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2022 (12) TMI 1022 - HC - Income TaxProvisional attachment to protect revenue in certain cases u/s 281B - Orders provisionally attaching the subject fixed deposits of the petitioner for a period of six months - allegation was made by FEMA authorities against the petitioner in the proceedings - HELD THAT:- A perusal of the impugned order will indicate that except for stating that there is likely addition of the amount mentioned in the order, no reasons, much less valid or cogent reasons are assigned by the 1st respondent as to how and why he has formed an opinion that it was necessary to provisionally attach the fixed deposits of the petitioner for the purpose of protecting the interest of the revenue. The requirements and parameters preceding passing of a provisional attachment order came up for consideration before the Apex Court in the case of Radha Krishan Industries’ case [2021 (4) TMI 837 - SUPREME COURT] In the light of existence of a legal mandatory pre-requirement and precondition of recording of formation of opinion which is in pari materia with “reasons to believe” in Section 281B of the I.T.Act, it was incumbent upon the 1st respondent to arrive at his own satisfaction and not borrowed satisfaction by proper application of mind and consequently, the impugned order which is bald, vague, cryptic, laconic, unreasoned and non-speaking order deserves to be set aside, particularly having regard the undisputed fact that except for stating that he was of the opinion that it was necessary to attach the fixed deposits for the purpose of protecting the interest of the revenue, no other reasons have been assigned by the 1st respondent in the impugned order. A perusal of the impugned order will also indicate that there is no finding recorded as to why a provisional order of attachment had to be passed against the petitioner; it is significant to note that there is no finding recorded by the 1st respondent that the petitioner was a ‘fly by night operator’ from whom it was not possible to recover the likely demand. The impugned order also does not state that the petitioner was either a habitual defaulter nor that he was not doing any business at all or that the petitioner did not have sufficient funds to satisfy the demand. In other words, in the absence of any reasons as to why and how the demand would be defeated by the petitioner, mere apprehension that huge tax demands are likely to be raised on completion of assessment was not sufficient to constitute formation of opinion and existence of proximate and live link for the purpose and necessity of provisional attachment which implicate the doctrine of proportionality. Under these circumstances also, the impugned order deserves to be quashed. A perusal of the approval also indicates that the same is silent on the aspect of necessity and does not satisfy the jurisdictional precondition / requirement for passing a provisional attachment order. It is trite law that grant of approval should not be a mechanical act and should reflect independent application of mind and this important safeguard of taking prior approval of the Commissioner under Section 281B of I.T.Act is not a mere empty formality and cannot be taken lightly. As stated supra, the approval granted by the 3rd respondent also reflects complete non-application of mind and is a non-speaking and unreasoned approval which is contrary to law and consequently, the impugned order based on the said approval deserves to be quashed. The contention of the respondents that in addition to the reasons contained in the impugned order, the other material on record comprising of email correspondence, investigation reports, statements recorded during the course of investigation, etc., are sufficient to satisfy the requirements contemplated in law cannot be accepted in view of the well settled legal position as held in Mohinder Singh Gills’ case [1977 (12) TMI 138 - SUPREME COURT] wherein the Constitution Bench held that when the respondent passed the impugned order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in a shape of an Affidavit or otherwise. Orders are not like old wine becoming better as they grow older. Under these circumstances, the said contention of the respondents cannot be accepted. Thus the impugned order passed by the 1st respondent is illegal, arbitrary and contrary to law and the same deserves to be quashed. In the interest of justice, it would be just and appropriate to direct the petitioner not to make payment in the form of royalty or any other form to any entities outside India till conclusion of assessment proceedings by the respondents. However, interest of justice would also be met if the petitioner is reserved liberty to take / obtain overdrafts on the subject fixed deposits and make payments from such overdrafts from the respective banks to foreign entities in accordance with law. During the pendency of the present petition, the 1st respondent passed a draft assessment order under Section 144C(1) of the I.T. Act after concluding the proceedings. It is needless to state that the petitioner would be entitled to contest the said draft assessment order and proceedings pursuant thereto before the respondents.
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