High Court Of Madhya Pradesh
OM Prakash Gupta & Ors. vs. Income Tax Officer & Ors.
S.S. Jha, J.
Writ Petn. Nos. 351 to 354 of 2001
20th March, 2001
S.S. JHA, J. :
The order in this petition shall also govern the disposal of writ petn. Nos. 351 of 2001 (Ram Kishan vs. ITO), 363 of 2001 (Dabburam Gupta vs. ITO) and 354 of 2001 (Smt. Sangeeta Gupta vs. ITO). The petitioner has filed this petition praying therein that the order of attachment, dt. 14th Feb., 2001, be quashed. It is further prayed that respondents Nos. 5 to 9 be directed to release the stock of the petitioner and the petitioner be permitted to operate his bank account. It is further prayed that respondent No. 1 be restrained from passing any order of attachment in future unless the demand is created against the petitioner. Learned counsel for the petitioner submitted that the petitioner is carrying on wholesale business of foodgrains at Dabra. The petitioner received a copy of instructions on 14th Feb., 2001, issued by respondent No. 1, whereby the bank accounts of the petitioner were frozen in pursuance of survey proceedings under s. 133A of the IT Act, 1961, (hereinafter referred to as “the Act”). The stock lying with Krishi Upaj Mandi was also attached on the same day. On account of the action of respondent No. 1, the petitionerâs business has come to a standstill, as the petitioner is unable to operate his account or sell or purchase the foodgrains. The proceedings initiated by respondent No. 1 are contrary to law. Counsel for the petitioner then submitted that the act is contrary to the provisions of the Act. Counsel for the petitioner invited attention to the provision of s. 133A of the Act and submitted that respondent No. 1 is not armed with any power to resort to such steps whereby the entire business of the petitioner has come to a grinding halt. Under theaforesaid section, respondent No. 1 was required to obtain relevant information from the documents, etc. from the business premises of the petitioner. It is further contended that no survey was carried out at the business premises of the petitioner and the order of attachment of bank accounts and stocks of the petitioners is without any justification. Counsel then submitted that the proceedings for provisional attachment to protect the Revenue can be initiated according to s. 281B of the Act. If some proceedings are pending against the assessee then only the provisions of this section can be attracted. Since no proceedings are pending or any demand is raised, therefore, the attachment under s. 281B of the Act is without jurisdiction and deserves to be quashed. The petitioner also contended that he has no business relations with Munnalal Gupta.
Counsel for the petitioner referred to a judgment in the case of Gaurav Goel vs. CIT (2000) 164 CTR (Cal) 358 : (2000) 245 ITR 169 (Cal), and submitted that the scope and ambit of s. 281B of the Act, is that where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of anyincome 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. Counsel submitted that the concerned AO cannot pass the order in a mechanical manner without assigning any reason in the order itself and without giving any indication as to the prior approval of the higher authority as provided under the section itself. Counsel submitted that such order is not valid and is liable to be quashed. For a similar proposition counsel for the petitioner referred to the judgment in the case of Gandhi Trading vs. Asstt. CIT (2000) 158 CTR (Bom) 512 : (1999) 239 ITR 337 (Bom), wherein it is held that since the properties attached under s. 281B of the Act had been valued by the Departmental valuer at Rs. 2.66 crores against the anticipated liability of Rs. 2.68 crores, there was no justification for allowing the continuation of attachment on the bank accounts and FDRs. It was further held that the attachment should be made, as far as possible, of immovable properties if that can protect the Revenue. Attachment of bank accounts and trading assets should be resorted to only as a last resort. In any event, attachment under s. 281B should not be equated with attachment in the course of recovery proceedings. Reference was made to the judgment in the case of Priyanka Wines vs. Asstt Commissioner (Intelligence) (1998) 110 STC 73 (AP). Counsel submitted that it is open for the respondents to take steps for assessment by issuing notice and calling for accounts. If the petitioners failed to respond to the notice by failing to appear on the date fixed by the concerned AO, it would be open to the AO to make ex parte assessments and raise the demand. The notice must be given to the party before proceeding with the case. The proceedings are in the nature of attachment before judgment under the CPC.
In the case of Mangalchand vs. Sales Tax Officer (1966) 17 STC 226 (MP), recovery and attachment under the provisions of the Madhya Pradesh General ST Act, 1958, was considered and the provisions of s. 33(4) of the said Act were considered. Counsel then referred to the judgment in the case of CIT vs. Mahindra & Mahindra Ltd. (1983) 36 CTR (SC) 300 : AIR 1984 SC 1182 : TC 68R.341 and invited attention to para 11 of the judgment, wherein it is held that the Court can interfere by exercising the owner of judicial review of administrative or executive action or decision. It is the settled position that if the action or decision is perverse or is such that no reasonable body of persons, properly informed, could come to, or has been arrived at by the authority misdirecting itself by adopting a wrong approach, or has been influenced by irrelevant or extraneous matters the Court would be justified in interfering with the same. Counsel for the respondents referred to the judgment in the case of Surya Restaurant vs. Union of India (1994) 120 CTR (MP) 515 : (1995) 211 ITR 63 (MP) : TC 51R.839, and submitted that all efforts were made to serve the petitioners. The petitioners were avoiding the service. The petitioners are part of the family of Munnalal Gupta. The petitioners have an alternative remedy by way of appeal under r. 86 of the IT Rules, 1962, as attachment has been made under Sch. II of r. 26 of the IT Rules. Some of the petitioners have already filed an application for review on 23rd Feb., 2001. Copy of the application is annexure R-1 filed with the return. It is stated that Ramkishan Gupta was directed to appear in the office of the AO on 13th March, 2001. He was intimated through his counsel, Shri Sumit Nema, Advocate, Jabalpur. The order of attachment has been challenged. It is submitted that the petitioners have moved an application through their counsel, Shri Sumit Nema, Advocate, and after receiving the application the case has been fixed by the AO on 7th March, 2001, and Dabburam Gupta was summoned to appear in the office. Dabburam Gupta intimated that the information required by the Department would have to be collected and enough time would be required. Time was prayed on 7th March, 2001. Reply has also been received in inward section. The documents have not been submitted. The respondents are proceeding very fast and there is no likelihood to delay in the matter of assessment asapprehended by the petitioner. The respondents submitted that the petitioners may appear before the assessing authority on the date fixed and in the event entire documents are produced, their grievance may be redressed within two weeks.
The assessing authority has decided on 12th Feb., 2001, to issue notices under s. 142(1)/148 to initiateproceedings in the case of various family members and employees of the petitioners. The officers having jurisdiction over Dabra issued notices on 13th Feb., 2001, annexure R-7. The notices were issued in 12 cases and proceedings were initiated. The inspectors were directed to serve notice on the assets of the petitioner and his family members on 13th Feb., 2001, itself. The notices were returned with the remark that the assessee did not co-operate and practically refused to accept the notices and remained in the business premises which were closed from the inside. The assessee had refused to open the business premises. The notices were directed to be served through affixture in the presence of two witnesses and the notices were served by affixure in the presence of two witnesses. The survey was authorised to be conducted in the business premises of the petitioner situated at Customs Road, Jawaharganj, and Mandi Committee, Dabra. All the eight concerns at Customs Road, Jawaharganj, occupying the premises had closed the business premises from the inside and refused to open the premises even after various requests by the survey party for reasons best known to them. The bank accounts and stock placed at the Mandi Committee premises were found to be in crores which may result into tax liability of more than Rs. 1 crore of various family members of the petitioner-group. Counsel for the respondents submitted that since it wa apprehended that there is likelihood of evasion of tax, the assessment proceedings were initiated after due process and following the provisions of s. 281B of the IT Act.
The respondents referred to the judgment in the case of Shyam Kishore vs. Municipal Corporation of Delhi AIR 1992 SC 2279, and invited attention to para 42 of the judgment. He submitted that the provisions should be read rigidly and to seek to soften the rigour by reference to the availability of a recourse to the High Courts by way of a petition under Arts. 226 and 227 in certain situations and the Departmental instructions referred to earlier does not appear to be a satisfactory solution. The Departmental instructions may not always be followed and the resort to Arts. 226 and 227 should be discouraged when there is an alternative remedy. A more satisfactory solution is available in the terms of the statute itself. The construction of the section approved by us above vests in the appellate authority a power to deal with the appeal otherwise than by way of final disposal even if the disputed tax is not paid. The petitioner referred to the judgment in the case of N.K. Mohnot vs. Deputy CIT (1995) 128 CTR (Mad) 247 : (1995) 215 ITR 275 (Mad) : TC 52R.992. In this case, documents and promissory note were impounded by the respondents and when the respondents conducted a survey of the petitionerâs business premises and after conducting the survey of the petitionerâs business premises it was felt that there is likelihood of evasion of tax, therefore, after survey under s. 133A of the Act attachment proceedings were initiated. From this judgment, it is apparent that the survey is material before attaching the property.
13. Counsel for the petitioner then contended that since no proceedings were pending, therefore, the proceedings under s. 281B of the Act could not be initiated and, in his support, counsel for the petitioner relied upon the judgment in the case of Sampatlal & Sons vs. CIT (1983) 36 CTR (MP) 293 : (1984) 150 ITR 191 (MP) : TC 62R.153, and submitted that there is a clear mandate that the books of account and other documents seized shall not be retained by the authorised officer for a period exceeding 180 days from the date of seizure unless reasons for the same are recorded by him in writing and unless there is an approval by the CIT the question of approaching the Board does not arise, therefore, it could not be said that there was alternative remedy open to the petitioners.
14. Considering the facts of the case and since the proceedings are pending, it will be appropriate that theauthority shall pass the orders by releasing the property from attachment on taking bank guarantee from the petitioner for the sum alleged to be due against the petitioner which is likely to be assessed after final assessment. The authority shall pass the orders to that effect within a period of three days from the date of communication of the order and on furnishing the bank guarantee the property shall be released by the respondents. However, the proceedings before the assessing authority shall go on and shall be decided in accordance with law. The petition is disposed of.
[Citation : 251 ITR 714]