Rajasthan High Court - Jaipur
Urban Improvement Trust vs Commissioner Of Income Tax Ors on 20 February, 2013
Author: Alok Sharma
Bench: Alok Sharma
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH ORDER S.B. CIVIL MISC. STAY APPLICATION NO.2070/2013(D) IN S.B. CIVIL WRIT PETITION NO.2569/2013(D) Date of Order : 20.02.2013 HON'BLE MR. JUSTICE ALOK SHARMA Mr. Sanjay Jhanwar with Mr. Prakul Khurana, for the petitioner-UIT, Kota. Ms. Parinitu Jain, for respondent-Income Tax Department.
1) Mr. Sanjay Jhanwar, appearing for the petitioner - Urban Improvement Trust, Kota, has submitted that the order dated 13.02.2013, passed by the Commissioner of Income Tax, Kota and the consequent order dated 14.02.2013, passed by the Income Tax Officer, Ward-1(2), Kota, provisionally attaching the accounts of the petitioner-Trust as also FDRs standing in the name of the petitioner-Trust are in gross violation of the provisions of Section 281B of the Income Tax Act, 1961 (hereinafter 'the Act of 1961'). He submits that Section 281B of the Act of 1961 provides that where during the pendency of any proceeding for the assessment of any income or for 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 to do so, property belonging to an assessee can be attached in a manner provided for in the Second Schedule of the Act of 1961. It is submitted that the petitioner-Trust is a State instrumentality and has huge amount of assets to cover any demand that may be finally settled against the petitioner-Trust and consequently, there could have been conceivably no reason for the Assessing Officer to form an opinion that a provisional attachment of the assets of the petitioner-Trust was required to be made in the interest of revenue. He submits that a Division Bench of the Bombay High in the case of Gandhi Trading Vs. Assistant Commissioner of Income Tax & Ors. [(2000) 158 CTR (Bom)512] while considering the provisions of Section 281B of the Act of 1961 has held that to ensure that the power under Section 281B of the aforesaid Act is not misused, a number of safeguards have been provided in the section itself more particularly with reference to Schedule II of the Act of 1961. It has been held that the power under Section 281B of the Act of 1961 should be exercised by the AO only on the basis of a reasonable apprehension that the assessee may thwart the ultimate collection of the demand that is likely to be raised on the completion of the assessment and being a drastic power, it should be exercised with extreme care and caution. Counsel submits that the Bombay High in the aforesaid judgment has categorically stated that the power under Section 281B of the Act of 1961 should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwart the ultimate collection of the demand. It has also been further held that the provisions of Section 281B of the Act of 1961 should not be used as a tool to harass the asessee nor in a manner which entails an irreversible detrimental effect on the business of the assessee and even where attachment is absolutely warranted in the given facts of a case, it should as far as possible be confined to immovable properties in the first instance sufficient to protect the interest of revenue and the attachment of bank accounts and trading assets of an assessee should be resorted to only as a last resort. Mr. Jhanwar submits that in the present case even the order rejecting the preliminary objections of the petitioner-Trust was served, the order of attachment dated 13.02.1013 was passed. It has been further submitted that till 30 days from the date of order of assessment, no recovery of any demand from an assessee can be made in accordance with law. Counsel has also relied upon a circular of CBDT bearing No.404/22/2004 ITCC, dated 05.11.2004 issued under Section 119 of the Act of 1961 which on the issue of exercise of power under Section 281B of the Act of 1961 provides that the provisions of Section 281B of the Act should not be indiscriminately used and it was desirable that the power be resorted to only in cases where there is a reasonable likelihood of the recovery becoming difficult due to inadequacy of assets of the assessee. The said circular provides that where there are sufficient assets to cover the demand, the provisions of Section 281B of the Act of 1961 should not be resorted to, unless exceptional circumstances warranting the same obtained. In the aforesaid context, counsel submitted that oddly the Income Tax Authority in the instance case has overlooked both the provisions of Section 281B of the Act of 1961 as also the clarification issued by the Central Board of Direct Taxes under Section 119 of the Act of 1961 which has a binding effect on all commissionerates of Income Tax.
2) On instruction, Mr. Parinitoo Jain has appeared on behalf of the respondent-Income Tax Department and submitted that reliance placed by the counsel for the petitioner-Trust on the Rules 20, 21 & 23 of Part II of Second Schedule of the Act of 1961 are inapposite to the facts of the present case. She contends that Rule 26 of Part II of Second Schedule is relevant to the case before this Court. She submits that compliance wit the said rule has been made by the respondent-Department.
3) Heard the counsel for the petitioner and the respondent-Department.
4) It is important to note that there is nothing before this Court to be satisfied with regard to compliances as required under Section 281B of the Act of 1961 read with the Rules under Part II of the Second Scheduled having been made. To my mind, Rule 26 of Part II of Second Schedule of the Act of 1961 does not prima facie attract to the facts of the present case because the said rule appears to be relevant to situations where the debts or shares of an assessee are lodged with a third party.
5) Having heard the counsel for the petitioners and the respondent-Department, and taking into consideration primarily the fact that the petitioner-Trust is a State instrumentality and there was no material before the A.O. to come to a conclusion that the recovery of the alleged outstanding against the petitioner-Trust would be jeopardised, I would stay the order dated 13.02.2013, passed by the Commissioner of Income Tax, Kota and the order dated 14.02.2013, passed by the Income Tax Officer, Ward-1(2), Kota during the pendency of the writ petition. The respondent-Banks are directed to allow the unhindered operation of the accounts of the petitioner-trust. It is however made clear that the impugned order of assessment passed by the Assessing Officer on 18.02.2013 would continue to operate and if the petitioner-Trust is aggrieved of the said order, it is free to take its remedy in accordance with the Act of 1961.
6) The stay application stands disposed of.
(ALOK SHARMA), J MS/-
All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.- Manoj Solanki, Jr. P.A.