Your bank accounts are provisionally attached and the business cannot operate. Is there a way out short of paying?
Yes — offer security. Provisional attachment exists to protect the revenue, not to freeze a business indefinitely. Where a bank guarantee and directors' undertakings could secure the revenue, continuation of the attachment was set aside.
Decided by the High Court (Gujarat High Court — Sonia Gokani J and Mauna M. Bhatt J) on 2022-11-29, reported as [2022] 145 taxmann.com 393 (Gujarat); [2023] 456 ITR 89 (Gujarat); R/Special Civil Application No. 15485 of 2022. It bears on section 281B, section 132(9B), section 132(9C), section 148, section 127 of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
The practical lesson is the shape of the relief, not the principle. Courts release attachments against security far more readily than they cancel them outright — so the application should come with an offer, not just a grievance.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner, incorporated in April 2020 and wholly owned by Fu Chin Shin (FCS) Machinery Manufacturing Co. Ltd. of Taiwan, manufactures injection moulding machines in Ahmedabad. A search concluded on 18 November 2021 covered its premises as part of an action against Chinese-controlled Indian companies. On the same day two bank accounts were provisionally attached under s.132(9B) — an HSBC account holding Rs 10,97,72,399 and a DBS account — freezing in excess of Rs 13 crores in all. The DBS balance was converted into a fixed deposit of Rs 2,65,04,306; the DBS account itself was released in June 2022 but the deposit stayed attached. After the six months in s.132(9C) expired, the attachment was continued by an order of 13 May 2022 made with the prior approval of the Principal Commissioner under s.281B, and extended again on 11 November 2022. The department's case was that the petitioner had routed purchases through two paper companies which bought from the Taiwanese parent and resold at a two to four per cent mark-up, purchases from one of them totalling Rs 4.51 crores over two years. The petitioner said it was not a Chinese company, that the freeze had halted its operations, and that the attachment could not survive the six-month limit.
The petition was disposed of with directions; the attachment orders were not quashed. The Court held it was satisfied that continuation of the provisional attachment was not necessary for the petitioner to carry on its business and that the revenue's interest could be safeguarded by an amount furnished by way of bank guarantee (para 11). But its operative directions took a different form: the fixed deposit of Rs 2,65,04,306 with DBS Bank was held to suffice to protect the revenue for the present and stayed attached; the Indian and Taiwanese directors were to file undertakings within a week that they would meet any excess assessment from their personal funds, together with a disclosure of the company's immovable assets; and only on verification of those was the HSBC account to be released (paras 12.1 to 12.3). The Court declined to decide whether the reasons for attachment had to be supplied to the assessee, that challenge not being pressed, and left it open (para 9.1). It recorded that none of its observations would prejudice either side in further proceedings (para 13).
The Court first satisfied itself that the attachment was not made without material: it called for the original file, examined it, and held that the authorised officer had recorded reasons, so the challenge on that footing failed (paras 8.2, 9 and 9.2). It then took its principle from the Bombay High Court's decision in Vodafone Idea, which treats s.281B as conferring drastic powers in the nature of attachment before judgment, to be exercised for proper reasons in appropriate cases and not by reproducing the language of the section (para 10.1). Applying that, it asked not whether the attachment was lawful but how much security the revenue actually needed, weighing the company's ability to keep trading against the department's protection (para 11). It declined to fix the exposure by reference to the Gujarat Ambuja line, under which additions on disputed purchases had been confined to a percentage, holding that such an exercise belongs to the completed assessment and not to a decision on interim protection while proceedings are still before the authority (para 10). Because the matter had been referred to the Transfer Pricing Officer, the Court considered the revenue's interest still had to be regarded, and secured it by keeping the deposit attached and taking personal undertakings from the directors (paras 12.1 and 12.2).
the continuation of provisional attachment is not necessary and even otherwise, the interest of the Revenue can be safeguarded by directing a particular amount to be furnished by way of a bank guarantee to the authority concerned, that would sub-serve the purpose
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Handle my notice → Ask a CA on WhatsAppYes — offer security. Provisional attachment exists to protect the revenue, not to freeze a business indefinitely. Where a bank guarantee and directors' undertakings could secure the revenue, continuation of the attachment was set aside. This was decided by the High Court (Gujarat High Court — Sonia Gokani J and Mauna M. Bhatt J) and bears on section 281B, section 132(9B), section 132(9C), section 148, section 127 of the Income Tax Act 1961. It is reported as [2022] 145 taxmann.com 393 (Gujarat); [2023] 456 ITR 89 (Gujarat); R/Special Civil Application No. 15485 of 2022. The practical lesson is the shape of the relief, not the principle. Courts release attachments against security far more readily than they cancel them outright — so the application should come with an offer, not just a grievance. If it applies to you, the first step is this: Come with a concrete alternative security — a bank guarantee, a fixed deposit lien, or a specific asset.
The petitioner, incorporated in April 2020 and wholly owned by Fu Chin Shin (FCS) Machinery Manufacturing Co. Ltd. of Taiwan, manufactures injection moulding machines in Ahmedabad. A search concluded on 18 November 2021 covered its premises as part of an action against Chinese-controlled Indian companies. On the same day two bank accounts were provisionally attached under s.132(9B) — an HSBC account holding Rs 10,97,72,399 and a DBS account — freezing in excess of Rs 13 crores in all. The DBS balance was converted into a fixed deposit of Rs 2,65,04,306; the DBS account itself was released in June 2022 but the deposit stayed attached. After the six months in s.132(9C) expired, the attachment was continued by an order of 13 May 2022 made with the prior approval of the Principal Commissioner under s.281B, and extended again on 11 November 2022. The department's case was that the petitioner had routed purchases through two paper companies which bought from the Taiwanese parent and resold at a two to four per cent mark-up, purchases from one of them totalling Rs 4.51 crores over two years. The petitioner said it was not a Chinese company, that the freeze had halted its operations, and that the attachment could not survive the six-month limit. The matter was decided on 2022-11-29 by the High Court (Gujarat High Court — Sonia Gokani J and Mauna M. Bhatt J). On those facts the High Court held as follows. The petition was disposed of with directions; the attachment orders were not quashed. The Court held it was satisfied that continuation of the provisional attachment was not necessary for the petitioner to carry on its business and that the revenue's interest could be safeguarded by an amount furnished by way of bank guarantee (para 11). But its operative directions took a different form: the fixed deposit of Rs 2,65,04,306 with DBS Bank was held to suffice to protect the revenue for the present and stayed attached; the Indian and Taiwanese directors were to file undertakings within a week that they would meet any excess assessment from their personal funds, together with a disclosure of the company's immovable assets; and only on verification of those was the HSBC account to be released (paras 12.1 to 12.3). The Court declined to decide whether the reasons for attachment had to be supplied to the assessee, that challenge not being pressed, and left it open (para 9.1). It recorded that none of its observations would prejudice either side in further proceedings (para 13).
The Court first satisfied itself that the attachment was not made without material: it called for the original file, examined it, and held that the authorised officer had recorded reasons, so the challenge on that footing failed (paras 8.2, 9 and 9.2). It then took its principle from the Bombay High Court's decision in Vodafone Idea, which treats s.281B as conferring drastic powers in the nature of attachment before judgment, to be exercised for proper reasons in appropriate cases and not by reproducing the language of the section (para 10.1). Applying that, it asked not whether the attachment was lawful but how much security the revenue actually needed, weighing the company's ability to keep trading against the department's protection (para 11). It declined to fix the exposure by reference to the Gujarat Ambuja line, under which additions on disputed purchases had been confined to a percentage, holding that such an exercise belongs to the completed assessment and not to a decision on interim protection while proceedings are still before the authority (para 10). Because the matter had been referred to the Transfer Pricing Officer, the Court considered the revenue's interest still had to be regarded, and secured it by keeping the deposit attached and taking personal undertakings from the directors (paras 12.1 and 12.2). In the words reproduced by the source cited on this page: "the continuation of provisional attachment is not necessary and even otherwise, the interest of the Revenue can be safeguarded by directing a particular amount to be furnished by way of a bank guarantee to the authority concerned, that would sub-serve the purpose" The decision followed or applied Vodafone Idea Ltd. v. Dy. CIT [2020] 119 taxmann.com 337 / 274 Taxman 233 (Bom.).
It was decided by the High Court on 2022-11-29 and is reported as [2022] 145 taxmann.com 393 (Gujarat); [2023] 456 ITR 89 (Gujarat); R/Special Civil Application No. 15485 of 2022. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 281B, section 132(9B), section 132(9C), section 148, section 127, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The petition was disposed of with directions; the attachment orders were not quashed. The Court held it was satisfied that continuation of the provisional attachment was not necessary for the petitioner to carry on its business and that the revenue's interest could be safeguarded by an amount furnished by way of bank guarantee (para 11). But its operative directions took a different form: the fixed deposit of Rs 2,65,04,306 with DBS Bank was held to suffice to protect the revenue for the present and stayed attached; the Indian and Taiwanese directors were to file undertakings within a week that they would meet any excess assessment from their personal funds, together with a disclosure of the company's immovable assets; and only on verification of those was the HSBC account to be released (paras 12.1 to 12.3). The Court declined to decide whether the reasons for attachment had to be supplied to the assessee, that challenge not being pressed, and left it open (para 9.1). It recorded that none of its observations would prejudice either side in further proceedings (para 13). It arises in Demand, Recovery & Stay matters, on section 281B, section 132(9B), section 132(9C), section 148, section 127 of the Income Tax Act 1961, and was decided by Gujarat High Court — Sonia Gokani J and Mauna M. Bhatt J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Evidence the operational harm: payroll, supplier payments, statutory dues that cannot be met. Track the six-month life of a s.281B attachment and the order extending it; extensions have their own requirements.
Validity check could not be completed. The report carries no later-treatment note and no case review of this decision, and no case applying, following or affirming it was found on the full read. It is in substance an order regulating interim security in one search matter: the Court itself recorded that none of its observations would prejudice either side in further proceedings, so it carries little weight as precedent. The principle it applies is the Bombay High Court's in Vodafone Idea Ltd. v. Dy. CIT [2020] 119 taxmann.com 337 (Bom.), which this Court followed; that is the authority to cite for the proposition. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The date is 29 November 2022 and the figures reconcile on the judgment: Rs 10,97,72,399 was the HSBC balance, over Rs 13 crores was frozen in all, and Rs 2,65,04,306 is the fixed deposit that remained attached. Read the disposal carefully before citing this. The Court did not quash the attachment: it found the recorded reasons adequate, kept the deposit attached, and released the current account only against undertakings from the directors to meet any excess from their own funds and a disclosure of the company's immovable assets. It also left open, without deciding, whether the reasons for a provisional attachment must be supplied to the assessee, and said its observations would not prejudice either side later. The general observation at para 11 about a bank guarantee was not carried into the operative directions. No later treatment of this decision was identified. The Court expressly left undecided whether the reasons recorded for a provisional attachment must be furnished to the assessee, so the case is no authority on that point. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was disposed of with directions; the attachment orders were not quashed. The Court held it was satisfied that continuation of the provisional attachment was not necessary for the petitioner to carry on its business and that the revenue's interest could be safeguarded by an amount furnished by way of bank guarantee (para 11). But its operative directions took a different form: the fixed deposit of Rs 2,65,04,306 with DBS Bank was held to suffice to protect the revenue for the present and stayed attached; the Indian and Taiwanese directors were to file undertakings within a week that they would meet any excess assessment from their personal funds, together with a disclosure of the company's immovable assets; and only on verification of those was the HSBC account to be released (paras 12.1 to 12.3). The Court declined to decide whether the reasons for attachment had to be supplied to the assessee, that challenge not being pressed, and left it open (para 9.1). It recorded that none of its observations would prejudice either side in further proceedings (para 13).
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