Facts of the Case

  • The petitioners filed a cluster of writ petitions challenging a common order dated 13.10.2008 passed by the Deputy Commissioner of Income-tax, Central Circle-13, New Delhi under Section 281-B of the Income-tax Act, 1961.
  • By virtue of this impugned order, various movable and immovable properties belonging to the petitioners were placed 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 for the Assessment Years (AY) 2000-01 to 2006-07 were pending, and information gathered revealed that a massive tax demand was likely to be created upon completion of the assessments (with a statutory deadline of 31.12.2008).

Issues Involved

  1. Whether the provisional attachment of movable and immovable properties under Section 281-B is legally sustainable when the underlying assessment proceedings under Section 153-A are alleged to be time-barred.
  2. Whether Section 153-A proceedings can be treated as pending in law against specific assessees (such as ALM Exports, ALM Infotech City Pvt. Ltd, ALM Global Finlease Limited, and Rendezvous Commercial Mall Private Limited) if no search was actually conducted on their premises.

Petitioner’s Arguments

  • The senior counsel for the petitioners contended that the assessment proceedings initiated under Section 153-A were entirely time-barred. This jurisdictional objection was raised before the Assessing Officer (AO), but the AO failed to adjudicate upon the issue.
  • It was specifically argued that for four distinct assessees—ALM Exports, ALM Infotech City Pvt. Ltd, ALM Global Finlease Limited, and Rendezvous Commercial Mall Private Limited—no search operations were ever conducted. Consequently, Section 153-A proceedings could not legally exist or be deemed "pending" against them.
  • Without prejudice to their legal stands, the petitioners offered to protect the revenue's interest by providing an explicit undertaking not to transfer, alienate, part with possession, or create any third-party rights/charges on their specified immovable properties.
  • They further requested that their frozen bank accounts be released for normal business operations, undertaking to maintain immaculate transaction records.

Respondent’s Arguments

  • The Revenue Department (represented by the standing counsel) maintained that the provisional attachment was crucial to protect the financial interest of the revenue.
  • They argued that based on the quantum of information collected during the search/investigation process, a massive tax liability was projected to surface once the pending assessments under Section 153-A were finalized.

Court Order / Findings

  • The Delhi High Court, after taking note of the mutual need to balance business continuity with revenue protection, modified the impugned attachment order based on the conditional undertakings offered by the petitioners.
  • Immovable Properties: The Court accepted the petitioners' undertaking that the immovable properties listed at Serial Nos. 2, 3, 4, and 5 of the impugned order shall not be transferred, alienated, or subjected to any third-party charge or possession transfers. No orders were passed for Serial No. 1 as it did not belong to the petitioners.
  • Movable Properties (Bank Accounts): The Court ordered that all bank accounts specified at Serial Nos. 1 to 16 be operated freely, but strictly for the purpose of running the ordinary course of the petitioners' business. The petitioners were mandated to maintain full and complete records of these transactions.
  • Duration: The High Court ordered that this modified arrangement would remain in active operation until 10 days after the passing of the final assessment order.

Important Clarification

  • The Court explicitly clarified that a provisional attachment order passed under Section 281-B operates strictly in respect of the specific assessees and their defined shares in the movable and immovable assets highlighted in the impugned order, preventing arbitrary extensions of the freeze to third-party assets.

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:5867-DB/BDA24102008CW76082008_172523.pdf

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