Introduction
The Income Tax Act, 1961 (ITA), holds provisions for provisional attachment of property during ongoing income assessment proceedings. The question arises: Whether any Officer authorized under the Income Tax Act (ITA), 1961 can exercise the power of extension of provisional attachment under 1st proviso of section 281B(2) of the Income Tax Act, 1961? To answer this, we’ll delve into the relevant sections of the ITA and examine judicial interpretations.
1. Before going to discuss the interpretation of section 281B of the Income Tax Act, 1961 (Hereinafter referred to as “ITA”). We would like to produce the relevant extract of section 281B of the ITA as under:
“281B. Provisional attachment to protect revenue in certain cases.
(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 or for imposition of penalty under section 271AAD where the amount or aggregate of amounts of penalty likely to be imposed under the said section exceeds two crore rupees, 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.
(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.”
2. I would like to states here that sub section 1 of section 281B of the ITA proclaims that during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income etc, the assessing officer may provisionally attach the property of the asesssee with the prior approval of approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director etc for protecting the interest of revenue.
3. Further, sub section (2) of section 281B of ITA proclaims that Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order of provisional attachment.
4. 1st proviso of section 281B (2) of ITA proclaims that the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director may extend the provisional attachment further period but not more than 2 years with recording reasons.
5. Now let us determine whether extension of period of provisional attachment of property can be done by the assessing officer or only the officer who is authorized under 1st proviso of Section 281B (2) of the ITA. For that we will discuss the judgments/ orders pronounced by various Hon’ble court in favour of assesse as well as in favour of revenue.
Judgment pronounced by Hon’ble Court in favour of assesse and against the Assessee
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Sr. No. |
Judgment pronounced by Hon’ble Court in favour of assesse |
| 01. | Hon’ble Gujarat High Court in the case of Ilaben Ramanlal Zariwala vs. Ilaben Ramanlal Zariwala vide Special Civil Leave Application No. 1723 OF 1978. The relevant extract of the judgment is reproduced as under:
” From the letter addressed to the Agent, State Bank of India, Surat, on September 26, 1978, a copy of which is also kept on the record of the case, it does not appear anywhere that the order of extension was passed by the CIT. This is an intimation sent by the ITO concerned, the fourth respondent herein, to the Agent, State Bank of India, Surat, that the period of attachment was to continue till further orders of the ITO. How the ITO could have sent this intimation that the period of attachment was extended until further orders is difficult to understand and appreciate. However, it is obvious that if the documents which are shown to us do not amount to an order of extension of time passed by the CIT after recording in writing his reasons for the extension of time, the attachment cannot continue after 26th September, 1978, because the period of six months contemplated by s. 281B(2) came to an end on September 26, 1978. In our opinion, though the proposal was approved and to that extent it is possible to say by stretching the language that the Commissioner decided that the period of attachment should be extended, yet there is no order by the Commissioner himself that the period of provisional attachment should be extended by a further period of six months. The only possible reason for extension of time which emerges from the documents before us is “as the enquiry is still pending”. The Commissioner does not appear to have found out why the inquiry was still pending and how long the inquiry was likely to take. The Commissioner does not seem to have applied his mind to any reasons for the extension of the period of attachment for a further period of six months beyond this ipse dixit of the ITO concerned that the inquiry was still pending. In our opinion, this is a mere apology for reasons to be recorded in writing and not the reasons which are contemplated by the proviso to s. 281B(2). Under these circumstances, the only conclusion that we could reach is that appropriate order for extension of the period of provisional attachment as contemplated by the proviso to s. 281B(2) has not been passed in the instant case (1) by the officer concerned, and (2) in the manner in which and after satisfying the conditions precedent which are prescribed by the proviso. Under these circumstances, it is obvious that the period of provisional attachment expired by efflux of time on September 26, 1978.” |
| 02. | Hon’ble Madras High Court in the case of Seshasayee Paper & Boards Ltd vs Commissioner of Income-tax vide W.P. NO. 1787 OF 2003. The relevant extract of the judgment is reproduced as under:
“9. Even assuming that such an endorsement is an order by the Commissioner of Income-tax, the fact remains that no reasons have been recorded. Section 281B(2), proviso, makes it clear that an order for extension of attachment under section 281B(1) can be made only for reasons to be recorded in writing. In the absence of reasons being recorded by the Commissioner of Income-tax, such an order, contained in the file, must be taken to be illegal and without jurisdiction. Subsequent communication, containing the so-called reasons, has been given by the Deputy Commissioner of Income-tax. There is no dispute that the Deputy Commissioner of Income-tax is not the person authorised under section 281B(2), proviso.” |
| S. No. | Judgment pronounced by Hon’ble Court in favour of Revenue |
| 01. |
Nimitya Properties Limited vs Commissioner of Income Tax and Others “8. Insofar as orders dated 03.08.2009 extending this attachment is concerned, his submission was that this order was passed by the AO who was not the Competent Authority, as such an extension order could be passed only by the Commissioner. …… 17. This argument is found to be factually incorrect and militates against the record. We find that the Assistant Commissioner of Income Tax (Central Circle-22) had addressed a letter dated 24.07.2009 to the Commissioner of Income Tax pointing out about the attachment orders dated 26.02.2009 passed by the AO with prior approval of the Commissioner of Income Tax. It was further mentioned in this communication that in many of the group cases, the orders under Section 127 of the Act were yet to be passed, the case records were yet to be received, further notices to be issued, inquiries, investigations to be made and thereafter only assessment orders could be passed. The request was, therefore, made for extension to the provisional attachment. On this, the Commissioner gave his approval on 31.07.2009 in the following manner: “I have gone through the proposal of the AO. In view of the facts mentioned in the proposal, I am satisfied that this is a fit case to extend the provisional attachment upto 31.07.2010. The A.O. shall make efforts to complete the assessments as early as possible.” 18. After the aforesaid approval was given on the file, letter dated 31.07.2009 was written by the Deputy Commissioner of Income Tax to the Assistant Commissioner of the Income Tax informing him about the approval. The led to passing of the orders dated 03.08.2009 and in this order also it is specifically mentioned that the same is issued after taking approval from the CIT (Central)-III, New Delhi. |
6. As we know the statue gives power to do certain thing in certain way, in the same manner when we peruse 1st proviso of section 281B(2) of ITA which is empower to exercise of extension of provisional attachment to the officer prescribed under 1st proviso of section 281B(2) of ITA.
7. For that I rely upon the judgment pronounced by Bombay High Court in the case of Nazir Ahmad Vs Emperor (No. 2) on 16 June, 1936 wherein the Hon’ble court held that whenever the statue gives power to do certain things in certain way, then the things to be done in that way not any other way. The relevant extract of the judgment is reproduced as under:
“13. As a matter of good sense, the position of accused persons and the position of the magistracy are both to be considered. An examination of the Code shows how carefully and precisely denned is the procedure regulating what may be asked of or done in the matter of examination of accused persons and as to how the results are to be recorded and what use is to be made of such records. Nor is this surprising in a jurisdiction where it is not permissible for an accused person to give evidence on oath. So with regard to the Magistracy: it is for obvious reasons most undesirable that Magistrates and Judges should be in the position of witnesses in so far as it can be avoided. Sometimes it cannot be avoided, as under Section 533, but where matter can be made of record and therefore admissible as such, there are the strongest reasons of policy for supposing that the legislature designed that it should be made available in that form and no other.”
Conclusion: it is clear that if the statue empowers to do certain things by specify officer (Designated officer), then such power must be exercised by the specify officer (Designated officer) rather than any of the Officer authorized under ITA.
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