Cash in a bank account is considered 'property' liable for provisional attachment under Section 281B of the Income Tax Act, 1961.

JUDGMENT :

(Sathish Ninan, J.)

Is cash in a Bank account 'property' liable to attachment under Section 281B of the Income Tax Act, 1961(“the Act”)? On the discussions in this judgment we hold, 'Yes'.

2. On 12.04.2022, the police seized a huge amount of cash (Rs.1,56,00,000/-) from a car in which respondents 1 and 2 in the writ appeal were riding. The seized amount was produced before the Judicial First Class Magistrate's Court.

3. On application by the Department under Section 132A of the Act, the Court directed release of the amount to the Department. Respondents 1 and 2 herein and others challenged the said order before this Court in Crl.M.C. Nos.5605/2022 and 5591/2022. This Court as per order dated 21.12.2023, directed release of the cash to them on furnishing a bond for the amount. The amount was accordingly released.

4. Upon investigation and being satisfied that there was no explanation for the cash nor was it accounted, and after recording reason to believe that income chargeable to tax has escaped assessment, proceedings were initiated in relation to the same by the issuance of notice under Section 148 of the Act.

5. Finding that the expected demand on assessment including penalty would be a substantial amount exceeding two crores, the payment of which the assessees would evade, the competent authority of the Department, ordered provisional attachment of the Bank accounts of the assessees as per Exts.P7 and P8 orders of attachment under Section 281B of the Act. The said orders were challenged in the writ petition. The writ petition was allowed, against which the Department is in appeal.

6. We have heard Sri.A.R.L. Sundaresan, Additional Solicitor General assisted by Sri.Navaneeth N. Nath, Standing Counsel-IT, for the appellants and Sri.P. Reghunathan, learned counsel for the respondents.

7. Allowing the writ petition and quashing the provisional order of attachment, the learned Single Judge held: -

(i) Bank account is not a 'property' under Section 281B, which could be subjected to provisional attachment.

(ii) The interest of the revenue stood secured by the security furnished before the Judicial First Class Magistrate's Court.

(iii) The records do not reveal that the opinion of the assessing officer and the approval granted by the Principal Commissioner of Income Tax(PCIT) to order provisional attachment was on due application of mind.

8. Section 281B of the Act reads thus: -

“281B. (1) Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment or for imposition of penalty under section 271 AAD where the amount or aggregate of amounts of penalty likely to be imposed under the said section exceeds two crore rupees, the Assessing Officer is of the opinion that of the purpose of protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to the assesee in the manner provided in the Second Schedule.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1) :

Provided that the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years or sixty days after the date of order of assessment or reassessment, whichever is later.

(3) Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the fair