OF

PROVISIONAL

ATTACHMENT

DTD.11.8.2022 PASSED UNDER SECTION 281B OF THE INCOME

TAX ACT 1961 BY THE R-1 WITH THE APPROVAL OF THE R-3

WHILST PROVISIONALLY ATTACHING THE FIXED DEPOSIT

TOTALING TO INR 3,700 CRORES (INDIAN RUPEES THREE

THOUSAND SEVEN HUNDRED CRORES) VIZ INR 2,600 CRORES

WITH HSBC BANK (ACCOUNT NO.073-161671-001) AND INR 1,100

CRORES WITH CITI BANK (ACCOUNT NO.521656018) ALONG

WITH INTEREST THEREUPON, WHEREBY AN ATTACHING HAS

BEEN MADE FOR A PERIOD OF SIX MONTHS (NEARING

ANNEXURE-A

BEARING

NO.ITBA.COM/F/A/2022-

23/1044616877(1).

THIS W.P. IS BEING HEARD AND RESERVED ON

17.10.2022, COMING ON FOR PRONOUNCEMENT OF ORDERS

THIS DAY, THE COURT MADE THE FOLLOWING:-

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ORDER

In this petition, petitioner seeks quashing of the

impugned order at Annexure-A dated 11.08.2022 passed

by the 1^st respondent – Deputy Commissioner of Income

Tax under Section 281E of the Income Tax Act, 1961 (for

short ‘the I.T.Act’) whereby, pursuant to the approval dated

11.08.2022 of the 3^rd respondent – Principal Commissioner

of Income Tax, the 1^st respondent provisionally attached

the subject fixed deposits of the petitioner in a sum INR

3,700 crores viz., i.e. INR 2,600 crores with HSBC Bank

and INR 1,100 crores with City Bank.

2. The brief facts rising to the present petition are as

under: -

The petitioner is a private limited company engaged

in the business of procurement, supply and distribution of

Xiaomi products in India bearing various brand names

including mobile phones, accessories, computers etc., as

part of its business, petitioner has to pay royalty to

Qualcomm and Beijing Xiaomi mobile software company

Ltd., During the period from 2019 to March 2022, there

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were proceedings between the respondents and Income

Tax Department and the proceedings in relation to alleged

payment of income tax by the petitioner. Meanwhile, the

Enforcement Directorate passed a seizure order dated

29.04.2022 seizing the bank accounts of the petitioner to

an extent of INR 5,551 crores under the Foreign Exchange

Management Act (for short ‘FEMA’). The said order having

been challenged by the petitioner in W.P.No.9182/2022,

this Court passed an interim order dated 05.05.2022

staying the operation of the seizure order, subject to the

condition that the petitioner was not entitled to make

payments to foreign entities in the form of royalty or any

other form. Subsequently, this Court issued a further

clarification on 12.05.2022 that the petitioner was at liberty

to take overdrafts and make payments from such

overdrafts to foreign entities excluding payment of royalty.

2.1 Subsequently, by final order dated 05.07.2022,

this Court disposed of W.P.No.9182/2022 by relegating the

petitioner to the competent authority i.e., Commissioner of

Customs (Appeals) and further directed that the aforesaid

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earlier interim orders dated 05.05.2022 and 12.05.2022 to

continue till disposal of the proceedings.

2.2 Subsequently, in the proceedings before the

petitioner before the Transfer Pricing Officer (TPO) in

respect of the Assessment Year 2018-19, the petitioner

contested

the

proceedings

and

filed

the

detailed

submissions with regard to payment of royalty to the

foreign entities referred to supra and the said proceedings

were pending consideration and on 30.07.2022, the TPO

passed an order under Section 92CA (3) of the I.T.Act for

the Assessment Year 2018-19 whilst making transfer

pricing adjustment. Pursuant to the said order, the

Assessing Officer issued a Notice under Section 142(1) of

the I.T.Act for the Assessment Year 2018-19 inter alia

calling upon the petitioner to show cause, as to why

payment of royalty to the foreign entity i.e., Qualcomm and

Beijing Xiaomi Mobile should not be disallowed. On

10.08.2022, petitioner submitted a detailed response along

with documents and contested the said Notice and

proceedings.

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2.3 On 11.08.2022, upon obtaining approval from

the 3^rd respondent, the 1^st respondent passed the

impugned order under Section 28