Facts of the Case

  • The petitioners filed 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 passed under Section 281-B of the Income-tax Act, 1961, provisionally attaching various movable and immovable properties of the petitioners for a period of six months.
  • The Revenue Department initiated these attachments on the grounds that assessment proceedings under Section 153-A for the Assessment Years 2000-01 to 2006-07 were pending.
  • The Department indicated that information gathered revealed a massive tax demand was likely to be created upon the completion of these assessments (the statutory deadline for which was December 31, 2008).

Issues Involved

  1. Whether provisional attachment under Section 281-B is legally sustainable when the underlying assessment proceedings under Section 153-A are explicitly challenged as being time-barred.
  2. Whether Section 153-A assessment proceedings can legally be considered "pending" against assessees upon whom no search operations were actually conducted.
  3. How to equitably balance the Revenue’s interest in protecting potential tax demands with the Assessees' right to continue ordinary business operations without overly restrictive property freezes.

Petitioner’s Arguments

  • Time-Barred Proceedings: The petitioners contended that the ongoing proceedings under Section 153-A were legally time-barred. This jurisdictional objection was raised before the Assessing Officer (AO), but the AO failed to adjudicate upon it.
  • Absence of Search: For four specific 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 be deemed "pending" against them.
  • Protection of Revenue via Undertaking: To demonstrate bona fide intent and safeguard the revenue's interest, the petitioners offered a legal undertaking not to transfer, alienate, create third-party interests, part with possession, or create any charge on their immovable properties (listed at S. Nos. 2, 3, 4, and 5 of the impugned order).
  • Ownership Disclaimer: The petitioners clarified that the property listed at S.No. 1 of the impugned order did not belong to any of them, hence requiring no order.
  • Business Continuity: The petitioners sought permission to operate their attached bank accounts (S.Nos. 1 to 16) strictly for the ordinary course of running their business.

Respondent’s Arguments

  • The Revenue Department (represented by Mr. R.D. Jolly) defended the provisional attachment under Section 281-B, arguing it was a necessary precautionary measure.
  • Based on gathered information, a substantial tax demand was highly anticipated upon completing the pending evaluations for AY 2000-01 to 2006-07 before the December 31, 2008 deadline.

Court Order / Findings

  • Modification of Attachment: Moving past a rigid freeze, the Delhi High Court modified the omnibus provisional attachment order based on the mutual balance of interests.
  • Submission of Undertakings: The Court directed the petitioners to file a formal undertaking within one week promising not to alienate, transfer, or encumber the immovable properties at S.Nos. 2, 3, 4, and 5.
  • Conditional Operation of Bank Accounts: The Court permitted the petitioners to operate the attached bank accounts (S.Nos. 1 to 16) but strictly for running their business in the ordinary course. The petitioners were mandated to maintain full and complete records of all such transactions.
  • Duration of Order: The modified directions were ordered to remain operative until 10 days after the passing of the final assessment order.
  • Scope Limitation: The Court explicitly clarified that the provisional attachment order would only operate with respect to the specific assessees and their exact shares in the movable/immovable assets listed.

Important Clarification

  • The Court carved out an essential commercial buffer: provisionally attached bank accounts do not need to be completely frozen if the assessee utilizes them strictly to maintain business continuity, provided robust accounting records are maintained and no asset stripping occurs during pending assessments.

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:5864-DB/BDA24102008CW76052008_172334.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.