AO can’t make provisional attachment without forming an opinion on non-fulfillment of tax demand: HC

Case Details: Indian Minreals and Granite Co. v. DCIT - [2022] 137 taxmann.com 119 (Karnataka)

Judiciary and Counsel Details

• • S.R. Krishna Kumar, J.
  • M.V. Seshachala, Sr. Counsel, Gangadhar J.M. and Praveen P. Tarikar, Advs. for the Petitioner. 
  • Y.V. Raviraj, Adv. for the Respondent.

Facts of the Case

A search under section 132 was conducted upon the assessee pursuant to which assessment proceedings under section 153A were initiated. During said proceedings, the Deputy Commissioner had passed an order to provisionally attach the fixed deposit of the assessee by invoking section 281B.

The assessee filed a writ petition before the Karnataka High Court against such attachment.

High Court Held

The Karnataka High Court held that the exercise of power for order of provisional attachment must necessarily be preceded by the formation of an opinion by the authorities that it is necessary to do so to protect the interest of revenue.

Before passing the provisional attachment order, the commissioner must form an opinion based on tangible material available for attachment that the assessee is not likely to fulfil the demand payment of tax.

In the instant case, except for merely stating that since there is a likelihood of huge tax payments to be raised on completion of assessment and that to protect the revenue, other mandatory requirements and pre-condition have neither been complied with nor fulfilled or followed before passing the order.

Accordingly, the impugned provisional attachment orders do not satisfy the legal requirements and, consequently, said provisional order were cryptic, unreasoned, non-speaking and laconic, same deserve to be quashed.

Case Review

• • Radha Krishnan Industries v. State of Himachal Pradesh [2021] 127 taxmann.com 26/86 GST 665 (SC) (para 9) followed.

List of Cases Referred to

• • Radha Krishan Industries v. State of Himachal Pradesh [2021] 127 taxmann.com 26/86 GST 665 (SC) (para 4)
  • Sahara India (Firm) v. CIT [2008] 169 Taxman 328/300 ITR 403 (SC) (para 4).