High Court Of Delhi
Nimitya Properties Ltd. vs. CIT & Ors.
Section 132, Expln. 2, 281B
A.K. Sikri & Siddharth Mridul, JJ.
Writ Petn. Nos. 8436 & 12173 of 2009
23rd December, 2009
Counsel Appeared :
Salil Kapoor with Sanat Kapoor & Ms. Swati Kapoor, for the Petitioners : Sanjeev Sabharwal with Subhash Bansal, for the Respondents
JUDGMENT
A.K. SIKRI, J. :
The two petitioners herein, viz., Nimitya Properties Ltd. and Nimitya Promoters Ltd., who belong to the same group, have filed two petitions each. In the first two petitions filed by these petitioners, the challenge is laid to the orders dt. 6th Feb., 2009 passed under s. 281B of the IT Act (hereinafter referred to as ‘the Act’), provisionally attaching their properties. Other two petitions by each of them came to be filed because of the orders dt. 3rd Aug., 2009 passed under s. 281B of the Act extending the time of attachment of the properties upto 31st July, 2010. Thus, these subsequent orders are passed as a continuation/extension of the first order. The circumstances under which the attachment orders in respect of properties belonging to these two petitioners have been passed are identical. For these reasons, writ petitions were heard together and by this common judgment, issues raised in all these writ petitions are dealt with. For the sake of brevity, we shall take not of the facts of Writ Petn. (C) No. 8436 of 2009.
2. A search and seizure operation was conducted by the IT authorities at the office premises of Nimitya Properties Ltd. on 6th Nov., 2008. Some documents were seized and the premises were sealed. Twenty days thereafter, i.e, on 26th Nov., 2008, office premises of the petitioners were de-sealed. The documents were put in one almirah and restrained order was passed under s. 132(3) of the Act. On 30th Dec., 2008, the almirah was opened by the Dy. Director of Investigation (respondent No. 3) and documents were seized. It was followed by order dt. 6th Feb., 2009 issued under s. 281B of the Act by the ITO attaching the property No. 3, Avenue Cassia, Westend Green, Rajokri, New Delhi. This order reads as under : “Sub : Order under s. 281B of the IT Act, 1961
In exercise of the power conferred upon me under s. 281B of the IT Act, 1961 the Farm House No. 3, Jacranda, Westend Green, Rajokari, New Delhi-110038, held by M/s Nimitaya Properties Ltd. are hereby attached with the immediate effect. You are hereby required not to part with or transfer or alienate or deal with above mentioned property till further order.”
In the case of other petitioner, viz., Nimitya Promoters (P) Ltd., on the same date, search and seizures were conducted at their premises, documents were seized, restraint orders were passed under s. 132(3) of the Act and ultimately, orders were passed under s. 281B on 26th Feb., 2009 provisionally attaching the property No. 1, Golden Gates, West End Green, Rajokri, New Delhi. According to the petitioners, the properties attached form part of stock-in-trade and no tax was outstanding against the petitioners. Thus, letter dt. 10th Feb., 2009 was written bringing these aspects to the notice of the respondents and the respondents were also asked to provide reasons for attachment of the properties. This was followed by application/letter dt. 4th March, 2009 requesting the respondent No. 2 to withdraw the said orders dt. 6th Feb., 2009, but no response was received. Therefore, reminder dt. 16th March, 2009 was also sent. In reply thereto, the respondent No. 2 informed the petitioners vide its letter dt. 17th March, 2009 that attachment orders have been passed on the basis of proposal received from the respondent No. 3 vide letter dt. 30th Dec., 2008 informing that a large number of incriminating documents were seized and huge demand is likely to be raised under ss. 153A and 153C and there was an apprehension that the petitioners may transfer the properties just to defer the payment of taxes. Therefore, the respondent No. 3 had requested that to safeguard the interest of Revenue, the said property be attached under s. 281B of the Act pending assessment for the asst. yr. 2007-08.
The case of the petitioners is that such an order could not have been passed in as much as assessment after asst. yrs. 2005-06 and 2006-07 had been completed under s. 143(3) of the Act and no additions had been made except for minor disallowances. No tax payment was outstanding. Likewise, no proceedings for assessment or reassessment were pending at the time of passing of the orders. Insofar as the asst. yr. 2007-08 is concerned, notice under s. 143(2) was issued on 16th Sept., 2008 and no assessment proceedings had been taken up thereafter and no enquiry had been made so far. In any case, that assessment stood abated on the date of initiation of search as per second proviso to s. 153A(1) of the Act and thus assessment in respect of asst. yr. 2007-08 was also not pending.
The petitioners also make a grievance that documents seized on 6th Nov., 2008 had not been confronted and no question had been asked from them and no notice under s. 153A or 153C had been issued. The petitioners have also referred to the instructions of CBDT issued as Addendum dt. 5th Nov., 2004 in which it is recommended that the provisions of s. 281B should be resorted to only in cases where there is a reasonable likelihood of the recovery becoming difficult due to inadequacy of assets and where there are sufficient assets to cover the demand, the provisions of s. 281B should not be resorted to, except under exceptional circumstances warranting the same.
On the basis of the aforesaid pleas taken in the petition, Mr. Salil Kapoor, learned counsel appearing for the petitioners, argued that there was no basis for attachment of the properties, even provisionally, in the absence of any tax demand or pendency of any assessment proceeding. He also submitted that as on the date of search, even no surrender was made by the petitioners. His further submission was that the competent authority who can pass such an order is the AO and he was supposed to apply his own mind and could not have passed the order at the instance of other authority, viz., the respondent No. 3 in this case.
Insofar as orders dt. 3rd Aug., 2009 extending this attachment is concerned, his submission was that this order was passed by the AO who was not the competent authority, as such an extension order could be passed only by the CIT. Furthermore, even while passing the extension order, the assessee was not confronted with seized documents. He also referred to and relied upon the judgment of Punjab & Haryana High Court in the case of Sukhpal Singh (HUF) vs. CIT & Anr. (1985) 47 CTR (P&H) 42 : (1985) 156 ITR 480 (P&H) wherein the Court held that notices issued for provisional attachments of fixed deposit under s. 281B were effective only for a period of six months and this period could be extended by the CIT only in exercise of his powers under sub-s. (2) of s. 281B of the Act and for want of material on the record to show that the ITO had formed an opinion on the basis of some material that it was necessary to attach the property in order to protect the interest of the Revenue, notices in provisional attachment were unsustainable. The Court held as under : “4. After hearing the learned counsel for the parties, in the circumstances of the case, we find force in the contention of the learned counsel for the petitioner. A bare perusal of the impugned notices would show that the ITO has passed the order of the provisional attachment of the FDRs till further orders. According to the aforesaid provision, this provisional attachment remains operative only for a period of six months, but this period could be extended by the CIT in exercise of his powers under sub- s. (2) of s. 281B of the Act, after recording reasons for the extension of such period. In the instant case, the period of six months has since expired. Mr. Ashok Bhan, senior advocate, learned counsel for the Department, has not been able to produce today before us any order of the CIT by which the extension of the provisional attachment may have been granted. As the period of six months has expired, the provisional attachment ceases to be of any effect.”
Mr. Sanjeev Sabharwal and Mr. Subhash Bansal, who appeared for the Revenue refuted the aforesaid submissions. We shall take note of their arguments while dealing with contentions of the learned counsel for the petitioner.
It would be apt to initiate the discussion by taking note of the provisions of s. 281B. The relevant portion of this provision reads as under : “281B. Provisional attachment to protect revenue in certain cases.—(1) 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 AO 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 CIT, CIT, Director-General or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. Explanation : For the purposes of this sub-section, proceedings under sub-s. (5) of s. 132 shall be deemed to be proceedings for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment. (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-s. (1) :
Provided that the Chief CIT, CIT, 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 :”
11. Sub-s. (1) of s. 281B authorizes the AO to pass provisional order of attachment of property belonging to the assessee ‘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’. This has to be done with the previous approval of the Chief CIT, CIT, Director-General or Director. The Explanation attached to sub-s. (1) gives the scope of ‘proceedings’ and categorically provides that proceedings under sub-s. (5) of s. 132 shall be deemed to be proceedings for the assessment of any income, etc. Sec. 132 deals with search and seizure. In the present case, such search and seizure had taken place under the said provision and provisional assessment order is the consequence of that search and seizure. Therefore, the Explanation wherein reference to provisions of s. 132 is made becomes applicable in the instant case. Sub-s. (5) of s. 132 provides for making an order estimating the undisclosed income in a summary manner and calculating the amount on tax of income where any money, bullion, jewellery or other valuable article or thing is seized under that provision. This sub-section has been omitted by the Finance Act, 2002, w.e.f. 1st June, 2002 and therefore, was no more available on the date of search in the cases of these petitioners. However, what is relevant fact is in Expln. 2 to s. 132, which reads as under : “Explanation 2. : In this section, the word ‘proceeding’ means any proceeding in respect of any year, whether under the Indian IT Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorized under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.” The ambit and scope of word “proceeding” is expanded by this Explanation to include not only those proceedings, which are pending on the date of attachment of the property, when the search is authorized under s. 132, but also proceedings which may have been completed on or before such date and includes all proceedings under this Act, which may be commenced after such date in respect of any year. No doubt, proceedings in respect of asst. yr. 2007-08 stand abated because of the search. However, it is also a fact, which cannot be shyed away, that the proceedings for that assessment year will have to be initiated under s. 153A or 153C of the Act. Such proceedings, which are to be necessarily commenced as a result of the search, are to be treated as proceedings under this Act. By virtue of Explanation to s. 281B of the Act, these are to be treated as the proceedings within the meaning of sub-s. (1) of s. 281B of the Act.
In view thereof, we do not agree with the contention of the learned counsel for the petitioner that no such order under s. 281B of the Act could be passed, as no assessment proceedings were pending on that date. This takes us to the next contention put forth by the learned counsel for the petitioner, viz., the AO passed the impugned orders at the dictates of other authority, viz., the respondent No. 3 without considering the issue independently by applying his own mind. We have already reproduced the orders dt. 6th Feb., 2009 passed by the AO. This order is passed by him, as stated therein, in exercise of the power conferred upon him under s. 281B of the Act. The petitioner, however, relies upon the letter dt. 17th March, 2009 addressed by the AO to the petitioner in response to the petitioners request to withdraw the aforesaid attachment. In this letter, ITO has mentioned that the property was attached on the basis of proposal received from Dy. Director of IT (Inv) Unit-IV-3, New Delhi vide his letter dt. 5th Jan., 2009. Vide this letter, Dy. Director had informed that the search and seizure operation was conducted on 6th Nov., 2008 wherein a large number of incriminating documents and evidence regarding bogus credit entries were gathered and huge demand is likely to be raised under ss. 153A and 153C of the IT Act. The Dy. Director had expressed the apprehension that just to defer the payments of tax, the assessee may transfer the properties and therefore, requested the AO to attach the mentioned immovable properties to safeguard the interest of the Revenue. No doubt, after the AO received this letter, he passed the impugned attachment orders. However, at the same time, one cannot overlook the fact that search operation was conducted by the Dy. Director of IT and therefore, only he could bring the fact of the said search to the notice of the AO. Therefore, the AO was apprised of the said search and was also apprised of the fact that various incriminating documents and evidence regarding purported bogus entries were gathered, which could result in huge demand against the petitioners in that context, the suggestion was mooted by the Dy. Director for attachment of the property to protect the interest of the Revenue. However, the letter dt. 17th March, 2009 further mentions that “in view of the above facts and assessment pending for asst. yr. 2007-08 the order of attachment was passed”. Thus, when these facts were brought to the notice of the AO, it is he who alone exercised his discretion finding it to be a fit case for attachment of the property in question. Therefore, it cannot be said that he was simply carried (away) by the suggestion mooted by the Dy. Director and did not apply his own mind.
The fact situation in Gujarat Gas Co. Ltd. vs. CIT (2000) 161 CTR (Guj) 246 : (2000) 245 ITR 84 (Guj) was entirely different. In that case, what was found is that the CBDT had issued instructions to the subordinate authorities directing that assessments to be made in a particular manner. This included the instructions that in scrutiny cases under s. 143(3) of the Act, the income cannot be assessed at a figure lower than the returned income. Circular issued by the CBDT in exercise of powers under s. 119 was found to be ultra vires on the ground that the AO exercised quasi judicial functions and other authorities cannot control or affect his judgment in the matter of assessment. Furthermore, the present order under s. 281B of the Act is administrative in nature and not quasi judicial.
This leaves us with the last contention of the petitioner, which relates to orders dt. 3rd Aug., 2009 whereby the attachment period is extended. It was argued that the extension order could be passed only by the CIT, which is the authority specifically mentioned in s. 281B(2) of the Act.
This argument is found to be factually incorrect and militates against the record. We find that the Asstt. CIT (Central Circle-22) had addressed a letter dt. 24th July, 2009 to the CIT pointing out about the attachment orders dt. 26th Feb., 2009 passed by the AO with prior approval of the CIT. It was further mentioned in this communication that in many of the group cases, the orders under s. 127 of the Act were yet to be passed, the case records were yet to be received, further notices to be issued, inquiries, investigations to be made and thereafter only assessment orders could be passed. The request was, therefore, made for extension to the provisional attachment. On this, the CIT gave his approval on 31st July, 2009 in the following manner : “I have gone through the proposal of the AO. In view of the facts mentioned in the proposal, I am satisfied that this is a fit case to extend the provisional attachment upto 31st July, 2010. The AO shall make efforts to complete the assessments as early as possible.”
After the aforesaid approval was given on the file, letter dt. 31st July, 2009 was written by the Dy. CIT to the Asstt. CIT informing him about the approval. This led to passing of the order dt. 3rd Aug., 2009 and in this order also it is specifically mentioned that the same is issued after taking approval from the CIT (Central)-III, New Delhi.
In view of this factual position prevailing on the record, judgment of the Punjab & Haryana High Court in Sukhpal Singh (HUF) (supra) would not come to the aid of the petitioner. The upshot of the aforesaid discussion is that the provisional order of attachment originally passed on 6th Feb., 2009 and extension of this order vide orders dt. 3rd Aug., 2009 are without blemish, valid and legal. Finding no force in the writ petitions, we dismiss the same.
Before we part with, it is necessary to point out that such attachment orders naturally are prejudicial to the petitioners. No doubt, the Revenue has justified the passing the attachment orders to safeguard its interest. At the same time, provisional attachment orders should not continue for indefinite period. Therefore, the respondents are impressed upon to complete all the assessment proceedings before 31st July, 2010 so that the petitioners know their fate and necessity of extension of the provisional attachment is obviated.
22. In the facts of these cases, there shall be no orders as to costs.
[Citation : 322 ITR 668]
