Search & seizure action u/s 132 was undertaken at the assessee’s premises. Thereafter an order of provisional attachment u/s 281B was passed. The assessee filed a writ petition challenging the validity of the search and the provisional attachment. HELD dismissing the Petition:
(1) Search action u/s 132 can be initiated only if the designated authority forms a reasonable belief on the basis of information that one of the three conditions of s. 132 exist. However, it is not the mandate of s. 132 that the reasonable belief recorded by the designated authority must be disclosed to the assessee.
(2) On facts, the search was justified as the information received showed that the assessee had evaded tax by claiming deduction of business expenditure of Rs.170 allegedly paid to Cyprus / UK based companies towards marketing and advertisement expenses, but which were in fact credited by the said Cyprus & U.K. based companies in the private bank account of the assessee’s CMD in Cyprus.
(3) Attaching the properties of an assessee u/s 281B even before crystallization of the demand is a drastic step and has to be exercised only in extreme circumstances. On facts, as the incriminating documents prima facie established large scale tax fraud and as the assessee and as the assessee had failed to explain the same, the provisional attachment to protect the revenue’s interests was justified.
(4) Provisional attachment u/s 281B can be levied even where proceedings are yet to be initiated. Accordingly, the fact that notice u/s 153A and the order u/s 281B were issued on the same date did not affect the validity of the provisional attachment.