Facts of the Case

  • The petitioners filed a cluster of writ petitions challenging a common order dated October 13, 2008, issued by the Deputy Commissioner of Income-tax, Central Circle-13, New Delhi.
  • The impugned order was purportedly passed under Section 281-B of the Income-tax Act, 1961, placing various movable and immovable properties of the petitioners under provisional attachment for a period of six months.
  • The Revenue Department initiated this provisional attachment on the ground that assessment proceedings under Section 153-A of the Act for the Assessment Years (AY) 2000-01 to 2006-07 were currently pending.
  • The Revenue indicated that information gathered in the case revealed a likelihood of a massive tax demand being created upon the completion of these assessments, for which the statutory limitation deadline was December 31, 2008.

Issues Involved

  • Whether provisional attachment orders under Section 281-B can legally stand when the underlying assessment proceedings under Section 153-A are allegedly barred by limitation.
  • Whether assessment proceedings under Section 153-A can be deemed legally "pending" against specific assessees (namely ALM Exports, ALM Infotech City Pvt. Ltd, ALM Global Finlease Limited, and Rendezvous Commercial Mall Private Limited) when no physical search operations were actually conducted on their premises.
  • How to balance the statutory interest of protecting government revenue under Section 281-B with the operational and business continuity rights of the assessees.

Petitioner’s Arguments

  • The learned Senior Counsel for the petitioners argued that the ongoing assessment proceedings under Section 153-A of the Income-tax Act were entirely time-barred.
  • It was emphasized that while this objection regarding the limitation period was formally raised before the Assessing Officer (AO), the AO had failed to adjudicate or rule upon the issue.
  • For four specific assessees—ALM Exports, ALM Infotech City Pvt. Ltd, ALM Global Finlease Limited, and Rendezvous Commercial Mall Private Limited—it was strictly contended that no search operations were conducted. Consequently, Section 153-A proceedings could not legally be treated as "pending" in the eyes of the law.
  • Without prejudice to these legal objections, the petitioners offered a cooperative mechanism to protect the interest of the revenue, volunteering not to alienate specific immovable properties and requesting conditional operation of their essential business bank accounts.

Respondent’s Arguments

  • The Revenue, represented by its standing counsel, defended the provisional attachment order dated October 13, 2008, as a necessary protective measure under Section 281-B.
  • The department maintained that the information unearthed during their investigation pointed toward a substantial tax liability.
  • Because the statutory deadline to finalize the pending Section 153-A assessments was fast approaching (December 31, 2008), the provisional attachment of movable and immovable assets was imperative to prevent the dissipation of assets before the final demand could be formalised.

Court Order / Findings

  • The Delhi High Court, comprising Hon'ble Justice Badar Durrez Ahmed and Hon'ble Justice Rajiv Shakdher, modified the impugned provisional attachment order by recording and accepting the voluntary undertakings of the petitioners.
  • Regarding Immovable Properties: The Court took note of the petitioners' undertaking regarding properties listed at Serial Nos. 2, 3, 4, and 5 of the impugned order. The petitioners were ordered not to transfer, alienate, create third-party interests, part with possession (in whole or in part), or create any charge on these assets. Formal undertakings to this effect were directed to be filed within one week.
  • Regarding Property No. 1: Since the petitioners stated that the property listed at Serial No. 1 did not belong to any of them, the Court did not pass any regulatory orders regarding it.
  • Regarding Bank Accounts (Movable Assets): To ensure business continuity, the Court permitted the petitioners to operate all 16 bank accounts listed at Serial Nos. 1 to 16, subject to the condition that they be utilized solely for running the ordinary course of the petitioners' business. The petitioners were strictly mandated to maintain complete and full records of all transactions.
  • Duration of Order: The Court ordered that this modified arrangement would remain operational until 10 days after the final assessment orders are passed, after which the writ petitions and interim applications stood disposed of.

Important Clarification

  • The High Court explicitly clarified that a provisional attachment order issued under Section 281-B can operate only and exclusively in respect of the specific assessees in question and is strictly confined to their quantified shares in the movable and immovable assets indicated in the impugned order. It cannot extend to third-party properties or non-assessees.

Section Involved

  • Section 281-B of the Income-tax Act, 1961 (Provisional attachment to protect revenue in certain cases).
  • Section 153-A of the Income-tax Act, 1961 (Assessment in case of search or requisition).

Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2008:DHC:5862-DB/BDA24102008CW76002008_172151.pdf

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