Facts of the Case

  • The writ petitions were filed against a common order dated October 13, 2008, passed by the Deputy Commissioner of Income-tax, Central Circle-13, New Delhi.
  • The Revenue issued a provisional attachment order under Section 281-B of the Income-tax Act, 1961, attaching various movable and immovable properties of the petitioners for six months.
  • The provisional attachment was initiated on the grounds that assessments under Section 153-A for the Assessment Years 2000-01 to 2006-07 were pending.
  • The Revenue indicated that information gathered revealed a substantial demand was likely to be created upon completion of the assessments, which had a statutory completion deadline of December 31, 2008.

Issues Involved

  • Whether provisional attachment under Section 281-B is valid when the underlying assessment proceedings under Section 153-A are alleged to be time-barred and unadjudicated by the Assessing Officer.
  • Whether assessment proceedings under Section 153-A can legally be considered "pending" against assessees in whose cases no search operations were actually conducted.
  • How to balance the protective interests of the Revenue with the operational business continuity of the assessees during pending assessments.

Petitioner’s Arguments

  • The learned Senior Counsel contended that the ongoing proceedings under Section 153-A of the Act were legally time-barred. Despite raising this preliminary objection before the Assessing Officer, it remained unadjudicated.
  • It was specifically argued that for four particular assessees—namely, ALM Exports, ALM Infotech City Pvt. Ltd, ALM Global Finlease Limited, and Rendezvous Commercial Mall Private Limited—no search operations were ever conducted. Therefore, Section 153-A proceedings could not legally exist or be deemed "pending in law" against them.
  • To exhibit bona fide intent and protect revenue interests, the petitioners offered structured legal undertakings to restrict the alienation of their specific immovable assets and regulate their bank accounts strictly for business operations.

Respondent’s Arguments

  • The Revenue, represented by its counsel, defended the provisional attachment order under Section 281-B, asserting its necessity to safeguard the interests of government revenue.
  • The Revenue relied on the gathered information indicating that the conclusion of the pending search assessments under Section 153-A would lead to a significant tax demand, thereby justifying the preemptive attachment of assets prior to the December 31, 2008 deadline.

Court Order / Findings

  • Modification of Impugned Order: The Delhi High Court modified the Deputy Commissioner's rigid attachment order by substituting it with strict judicial undertakings offered by the petitioners.
  • Immovable Properties Directive: Regarding the properties listed at Serial Nos. 2, 3, 4, and 5, the Court directed the petitioners to file a formal undertaking within one week affirming that they shall not transfer, alienate, create third-party interests, part with possession, or create any charge on these assets. Property No. 1 was excluded from the directive as it did not belong to the petitioners.
  • Movable Assets & Business Operation Directive: For the bank accounts listed at Serial Nos. 1 to 16, the Court allowed the petitioners to operate them, but strictly for running the day-to-day ordinary course of business. The petitioners were mandated to maintain full and complete records of all transactions.
  • Duration of Relief: The Court ordered that these modified directions and undertakings would operate and remain in force until 10 days after the passing of the final assessment order.
  • Scope of Attachment: The Court clarified that the provisional attachment order would only operate in respect of the specific assessees and their defined shares in the movable/immovable assets.

Important Clarification

The Court effectively established a balanced precedent: complete freezing of corporate bank accounts via Section 281-B can paralyze a business. By allowing the operation of bank accounts for ordinary business expenses subject to meticulous record-keeping and strict asset non-alienation undertakings, the Court ensured that revenue is secured without shutting down commercial entities during uncompleted, disputed Section 153-A assessments.

Section Involved

  • Primary Section: Section 281-B of the Income-tax Act, 1961 (Provisional attachment to protect revenue in certain cases).
  • Consequential Section: 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:5868-DB/BDA24102008CW76092008_172554.pdf

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