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.

• ACIT v Muhammed Shameer (Kerala) High CourtHelps departmentValidity unconfirmed
  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 taxpayerValidity unconfirmed
  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 waysValidity unconfirmed
  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 departmentValidity unconfirmed
  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.
• 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.