AO can’t attach property of any person other than assessee while resorting provisions to sec. 281B: HC

Case Details: Raghunandan Enterprise v. ACIT - [2022] 139 taxmann.com 51 (Gujarat)

Judiciary and Counsel Details

• • J.b. Pardiwala & Ms Nisha M. Thakore, Jj.
  • B.S. Soparkar for the Petitioner.
  • Mrs Kalpanak Raval for the Respondent.

Facts of the Case

A search and seizure were undertaken under section 132 at the premises of a person and many documents were seized that showed instances of tax evasion by the assessee. On the likelihood of huge demand, Assessing Officer (AO) passed an order of provisional attachment of various properties of the assessee under section 281B.

In the list of properties belonging to the assessee and one property was owned by partnership Firm. Said property was also attached on the ground that the assessee derived 2.50% share in the profit from one of the partners of the partnership firm.

Partnership Firm filed the writ petition before the Gujarat High Court against the action taken by AO.

High Court Held

The High Court held that the language of the provisions of section 281B is plain and simple which provides for the attachment of the property of the assessee only and no one else.

The golden rule of interpretation of the statutes is that the statute has to be construed according to its plain, literal, and grammatical meaning unless it leads to absurdity. The attached property in the given case didn’t belong to the assessee and thus couldn’t be provisionally attached.

There is a fine distinction between a case where a partner of a firm assigns his share in favour of a third person and a case where a partner constitutes a sub-partnership with his share in the main partnership. Assigning a percentage of a share in profit by a partner to a third person cannot be equated with the situation that a sub-partnership came into existence.

Considering the fact of the case, provisional attachment of property of partnership firm on the ground that the assessee was assigned share in profit by one of the partner was untenable.

List of Cases Reviewed

• • CIT v. Sunil J. Kinariwala [2003] 126 Taxman 161/259 ITR 10 (SC) (para 24) followed.

List of Cases Referred to

• • Addanki Narayanappa v. Bhaskara Krishnappa AIR 1966 SC 1300 (para 7)
  • CIT v. Sunil J. Kinariwala [2003] 126 Taxman 161/259 ITR 10 (SC) (para 11).