The Assessing Officer has provisionally attached our deposits under s.281B saying a large demand is likely. Is an expected demand enough?
No. A mere apprehension that huge tax demands are likely to be raised on completion of assessment is not enough. The officer must record his own formation of opinion, on tangible material, that the assessee is likely to defeat the demand and that attachment is necessary - not merely expedient - to protect the revenue, and the attachment must be proportionate. An order resting on the Investigation Wing's and the Transfer Pricing Officer's findings is borrowed satisfaction, and the Principal Commissioner's approval is not an empty formality.
Decided by the High Court (S.R. Krishna Kumar J) on 2022-12-16, reported as Writ Petition No. 16692 of 2022 (T-IT) (High Court of Karnataka at Bengaluru); no neutral citation traced. It bears on section 281B, section 281, section 92CA(3), section 142(1), section 144C(1), section 153A, section 234B of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
This is the income-tax application of the tests the Supreme Court laid down in Radha Krishan Industries - which is a GST decision under s.83 of the Himachal Pradesh GST Act, 2017, not an income-tax case, and must be cited as such. The Karnataka High Court reproduces those tests and applies them to s.281B through its own earlier decision in Indian Minerals and Granite. The checklist that emerges is the one to run any provisional attachment against: recorded opinion, tangible material, necessity rather than expediency, proportionality, an approval that shows application of mind, and no supplementing the order with reasons produced later in an affidavit. Note the relief: the attachment of Rs.3,700 crores was set aside but on conditions restricting the petitioner's payments abroad, so a successful s.281B challenge does not always end in an unconditional release.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner procures, supplies and distributes Xiaomi products in India and pays royalty to Qualcomm and to Beijing Xiaomi Mobile Software Co. Ltd. The Enforcement Directorate had seized about Rs.5,551 crores of its bank accounts under FEMA on 29.04.2022; the High Court had stayed that seizure on terms that no royalty be remitted abroad. On 30.07.2022 the Transfer Pricing Officer passed an order under s.92CA(3) for AY 2018-19 making a transfer pricing adjustment; a s.142(1) notice followed asking why the royalty should not be disallowed; the petitioner replied on 10.08.2022. On 11.08.2022, with the Principal Commissioner's approval of the same date, the Assessing Officer provisionally attached under s.281B fixed deposits of Rs.3,700 crores - Rs.2,600 crores with HSBC and Rs.1,100 crores with Citibank - for six months. The attachment order recited the Investigation Wing's and the TPO's findings, estimated additional income of Rs.33,980,08,42,186 and tax of about Rs.10,434 crores, and concluded that attachment was necessary to protect the interest of revenue. A draft assessment order under s.144C(1) for AY 2018-19 was passed on 28.09.2022 while the writ petition was pending.
The petition was partly allowed and the provisional attachment order dated 11.08.2022 set aside, subject to conditions that the petitioner make no payment from the attached deposits by way of royalty or otherwise to entities outside India, with liberty to take overdrafts on those deposits and make payments from the overdrafts, and with a direction to the Revenue to complete the draft assessment proceedings for AYs 2019-20, 2020-21 and 2021-22 on or before 31.03.2023 (para 28). The order was held arbitrary and premeditated, recording neither an opinion nor the necessity to attach; a mere apprehension of large demands is not sufficient; the satisfaction was borrowed from the Investigation Wing and the TPO rather than independently formed; and the Principal Commissioner's approval was non-speaking and reflected non-application of mind (paras 12 to 17). The Revenue could not supplement the order's reasons with other material on record (para 18).
The Court set out the operative part of the attachment order and observed that beyond stating the likely addition it assigned no reasons why attachment was necessary (paras 9 and 10). It then reproduced the Supreme Court's analysis in Radha Krishan Industries - that the power is draconian, that the statutory preconditions must be strictly and punctiliously observed, that 'necessary' is a more stringent requirement than expediency, that the formation of opinion must bear a proximate and live nexus to protecting the revenue and rest on tangible material, and that proportionality requires a live link between the attachment and its purpose - and its own earlier application of those tests to s.281B in Indian Minerals and Granite (paras 10 and 11). Applying them, it found no recorded opinion or necessity and no proportionality (para 12); mere apprehension of large demands insufficient without tangible material that the assessee was likely to defeat the demand (para 13); mechanical, borrowed satisfaction (para 14); the requirement of recorded formation of opinion being in pari materia with 'reasons to believe' (para 15); no finding that the petitioner was a fly-by-night operator, a habitual defaulter, not carrying on business or without funds (para 16); and an approval silent on necessity, prior approval under s.281B not being an empty formality (para 17). On the Revenue's attempt to rely on emails, investigation reports and statements, it applied Mohinder Singh Gill (para 18). The DIN objection was left undecided (para 20). Conditions were imposed because of the parallel FEMA proceedings and the allegation of profit diversion (paras 22 to 27).
Further, mere apprehension that huge tax demands are likely to be raised on completion of assessment is not sufficient for the purpose of passing a provisional attachment order and the exercise of the same must necessarily be preceded by the formation of an opinion that it was necessary to do so for the purpose of protecting the interest of Government revenue, that too on the basis of tangible material that the petitioner was not likely to fulfil the demand and on the other hand, was likely to defeat the demand, which is conspicuously missing and absent in the impugned order.
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Handle my notice → Ask a CA on WhatsAppNo. A mere apprehension that huge tax demands are likely to be raised on completion of assessment is not enough. The officer must record his own formation of opinion, on tangible material, that the assessee is likely to defeat the demand and that attachment is necessary - not merely expedient - to protect the revenue, and the attachment must be proportionate. An order resting on the Investigation Wing's and the Transfer Pricing Officer's findings is borrowed satisfaction, and the Principal Commissioner's approval is not an empty formality. This was decided by the High Court (S.R. Krishna Kumar J) and bears on section 281B, section 281, section 92CA(3), section 142(1), section 144C(1), section 153A, section 234B of the Income Tax Act 1961. It is reported as Writ Petition No. 16692 of 2022 (T-IT) (High Court of Karnataka at Bengaluru); no neutral citation traced. This is the income-tax application of the tests the Supreme Court laid down in Radha Krishan Industries - which is a GST decision under s.83 of the Himachal Pradesh GST Act, 2017, not an income-tax case, and must be cited as such. The Karnataka High Court reproduces those tests and applies them to s.281B through its own earlier decision in Indian Minerals and Granite. The checklist that emerges is the one to run any provisional attachment against: recorded opinion, tangible material, necessity rather than expediency, proportionality, an approval that shows application of mind, and no supplementing the order with reasons produced later in an affidavit. Note the relief: the attachment of Rs.3,700 crores was set aside but on conditions restricting the petitioner's payments abroad, so a successful s.281B challenge does not always end in an unconditional release. If it applies to you, the first step is this: Get the attachment order and the approval, and read them for what they actually record. If the order says only that a large addition is likely and that attachment is necessary to protect revenue, that is the defect this case is about.
The petitioner procures, supplies and distributes Xiaomi products in India and pays royalty to Qualcomm and to Beijing Xiaomi Mobile Software Co. Ltd. The Enforcement Directorate had seized about Rs.5,551 crores of its bank accounts under FEMA on 29.04.2022; the High Court had stayed that seizure on terms that no royalty be remitted abroad. On 30.07.2022 the Transfer Pricing Officer passed an order under s.92CA(3) for AY 2018-19 making a transfer pricing adjustment; a s.142(1) notice followed asking why the royalty should not be disallowed; the petitioner replied on 10.08.2022. On 11.08.2022, with the Principal Commissioner's approval of the same date, the Assessing Officer provisionally attached under s.281B fixed deposits of Rs.3,700 crores - Rs.2,600 crores with HSBC and Rs.1,100 crores with Citibank - for six months. The attachment order recited the Investigation Wing's and the TPO's findings, estimated additional income of Rs.33,980,08,42,186 and tax of about Rs.10,434 crores, and concluded that attachment was necessary to protect the interest of revenue. A draft assessment order under s.144C(1) for AY 2018-19 was passed on 28.09.2022 while the writ petition was pending. The matter was decided on 2022-12-16 by the High Court (S.R. Krishna Kumar J). On those facts the High Court held as follows. The petition was partly allowed and the provisional attachment order dated 11.08.2022 set aside, subject to conditions that the petitioner make no payment from the attached deposits by way of royalty or otherwise to entities outside India, with liberty to take overdrafts on those deposits and make payments from the overdrafts, and with a direction to the Revenue to complete the draft assessment proceedings for AYs 2019-20, 2020-21 and 2021-22 on or before 31.03.2023 (para 28). The order was held arbitrary and premeditated, recording neither an opinion nor the necessity to attach; a mere apprehension of large demands is not sufficient; the satisfaction was borrowed from the Investigation Wing and the TPO rather than independently formed; and the Principal Commissioner's approval was non-speaking and reflected non-application of mind (paras 12 to 17). The Revenue could not supplement the order's reasons with other material on record (para 18).
The Court set out the operative part of the attachment order and observed that beyond stating the likely addition it assigned no reasons why attachment was necessary (paras 9 and 10). It then reproduced the Supreme Court's analysis in Radha Krishan Industries - that the power is draconian, that the statutory preconditions must be strictly and punctiliously observed, that 'necessary' is a more stringent requirement than expediency, that the formation of opinion must bear a proximate and live nexus to protecting the revenue and rest on tangible material, and that proportionality requires a live link between the attachment and its purpose - and its own earlier application of those tests to s.281B in Indian Minerals and Granite (paras 10 and 11). Applying them, it found no recorded opinion or necessity and no proportionality (para 12); mere apprehension of large demands insufficient without tangible material that the assessee was likely to defeat the demand (para 13); mechanical, borrowed satisfaction (para 14); the requirement of recorded formation of opinion being in pari materia with 'reasons to believe' (para 15); no finding that the petitioner was a fly-by-night operator, a habitual defaulter, not carrying on business or without funds (para 16); and an approval silent on necessity, prior approval under s.281B not being an empty formality (para 17). On the Revenue's attempt to rely on emails, investigation reports and statements, it applied Mohinder Singh Gill (para 18). The DIN objection was left undecided (para 20). Conditions were imposed because of the parallel FEMA proceedings and the allegation of profit diversion (paras 22 to 27). In the words reproduced by the source cited on this page: "Further, mere apprehension that huge tax demands are likely to be raised on completion of assessment is not sufficient for the purpose of passing a provisional attachment order and the exercise of the same must necessarily be preceded by the formation of an opinion that it was necessary to do so for the purpose of protecting the interest of Government revenue, that too on the basis of tangible material that the petitioner was not likely to fulfil the demand and on the other hand, was likely to defeat the demand, which is conspicuously missing and absent in the impugned order." The decision followed or applied Radha Krishan Industries v. State of Himachal Pradesh (2021) 6 SCC 771 - applied; a GST decision on s.83 of the HPGST Act, 2017; Indian Minerals and Granite Company v. DCIT (2022) 440 ITR 292 (Kar) - followed; applies Radha Krishan Industries to s.281B; Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405 - applied; reasons cannot be supplemented later.
It was decided by the High Court on 2022-12-16 and is reported as Writ Petition No. 16692 of 2022 (T-IT) (High Court of Karnataka at Bengaluru); no neutral citation traced. 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 281, section 92CA(3), section 142(1), section 144C(1), section 153A, section 234B, 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 helps the taxpayer. The petition was partly allowed and the provisional attachment order dated 11.08.2022 set aside, subject to conditions that the petitioner make no payment from the attached deposits by way of royalty or otherwise to entities outside India, with liberty to take overdrafts on those deposits and make payments from the overdrafts, and with a direction to the Revenue to complete the draft assessment proceedings for AYs 2019-20, 2020-21 and 2021-22 on or before 31.03.2023 (para 28). The order was held arbitrary and premeditated, recording neither an opinion nor the necessity to attach; a mere apprehension of large demands is not sufficient; the satisfaction was borrowed from the Investigation Wing and the TPO rather than independently formed; and the Principal Commissioner's approval was non-speaking and reflected non-application of mind (paras 12 to 17). The Revenue could not supplement the order's reasons with other material on record (para 18). It arises in Demand, Recovery & Stay matters, on section 281B, section 281, section 92CA(3), section 142(1), section 144C(1), section 153A, section 234B of the Income Tax Act 1961, and was decided by S.R. Krishna Kumar 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. Ask what tangible material shows that YOU would defeat the demand - the Court looked for a finding that the assessee was a fly-by-night operator, a habitual defaulter, not carrying on business, or without funds, and found none. Attack the approval separately. A silent approval that does not address necessity fails the jurisdictional precondition, and prior approval under s.281B is not a mere formality. Resist any attempt to justify the order by material produced later - on Mohinder Singh Gill, the order stands or falls on the reasons it records. Argue proportionality on quantum: a live link between the amount attached and the purpose, especially where the approval covers only part of the additions. Expect the Court to protect the revenue by other conditions, and be ready with an acceptable one - here, an undertaking not to remit royalty abroad, with liberty to take overdrafts.
Still good law. Five citator hits. The useful one is ARL Infratech Ltd v DCIT (Rajasthan High Court, Jaipur, 6 March 2026), where the Bench, in its own consideration at para 10 - following its discussion of the Supreme Court in Radha Krishan Industries at para 9 and introduced by 'Almost on similar lines' rather than as a recital of submissions - listed this judgment with Vodafone Idea Ltd (Bombay) and India Mineral and Granite Co (Karnataka) as authority that the power of provisional attachment under section 281B is not to be exercised as a matter of course, and quashed the attachment order of 1 January 2026 (subject to a 20 per cent deposit). The other hits are Karnataka matters under the commercial tax law which draw on it only by analogy. Nothing overruling or doubting it was found. The two limbs a practitioner should carry from it are that the officer's satisfaction must be his own and recorded, not borrowed from an investigation wing or a sister agency, and that the attachment must be proportionate to the demand in prospect. 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.
ON THE STRUCTURE, and a numbering defect. The order runs to 28 numbered paragraphs, but the numbering jumps from paragraph 5 to paragraph 8 - there are no paragraphs 6 or 7 in the text as published. A citation to paragraph 6 or 7 of this judgment is a citation to something that does not exist. A MISDESCRIPTION IN PARAGRAPH 1. It describes the impugned order as one under 'Section 281E'. Everything else in the order is under s.281B, and s.281B is what the judgment decides. Do not reproduce the paragraph 1 reference. A WARNING ON LOCATORS. Paragraphs 10 and 11 reproduce long extracts - from the Supreme Court in Radha Krishan Industries, its paragraphs 48 to 51 and 72 to 74, and from the Karnataka High Court in Indian Minerals and Granite. Paragraph numbers appearing inside those blocks belong to the quoted judgments and not to this one. A WARNING ABOUT RADHA KRISHAN INDUSTRIES ITSELF. It is a decision on s.83 of the Himachal Pradesh Goods and Services Tax Act, 2017, not on the Income-tax Act, and it must always be cited as such. Its value here is that the principles it states about provisional attachment - that the power is draconian, is to be exercised only on tangible material, and must be proportionate - were applied to s.281B, and an opponent who points out that it is a goods and services tax decision is not thereby answering the point. WHAT THE JUDGMENT HOLDS, set out here because the two limbs are what travel. A mere apprehension that huge tax demands are likely to be raised on completion of assessment is not enough. The officer must record his own formation of opinion, on tangible material, that the assessee is likely to defeat the demand and that attachment is necessary - not merely expedient - to protect the revenue; and the attachment must be proportionate to the demand in prospect. An order resting on the Investigation Wing's and the Transfer Pricing Officer's findings is borrowed satisfaction, and the Principal Commissioner's approval is not an empty formality. A WARNING ABOUT THE SECTION TEXT. Consolidated texts of s.281B in circulation are of an old vintage and do not carry the current provision. The wording used on this page is taken instead from the Bombay High Court's reproduction of the section in Microfiber Corp Pvt. Ltd v. State Bank of India (WP 9449 of 2023, decided 23 February 2024), which sets out s.281B(1) and (2) including the reference to penalty under s.271AAD and the outer limit of 'two years or sixty days after the date of order of assessment or reassessment, whichever is later'. Read the section as it stands for your own matter before relying on either limit. 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 partly allowed and the provisional attachment order dated 11.08.2022 set aside, subject to conditions that the petitioner make no payment from the attached deposits by way of royalty or otherwise to entities outside India, with liberty to take overdrafts on those deposits and make payments from the overdrafts, and with a direction to the Revenue to complete the draft assessment proceedings for AYs 2019-20, 2020-21 and 2021-22 on or before 31.03.2023 (para 28). The order was held arbitrary and premeditated, recording neither an opinion nor the necessity to attach; a mere apprehension of large demands is not sufficient; the satisfaction was borrowed from the Investigation Wing and the TPO rather than independently formed; and the Principal Commissioner's approval was non-speaking and reflected non-application of mind (paras 12 to 17). The Revenue could not supplement the order's reasons with other material on record (para 18).
TaxSphere, “Xiaomi Technology India Private Limited v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/xiaomi-technology-281b-borrowed-satisfaction-and-proportionality/ (validity last checked 2026-09-08)
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