TMI Blog2005 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... Briefly stated the facts giving rise to the present petition are as follows: Petitioner No. 1 (hereinafter called as "the company") is a private limited company incorporated under the provisions of the Companies Act, 1956, vide certificate of incorporation, dated December 9, 2001, with the Registrar of Companies, U.P. and Uttaranchal, to carry on business in real estate and petitioner No. 2 who is the managing director is also doing business of kirana goods in the name and style of M/s. Chandra Kamal Agency. He is also the managing director of M/s. Kanhe Media Pvt. Ltd., which is engaged in publication of a daily newspaper known as Sri India. The case of the petitioners is that none of them are engaged in any manufacturing activities and as such the provisions of the Central Excise Act, 1944, are not applicable to them. The officials of the Central Excise Department searched the residential premises of the managing director of the company on June 8, 2002, and seized certain documents, computer and cash. The company is having a current account No. 28430 with the Union Bank of India in which the balance as on April 29, 2002, was Rs. 6,80,905 and also has four DRCs (fixed deposit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd arbitrary. The impugned order has been passed without there being any material in the possession of the Department to form an opinion that there is likelihood of a substantial demand against the petitioners. The aforesaid two accounts belonged to the petitioner-company. The Department has allotted a permanent account number to the petitioner-company, vide annexure 8 to the writ petition. The petitioner-company has filed its return of income for the assessment year 2002-03 which was accepted by the Department. For the assessment year 2003-04 assessment proceedings were completed under section 143(1) of the Act and a sum of Rs. 35,231 was refunded on account of the excess deduction of tax at source. Further, the case is that the amount in the aforesaid accounts is the share application money received by the petitioner-company. The two brothers of petitioner No. 2 are doing separate business of manufacturing gutkha and none of the petitioners have any concern with their business. No warrant of authorisation, requisition was served upon petitioner No. 2, namely, Chandra Mohan Sahu. The documents seized by the officials of the Central Excise Department do not relate to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved or tendered upon the petitioners. It has been further stated that since no notice or order extending the period of attachment has been served on the petitioners, they believe that no order extending the period of provisional attachment of bank account has been passed by the Commissioner of Income-tax. In reply to the supplementary affidavit a counter affidavit affirmed by Shri Durga Prasad Agnihotri has been filed, annexing copies of two letters dated June 8, 2005 and June 7, annexures-1 and 2, where under the Assessing Officer has been informed that the Commissioner of Income-tax-2, Kanpur, has been pleased to extend the provisional attachment under section 281B for a further period of six months that is up to December 21, 2005. But copy of the actual order extending the period has not been enclosed. Heard Shri Rakesh Kumar, learned counsel for the petitioners, and Shri Govind Krishna, learned standing counsel for the contesting respondents Nos. 1, 2 and 3. Learned counsel for the petitioners submitted that exercise of power under section 281B by the Assessing Officer is wholly arbitrary and unwarranted in law. He submitted that there is no material in the possession of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interests of the Revenue it is necessary so to do, he may, with the previous approval of the Chief Commissioner, Commissioner, Director-General or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule... (2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1): Provided that the Chief Commissioner, Commissioner, Director-General or Director may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years. Provided further that where an application for settlement under section 245C is made, the period commencing from the date on which such application is made and ending with the date on which an order under sub-section (1) of section 245D is made shall be excluded from the period specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner-company. There is not a whisper even in any of the counter affidavits that these documents belong to the petitioner. Such an averment is absent in the pleading of the Department. The documents thus seized by the Central Excise Department and also requisitioned by the Income-tax Department do not relate to the business activities of either of the petitioners. As a matter of fact the enquiries on the basis of these documents are directed by the Department against certain persons other than the petitioners. It may be noted here that the case was partly heard on November 30, 2005, and on that day it was ordered to be put up tomorrow, i.e., on December 1, 2005. On December 1, 2005, learned standing counsel for the Department has filed second supplementary affidavit sworn by Sri Ram Singh, Income-tax Inspector of ITO-6(2), annexing therewith copy of the order sheet relating to the assessment years 2002-03 and 2003-2004, with respect to the petitioner-company (annexure 1 to the supplementary affidavit). From a perusal of the order sheet it is clear that notice under section 153A read with section 153C was issued on December 22, 2004, and return for the assessment year 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner, etc., has been made as a pre-condition. Further the orders of attachment must be in writing. It has been held thereafter that "there must be some material on record to show that the assessing authority had formed an opinion on the basis thereof that it was necessary to attach the property in order to protect the interests of the Revenue. The provisional attachment provided under section 281B of the Act is more like an attachment before the judgment under the Code of Civil Procedure. It is a liability on the property. However, the power conferred upon the assessing authority is very drastic, far-reaching power and that power has to be used sparingly and only on the substantive weighty grounds and reasons... One thing is clear that this power should be exercised by the Assessing Officer only if there is reasonable apprehension that the assessee may default the ultimate collection of the demand, i.e., likely to be raised on completion of the assessment, it should, therefore, be exercised with extreme care and caution. It should not be exercised unless there is sufficient and relevant material on record to justify the satisfaction that the assessee is about to dispose of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain enquiries with regard to the nature and source of gifts in favour of petitioner No. 2 is to be enquired into. This is the only ground which was stated in the counter affidavit and was urged by learned standing counsel. In our opinion this ground is wholly insufficient to invoke section 281B of the Act. The reason is simple. In every case where assessment has to take place it is the bounden duty of the Assessing Officer to make such enquiries as are necessary to complete the assessment apart from the above the petitioner-company is an assessee newly borne on the file of the Income-tax Department as it was incorporated only on December 9, 2001, and indisputably it filed returns of income up to the assessment year 2003-2004, which was finalised by the Department. There is no history of the petitioner-company to show that on any occasion earlier it failed to discharge its liability. Apart from the above as has been held by the Bombay High Court in the case of Gandhi Trading v. ACIT [1999] 239 ITR 337 that the attachment of the bank accounts is the last resort. The Department if it is of the opinion that the assessee is likely to dispose of its property to thwart the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department in its counter affidavit filed in reply to the supplementary affidavit has annexed the letter of the Income-tax Officer, informing that the Commissioner of Income-tax has been pleased to extend the provisional attachment up to December 21, 2005. It is not sufficient. The Department was required to place on record before the court the reasons recorded by the Commissioner of Income-tax for granting approval for extension of the order passed under section 281B of the Act. The disclosure of reasons recorded by the Commissioner of Income-tax would have thrown some light on the controversy, i.e., it is a case of gossip or hearsay or something more than that. An adverse inference should be drawn against the Department for withholding the reasons, if any, recorded by the Commissioner of Income-tax. It is not out of place to refer to a case of the apex court, strongly relied upon by the petitioners, in a somewhat similar statutory set up while interpreting section 132(8) of the Act, wherein it was held as follows: "132. (8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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