Section 500 — Provisional attachment to protect revenue in certain cases. Successor to s.281B of the 1961 Act.
Section 500 is in Chapter XXIII — Miscellaneous, which runs from section 499 to section 536.
Sub-section (1) allows the Assessing Officer, during the pendency of a proceeding for assessment, or for assessment or reassessment of escaped income, or for imposition of penalty under section 444 where the penalty likely to be imposed exceeds two crore rupees, to attach any property belonging to the assessee provisionally, by order in writing, with the previous approval of the Competent Authority, in the manner prescribed in section 413, if he is of the opinion that it is necessary to protect the interests of the revenue. Sub-section (2) makes the attachment lapse after six months, and sub-section (3) lets the Competent Authority extend it for reasons recorded in writing, with the total extension not exceeding two years or sixty days after the date of the assessment or reassessment order, whichever is later. Sub-sections (4) and (5) require the attachment to be revoked where the assessee furnishes a scheduled bank guarantee for not less than the fair market value of the attached property, and allow the Assessing Officer to accept a lower guarantee if satisfied it protects the revenue. Sub-section (6) lets him refer the property to the Valuation Officer, who must estimate fair market value in the manner provided in section 269(3) to (7) and report within thirty days of receiving the reference, and sub-section (7) fixes the time for the revocation order — forty-five days from receipt of the guarantee where a valuation reference has been made, fifteen days otherwise. Sub-sections (8) to (11) govern the guarantee: it may be invoked wholly or in part where a demand is not paid within the time specified, must be invoked if the assessee fails to renew it or furnish an equal replacement guarantee before fifteen days of its expiry, the amount realised is adjusted against the existing demand with the balance deposited in the Principal Commissioner's or Commissioner's Personal Deposit Account at a specified bank, and the guarantee is to be released forthwith when no longer needed. Sub-section (12) defines Competent Authority.
An assessment or a large penalty proceeding takes time, and the section allows the revenue to be secured against dissipation of assets in the meantime, subject to approval at a senior level and a hard time limit. The bank guarantee route exists so that the assessee can free the property by substituting security of equivalent value rather than living with the attachment.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Penalty threshold for attachment in a penalty proceeding | Two crore rupees | The amount or aggregate of penalty likely to be imposed under section 444 must exceed this; no such threshold applies to an assessment or reassessment proceeding under clause (a) | 500(1)(b) |
| Life of a provisional attachment | Six months | From the date of the order; it ceases automatically on expiry unless extended | 500(2) |
| Maximum extension | Two years, or sixty days after the date of the assessment or reassessment order, whichever is later | Granted by the Competent Authority for reasons recorded in writing | 500(3) |
| Time for the Valuation Officer's report | Thirty days | From the date of receipt of the reference | 500(6) |
| Time to pass the order revoking attachment | Forty-five days where a valuation reference has been made; fifteen days in any other case | In both cases from the date of receipt of the guarantee | 500(7) |
| Time before expiry to renew or replace the guarantee | Fifteen days | Failing which the Assessing Officer must invoke the guarantee in the interests of revenue | 500(9) |
An attachment cannot be made on the Assessing Officer's own view alone — it needs previous written approval of a Competent Authority — and it dies after six months unless extended for recorded reasons, with the outer limit being two years or sixty days after the assessment or reassessment order, whichever is later. The way out is a scheduled bank guarantee: furnish one for not less than the fair market value and revocation is mandatory, and a lower guarantee may be accepted if the Assessing Officer is satisfied it protects the revenue. Once the guarantee is in, the revocation order must follow within fifteen days, or forty-five if the property has gone to the Valuation Officer. Diary the guarantee's expiry — failing to renew it, or to furnish a fresh guarantee for an equal amount, more than fifteen days before expiry obliges the Assessing Officer to invoke it, and what is realised goes against the existing demand with any balance held in the Commissioner's Personal Deposit Account.
A penalty proceeding under section 444 is pending in which the penalty likely to be imposed is Rs. 2.4 crore. Because that exceeds two crore rupees, the Assessing Officer may attach the assessee's property provisionally — by order in writing, with the previous approval of a Competent Authority and not on his own opinion alone, in the manner prescribed in section 413; had the likely penalty been Rs. 1.8 crore, clause (1)(b) would not have been available at all, though an assessment or reassessment proceeding under clause (a) carries no monetary threshold. The attachment ceases six months from the date of the order unless the Competent Authority extends it for reasons recorded in writing, the total extension not exceeding two years or sixty days after the date of the assessment or reassessment order, whichever is later. The way out is a guarantee from a scheduled bank for not less than the fair market value of the property, on which revocation is mandatory — within fifteen days of receipt of the guarantee, or forty-five where the property has gone to the Valuation Officer, who must report within thirty days of the reference.
As a written order of provisional attachment served on you, carrying the previous approval of the Competent Authority — the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General, or Principal Director or Director — and executed in the manner prescribed in section 413. You meet it again in the order revoking the attachment against a bank guarantee, and in the invocation of that guarantee if a demand goes unpaid or the guarantee is not renewed fifteen days before expiry.
Every provisional attachment under sub-section (1) shall cease to have effect after the expiry of six months from the date of the order made under the said sub-section.
See the full 1961 to 2025 concordance.
