is of the opinion that for the purpose of protecting the interest of the revenue it is necessary so to do, he may, with the previous approval of the Chief Commissioner/Commissioner of Income-tax, by an order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. The attachment is valid for 6 months from the date of order of attachment. This period of 6 months can be extended by the Chief Commissioner/Commissioner by a maximum period of 2 years.

3. The Board desire that the Assessing Officers should always bear in mind the provisions of the aforesaid section and resort to provisional attachment in all suitable cases.

4. These instructions may be brought to the notice of all officers in your region. [F. No. 396/21/90 - ITCC dated 07.06.1991 from CBDT]

Power should be exercised by the Assessing officer only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment

The High Court relied on ‘Halbury’s Laws of India (Direct Tax – II, Vol. 32) 2nd Edition, Halsbury’s Laws of India (Direct Tax – II, Vol. 32) 2nd edition, 7. Miscellaneous, which says that section 281B relating to making an attachment before judgment is legal if assessing authority is of opinion that it is necessary to protect the interests of revenue and the same is supported by supervening factor. It gives guidelines for making provisional attachment. The power, conferred upon the Assessing Officer is a very drastic far reaching power and that power has to be used sparingly and only on substantive weighty grounds and reasons. To ensure that this power is not misused, a number of safeguards have been provided in this section. This power should be exercised by the Assessing officer only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution. This power is to be exercised only if there is sufficient material on record to justify satisfaction that the assessee is about to dispose of whole or any part of his property with a view to thwarting ultimate collection of demand and in order to achieve said objective, attachment should be of properties and to extent it is required to achieve this object. It should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. – [Valerius Industries v. Union of India - Date of Judgement : 28.08.2019 (Guj)]

Reasoned order - When earlier assessment years Tribunal has suspended the recoveries arising out of demands made on similar issues – Order of provisional attachment under section 281B is set aside

Allowing the petition the Court held that, power under section 281B are drastic powers permitting the Assessing Officer to attach any property of an assessee even before completion of assessment or reassessment. These powers are thus in the nature of attachment before judgement. They have provisionally applicability and terms and limited life. Such powers must be exercised in appropriate cases for proper reasons. Such powers cannot be exercised merely by repeating the phraseology used in the section and recording the opinion of the officer passing such order that he was satisfied for the purpose of protecting the interest of revenue, it was necessary so to do. On facts when earlier assessment years Tribunal has suspended the recoveries arising out of demands made on similar issues. Order of provisional attachment is set aside. (Related Assessment year : 2016-17) – [Vodafone Idea Ltd v. DCIT (2019) 311 CTR 210 : 182 DTR 177 (Bom)]

Recovery of tax - Over 21% of demand already collected - Assessments concluded - No justification to continue with provisional attachment under section 281B

Allowing the petition the Court held that once the assessment was complete there would be no justification for continuing with the order under section 281B. Over 21% of demand already collected. Assessment is concluded hence no justification to continue with provisional attachment. Referred Instruction F. No. 404/22/2004-ITCC, and Circular No. 179, dated 30.09.1975 (1976) 102 ITR 9 (St) (Related Assessment years : 2005-06 to 2016-17) -  [Dabur Invest Corp. v. ACIT (2019) 416 ITR 282 : 310 CTR 591 : 266 Taxman 207 181 DTR 328 (Del)]

Provisional attachment under section 281B-Pendency of appeal – Stay -Directed the revenue authorities not to enforce the order until a decision is taken by the appellate Authority on stay application filed by the assessee

Assessee-company was engaged in business of development of immovable properties. Before passing of assessment order on 28.12.2018, an order dated 27.12.2018 was passed under section 281B attaching properties belonging to assessee in order to protect interest of revenue during assessment proceedings. Assessee filed petition contending that order under section 281B was a non-speaking order and thus void ab initio and also additions made in the assessment order. Court held that factual aspects of the assessment cannot be examined in the writ petition.  The order passed by the Assessing Officer under Section 281B of the Act has been ceased to have effect after the expiry of six months from the date of the order of the assessment. However provisional attachment was concerned, authorities were to be directed that order passed under section 281B would not be enforced until a decision was taken by appellate authority on stay application filed by assessee. Accordingly the  matter remanded. (Related Assessment Year : 2016-17) – [Duo Meadows (P) Ltd. v. ITO (2019) 265 Taxman 221 (Karn.)]

Provisional attachment under section 281B – Search -Attachment of bank accounts and two
immoveable properties - Tax, interest penalties were unlikely to exceed attached two
immoveable properties - Directed to lift provisional attachment on bank accounts
Pursuant to search action in order to protect interest of revenue, assessee's bank accounts and two
immovable properties had been put under provisional attachment. On writ the Assessee submitted that he being 65 years of age, such action of Department which had virtually prevented him from
accessing his own funds in bank accounts would cause great difficulty in meeting his day-to-day
expenses, to meet with special requirements for medical attention for himself and his aged mother.
Further, attachment on movable properties being enough to cover all possible tax, interest and penalty which may arise even if all defences of assessee were negative, attachment of back accounts be lifted. Court held that in view of fact that assessee's tax, interest and possible penalty liabilities were unlikely to exceed valuation of aforesaid two immovable properties; provisional attachment of his bank accounts was to be lifted without disturbing attachment of immovable properties till litigation with respect to alleged undisclosed foreign income was over. The petitioner is prevented from selling, transferring, creating any charge or encumbrances on the said two immovable properties till the present litigation is over or without leave of the Court. – [Darius Sammotashaw v. DIT (inv.) (2019) 265 Taxman 8 (Mag.)(Bom)]

Attachment in any case should not be made so as to cause irreversible detrimental effect to the business of the assessee

The Assessing Officer passed orders under section 281B(1) not only attaching the petitioner's plant, machinery, furniture and fixtures and fixed deposit lying with various banks but also its trade receivables. Assessee filed writ petition against the order. Held: The sine qua non to exercise power under section 281B is that Assessing Officer must be of the opinion that for the purpose of protecting the interest of Revenue, it was necessary to provisionally attach assessee's property during pendency of any proceedings. No such recording of opinion by Assessing Officer was found in his order. Power of attachment has to be exercised with care and caution. Attachment in any case should not be made so as to cause irreversible detrimental effect to the business of the assessee. Moreover, attachment of trading assets and bank accounts should be only resorted to as a last resort. These guidelines were ignored. Orders were to be vacated. (Related Assessment year : 2011-12) – [Supermax Personal Care (P) Ltd. v. ACIT & Ors. (2016) TaxPub (DT)2314 (Bom)]

Fixed deposit of third parties attachment is held not to be not valid - Section 281B provides for attachment of property of the assessee only and of no one else

Assessee was searched and articles were seized. Articles were released on bank guarantee on basis of fixed deposits receipts of third parties. Department issued garnishee proceedings against bank and attached the fixed deposits under section 226(3). Department passed the provisional attachment under section 281B. Department invoking the bank guarantee en cashed the fixed deposit. The Assessee challenged the order by way of the Writ, the Court held that the encashment of the fixed deposit was unjustified. The Court held that the fixed deposits did not belong to assessee hence attachment of fixed deposit receipts were not valid. - [Gopal Das Khandelwal v. Union of India (2012) 340 ITR 235 (All)

Power under Order XXXVIII Rule 5 is a drastic and extraordinary power and should be used sparingly and should not be exercised mechanically or merely for the asking

The Hon'ble Apex Court has in the case of Raman Tech. & Process Engg. Co. and another v. Solanki Traders, inter alia held as under:

"4. ... It is well settled that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an order of attachment before judgment, unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. Equally well settled is the position that even where the defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.

5. The power under Order 38 Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilise the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. ... ....

6. ......... .............. A plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 CPC. Courts should also keep in view the principles relating to grant of attachment before judgment. (See Premraj Mundra v. Md. Manech Gazi AIR 1951 Cal 156 for a clear summary of the principles)". -  [Raman Tech. & Process Engg. Co. and another v. Solanki Traders, (2008) 2 SCC 302 : ALL SCR 1216 (SC)]

It was held that the foremost legal requirement is that the power under a statute has to be exercised for the purpose of the statute in a judicious manner. It is also settled that the powers vested with any authority under various provisions of law can be exercised only for the stated purpose and for no other purpose. The principle laid down in this case, given in the context of Section 281B of the Income Tax Act, is very much valid for Section 73C of the Finance Act 1994, as well. – [Raghuram Grah (P) Ltd and Another v. ITO and Others (2006) 281 ITR 147 (All)]

Basis of opinion and past defaults: In the absence of any material or circumstances on the basis of which requisite opinion could be formed under section 281B and in the absence of any history of past defaults of the petitioner, the impugned order passed under section 281B provisionally attaching the bank accounts of the petitioner and extension thereof by the CIT was wholly illegal and unwarranted. – [Raghu Ram Grah (P) Ltd. v. ITO & Ors. (2006) 281 ITR 147 (All)]

A property was transferred to transferee and the transferee had paid full consideration and possession was taken by transferee - Assessee became the deemed owner of those flats even if the deed of conveyance were not executed in the name of assessee - The proceedings under section 281B cannot be initiated by attaching the property. Registration is not relevant to Income-tax Act

In the case of Electro Zavod (India) Pvt. Ltd. v. CIT, the issue was that the assessee had entered into an agreement for purchase of two flats on 29.04.1997. As per agreement the consideration of these flats was Rs. 21,50,500/-. The assessee paid the entire consideration to the seller of the property and the possession was taken on 07.05.1997. However, the conveyance deed was not executed in favour of assessee. In the mean time due to certain tax demand by the Income Tax Department on seller of the property, the flats purchased by the assessee were attached under section 281B of the Act. The said action was challenged by the assessee on the ground that it was the owner of the flats as the entire consideration has been paid to the seller and that the possession of the flats was also taken by him. However, the Departments view was that the assessee M/s. Electrro Zavod (India) Pvt. Ltd. was not the legal owner of the property because the deed of conveyance was not executed by the seller in the name of assessee. The Department was of the view that still the seller of the property was the legal owner of those flats. In a writ petition filed by the assessee, it was held by his lordship of Calcutta High Court that since the assessee has paid entire consideration and has also taken possession of flats, for the purpose of Section 2(47) of the Act, the transfer of property is completed and within the terms of Clause (iiia) of Section 27 of the Act, the assessee became the deemed owner of those flats even if the deed of conveyance were not executed in the name of assessee. It was held by the Hon'ble court that aforesaid properties cannot be attached under section 281B of the Act against the tax liability of the seller of the property. - [Electro Zavod (India) Pvt. Ltd v. CIT (2005) 278 ITR 187 (Cal.)]

Provisional attachment order should be in writing and spell out the reasons in the order and must be passed with the approval of the higher authority

It is prime importance that order for provisional attachment must be speaking based on facts of the case, in case of the mechanical order without any reasons are liable to be quashed. - [Gaurav Goel v. CIT (2000) 245 ITR 169 : 164 CTR 358 (Cal)]

Provisional attachment of FDs and bank accounts were invalid where immovable property of assessee attached earlier was sufficient to cover tax demand of assessee - The attachment of bank accounts and trading assets should be resorted to only as a last resort because, the attachment of the bank accounts of the assessee would paralyse the functions and business of the assessee

In the instant case, attachment has been made by the assessing officer under section 281B to ensure the recovery of the anticipated demand which is estimated at Rs. 2.68 crores. There is no demand outstanding. Because the anticipated demand was estimated at Rs. 2.68 crores and book value of the two immovable properties, which was the subject-matter of attachment, was only Rs.4.27 lakhs, the bank accounts and fixed deposits were attached. The contention of the assessee was that the two immovable properties attached by the assessing officer were worth Rs. 5.83 crores as per the valuation of the approved valuer as against the estimated tax liability of Rs. 2.68 crores. That being so, there was no justification for attaching the bank accounts and the FDs. of the assessee which has very seriously affected the day-to-day business of the assessee. The two properties of the assessee, which have been attached under section 281B having been valued by the Departmental Valuer at Rs. 2.66 crores against the anticipated liability of Rs. 2.68 crores, there was no justification whatsoever for allowing the continuation of attachment on the bank accounts and FDs. Therefore, it is directed that respondents should forthwith lift the attachment on the bank accounts and FDRs. Attachment of the two immovable properties would, however, continue until further orders. – [Gandhi Trading v. ACIT (1999) 239 ITR 337 : (2000) 158 CTR 512 (Bom)]