It was carried by the Kerala High Court that cash in a bank account is a ‘property’ liable for provisional attachment u/s 281B of the Income Tax Act.
The Division Bench of Justices Sathish Ninan and Shoba Annamma Eapen stated that “the mere fact that a Bank account is not explicitly provided under Section 281B of the Income Tax Act, unlike the GST Act, 2017 which specifically mentions the same, cannot lead to the conclusion that Bank account is not liable to be attached under Section 281 B of the Act.”
The assessing officer (AO) has been provided with the authority under section 281B of the Income Tax Act to use the provisional attachment of the property as a tool/deterrence to pre-empt the chance of default in tax payment raised after an assessment/re-assessment.
In this case, the police seized a bigger cash amount from the taxpayer’s car. On the investigation and being fulfilled that there was no explanation for the cash nor was it accounted proceedings were started for it via the issuance of the notice under section 148 of the Income Tax Act.
It was discovered that the anticipated demand on assessment along with the penalty shall be an influential amount surpassing two crores, the payment of which the taxpayer shall evade, the competent authority of the department ordered provisional attachment of the bank accounts of taxpayer u/s 281B of the Income-tax Act.
In the writ petition, the cited orders were contested which was permitted. The department has contested the same order before the Kerala High Court.
The problem before the bench was is cash in a Bank account was ‘property’ obligated to attachment u/s 281B of the Income Tax Act, 1961.
After referring to sub-sections 3 and 4 of Section 281B of the Income Tax Act the taxpayer furnished that the term property cited in sub-section 1 can associate to immovable property. The provision towards the assessment of the fair market value of the property and providing bank guarantee to get release of attachment is a satisfactory indicator that the term ‘property’ cited in sub-section (1) is only, immovable property. The term at any rate cannot contain Bank deposits.
The bench opined that “Section 281B(1) provides for provisional attachment of “any property”. The prefix “any” to the word property has much significance. It indicates that the word ‘property’ occurring therein, is not to be comprehended in a restricted sense. Therefore, “any property” mentioned in Section 281B(1) would take within its sweep, money lying in Bank account also.”
It was mentioned by the bench that section 281B(1) defines, to regard whether a provisional attachment order is to be issued, the assessing officer should fulfil the feasible demand and the penalty shall surpass Rs 2 crores.
Read Also: Failure to Consider Assessee’s Request for Personal Hearing Violates Principles of Natural Justice
Hence the authorities are required to make a view concerning the probable demand, which cannot be cited with accuracy at that phase. But the attached scope of property along with the attachment of the money in the bank accounts must be proportionate with the demand along with the penalty.
“The proviso to Section 281B(3) indicates that the security required need only be to the extent sufficient to protect the interest of the revenue. Therefore, orders of provisional attachment under Section 281B should be commensurate with the probable demand including penalty, and should not be blanket orders attaching properties, the value of which would be much higher than the probable demand,” the bench said.
The bench in the above-mentioned view has permitted the plea.
| Case Title | Mohammed Salih vs. Assistant Commissioner Of Income Tax |
| Citation | W.A. Nos.1413, 1435 of 2024 |
| Date | 27.01.2025 |
| Counsel for Appellant/Department: | Navaneeth. N. Nath, Susie B Varghese, Jose Joseph |
| Kerala High Court | Read Order |
