Facts of the Case

  • The petitioner faced a total tax demand of ₹56.48 crore across three assessment years.
  • The department directed payment of ₹35.42 crore pending appeal before CIT(A).
  • Bank deposits worth approximately ₹42 crore were provisionally attached under Section 281B.
  • Partial release of deposits occurred, with remaining attachment of approx. ₹2.14 crore.
  • The petitioner had already filed an appeal before CIT(A) against the assessment order dated 29.07.2022.

Issues Involved

  1. Whether coercive recovery of substantial tax demand is justified during pendency of appeal.
  2. Applicability of CBDT guidelines prescribing 20% deposit of disputed demand.
  3. Legality and proportionality of provisional attachment under Section 281B.
  4. Balancing revenue interest vs taxpayer’s right to pursue appeal.

Petitioner’s Arguments

  • The demand for immediate payment of a large portion of tax was arbitrary and excessive.
  • The petitioner had sufficient financial capacity to satisfy the demand if unsuccessful in appeal.
  • Attachment of large deposits was disproportionate and oppressive.
  • Reliance placed on CBDT circular limiting recovery to 20% of disputed demand.

Respondent’s Arguments

  • The department justified attachment under Section 281B to secure revenue interest.
  • It argued that substantial funds were already secured through bank deposits.
  • Revenue emphasized the need to protect government dues pending adjudication.

Court’s Findings / Order

  • The Court applied the CBDT guideline (20% rule) as a reasonable benchmark.
  • Held that 20% of total demand (₹11.29 crore approx.) would suffice to protect revenue interest.
  • Since ₹2.14 crore was already secured, petitioner directed to deposit balance ₹9.15 crore within 4 weeks.
  • Directed bank to transfer attached deposit to revenue authority.
  • Ordered:
    • No coercive action after deposit until appeal disposal
    • CIT(A) to decide appeal expeditiously on merits
  • Writ petitions disposed accordingly.

Important Clarifications by Court

  • CBDT circular prescribing 20% deposit is a guiding principle and should be followed unless exceptional circumstances exist.
  • Revenue cannot insist on higher arbitrary deposits without justification.
  • Provisional attachment must be proportionate and not excessive.
  • Protection of taxpayer rights during appeal is essential.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS19072023CW78542023_142754.pdf

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