Section 281B – Provisional attachment of property – Treatment of amount realised by invoking bank guarantee – Clarification required


Section 281B empowers Assessing Officer to invoke bank guarantee wholly or in part if  demand raised on the assessee is not paid within time limit provided in the demand notice served. Very wide powers are conferred upon Assessing Officer. Mere nonpayment within notice period will empower Assessing Officer to invoke bank guarantee. There is no clarity on the situation where the application for stay of demand is pending before Assessing Officer or any higher authority or in case of automatic stay on payment of 15% demand.

The section provides that the amount collected by invoking bank guarantee is to be adjusted against demand payable and surplus, if any, to be deposited in personal deposit account of the Commissioner or Principal Commissioner in the branch of prescribed banks. Given that Section 281B(2) provides for maximum period of attachment to be 2 years from the date of attachment or 60 days from the date of assessment order, whichever is later, reasons for depositing the amount in the personal deposit account of authority and not to refund the same to the taxpayer is not clear.


It is suggested to clarify the aforesaid issues through appropriate amendments/circulars.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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