Section 281B

Section 281B — the law in short

What the courts have decided on section 281B, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Jyotsna Suri v DDIT (Inv.) High CourtCuts both waysNo later treatment found
  The officer has provisionally attached my property in a Black Money Act proceeding. Where does that power come from, and is s.3(2) under challenge?
  The attachment was made under s.84 of the Black Money Act, which applies s.281B of the Income-tax Act to that Act. The Delhi High Court issued notice on a petition seeking to set aside proceedings under s.10 for assessment year 2021-22 and challenging the constitutional validity of s.3(2), gave the petitioner until 8 April 2025 to respond to the show cause notice, directed the officer to hear her and pass an order by 15 May 2025, and directed that any adverse order would not be given effect until the next hearing. Nothing was decided.
• ACIT v Muhammed Shameer (Kerala) High CourtHelps departmentNo later treatment found
  Can a bank account be provisionally attached under s.281B at all, and how much can be attached?
  Yes. A Division Bench of the Kerala High Court held that money in bank accounts is property liable to provisional attachment under s.281B, reversing a single judge who had held otherwise. But the attachment must be commensurate with the probable demand including penalty, and must not be a blanket order attaching property worth far more than that demand.
• Xiaomi Technology India Private Limited v DCIT High CourtHelps taxpayer
  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.
• FCS Manufacturing (India) Pvt Ltd v DDIT High CourtCuts both waysNo later treatment found
  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.
• N.P. Subair v ITO High CourtHelps departmentNo later treatment found
  My s.281B attachment has been continued beyond six months. The Commissioner never passed a separate reasoned order - only an endorsement on the Assessing Officer's proposal. Is the extension bad?
  Not on this decision. The Court held that where the Assessing Officer's proposal narrates the facts necessitating extension and the Principal Commissioner endorses on it that in view of those facts the attachment may be continued for another six months to safeguard the interest of revenue, that endorsement is sufficient compliance with the first proviso to s.281B(2). The writ petitions were dismissed.
• Gandhi Trading v ACIT (Bombay) High CourtHelps taxpayer
  The department has provisionally attached my bank accounts under s.281B while the assessment is still going on. What are the limits on that power?
  Provisional attachment under s.281B is in the nature of attachment before judgment under the Code of Civil Procedure. It is a drastic power, to be exercised with extreme care and caution, only where there is sufficient material to justify a satisfaction that the assessee is about to dispose of property to thwart collection, and only to the extent required. Attachment should be of immovable property where that protects the revenue; attachment of bank accounts and trading assets is a last resort.
• Section 84 of the Black Money Act - the Income-tax Act provisions applied CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Which provisions of the Income-tax Act apply to the Black Money Act, and can the officer borrow one that is not on the list?
  Section 84 applies a closed list: clauses (c) and (d) of s.90(1), clauses (c) and (d) of s.90A(1), ss.119, 133, 134, 135 and 138, the whole of Chapter XV, and ss.237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act, with necessary modifications, as if they referred to undisclosed foreign income and asset instead of to income-tax. The list is expressed as an enumeration and the decided points located in this area turn on what is left out of it. Sections 234A, 234B and 234C are not on it, which is why the Chennai Bench in Pascal Postel held that the interest charge in s.40(2) has no advance-tax machinery to operate on; s.230 is not on it either, which is the omission on which Preetha Krishna (Madras High Court) is understood to turn, though no copy of that judgment was opened for this note.
• CBDT Circular 4/2011 CBDT Circulars & InstructionsCuts both ways
  I want to sell an asset or mortgage business assets while a tax demand is pending. How do I get permission?
  Apply to the Assessing Officer in the prescribed form at least thirty days before the proposed transaction. Permission is to be granted where there is no demand and none likely within six months, where an undisputed demand is paid with interest, or where a disputed demand is stayed and secured by bank guarantee, sufficient other assets or a departmental first charge; refusal must be by a reasoned order approved by the range head.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.