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PROVISIONAL ATTACHMENT – DIFFERENCE BETWEEN INCOME TAX ACT, 1961 AND CGST ACT, 2017 |
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PROVISIONAL ATTACHMENT – DIFFERENCE BETWEEN INCOME TAX ACT, 1961 AND CGST ACT, 2017 |
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Attachment of property Attachment of property is prevailing in all tax laws even in pre GST regimes. It is also postulated in GST laws. While the investigation or search or seizure is ongoing, in order to protect the interests of the Revenue Section 83 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides for the attachment of property by the Revenue. Section 83 provides that where during the pendency of any proceedings under-
the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed. Such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made. Issue The issue to be discussed in this article about the difference between the procedure adopted by the Income Tax Act and the Act for the attachment of property with reference to decided case law. Case law In ‘Valerius Industries v. Union of India’ – 2019 (9) TMI 618 - GUJARAT HIGH COURT the petitioner filed a writ petition before the High Court challenging-
consequent on inspection and search of the premises of the petitioner. The petitioner mainly challenged the above said orders on the grounds of non following the procedures in the Act and against to the principles of natural justice, since no proper opportunity of being heard was given to the petitioner. The High Court considered the submissions made by both the parties. The provisional attachment order, in this case, has been passed by the State Tax Officer – 1, Vadodara. The Revenue contended that this officer along with two officers have been conferred powers for provisional attachment. The High Court observed that the plain reading of section 83 makes it clear that the powers under section 83 have been conferred by the legislature upon the Commissioner. The subjective satisfaction that for the purpose of protecting the interest of the Government revenue, it is necessary that the goods should be provisionally attached should that of the Commissioner. The Commissioner has been conferred with power to pass an order in writing for the purpose of attaching provisionally and property including the bank account belonging to the taxable person. The High Court framed the question for its consideration is as to whether the Commissioner could have delegated his power to three officers. The Revenue contended that as per section 5(3) of the State Act the Commissioner is given powers to delegate his powers to any other officer who is subordinate to him subject to such conditions and limitations. The High Court observed that so far as the Act is concerned the power of delegation under section 5(3) of the Ac is within the Commissioner in the Board and not the Commissioner of Central Tax whereas so far as section 5(3) of the State Act is concerned the Commissioner would be the Commissioner of State Tax. The High Court held that if the provisions of the Central tax would have been applicable to the fact of the present case then there would have been no difficulty in quashing the order passed by the Commissioner of State Tax delegating his power of section 83 to the subordinate officers on the ground that the same is without jurisdiction. The High Court observed that section 83 makes I clear that it is the Commissioner’s opinion which is relevant. The Legislature has thought fit to confer his power upon the Commissioner. Such powers could not have been delegated to the three subordinate officers by the Commissioner. The initiation of proceedings under section 67 of the Act itself is not sufficient to provisionally attach the property for the purpose of protecting the interest of the Revenue. The power is specifically conferred upon the Commissioner to form such opinion. The subjective satisfaction should be based on some credible materials or information. Attachment of property being a drastic power should be supported by supervening factors and should be used sparingly. The attachment of bank account and trading assets should be resorted only as a last resort and the same should not be equated with the attachment in the course of recovery proceedings. The High Court observed that section 83 of the Act is in pari materia with the provisions of section 281B of the Income Tax Act, 1961. The High Court analyzed the provisions of section 281B of the Income Tax Act, 1961. The said section also provides for a provisional attachment of the property of an assessee pending the adjudication assessment/reassessment proceedings where the Income tax department believes that such attachment is necessary to protect the interest of the revenue. Section 281 of the Income Tax Act, 1961 provides that-
The High Court also relied on ‘Halbury’s Laws of India (Direct Tax – II, Vol. 32) 2nd Edition, Halsbury’s Laws of India (Direct Tax – II, Vol. 32) 2nd edition, 7. Miscellaneous, which says that section 281B relating to making an attachment before judgment is legal if assessing authority is of opinion that it is necessary to protect the interests of revenue and the same is supported by supervening factor. It gives guidelines for making provisional attachment. The power, conferred upon the Assessing Officer is a very drastic far reaching power and that power has to be used sparingly and only on substantive weighty grounds and reasons. To ensure that this power is not misused, a number of safeguards have been provided in this section. This power should be exercised by the Assessing officer only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution. This power is to be exercised only if there is sufficient material on record to justify satisfaction that the assessee is about to dispose of whole or any part of his property with a view to thwarting ultimate collection of demand and in order to achieve said objective, attachment should be of properties and to extent it is required to achieve this object. It should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. It further says that where on facts the Assessing Officer was satisfied that it was necessary to attach property of assessee in order to protect the interest of revenue and due approval was taken from concerned Commissioner who opined that it was fit case for provisional attachment, order passed under this provisions in respect of certain properties of assessee would not warrant judicial review. Since this provision provides for attachment of property of assessee only and therefore no order directing attachment of fixed deposits of assessee would be illegal. This provision does not contain requirement of hearing before passing order of provisional attachment of assessee’s bank account. The Gujarat High Court observed that the provisions of section 281B of the Income Tax Act, 1961 gives guidelines for making the provisional attachment whereas section 83 of the Act does not contain such guidelines. The High Court issued the following guidelines in its conclusion part of the judgment as detailed below-
having regard to the amount paid by reserving the input tax credit if the interest of the revenue is sufficiently secured, then the authority may not be justified in invoking its power under section 83 for the purpose of provisional attachment.
By: DR.MARIAPPAN GOVINDARAJAN - December 6, 2019
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