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2024 Supreme(Online)(Ker) 82631
IN THE HIGH COURT OF KERALA AT ERNAKULAM
HARISANKAR V. MENON, J, J.
MOHAMMED SALIH – Appellant
Versus
ASSISTANT COMMISSIONER OF INCOME TAX – Respondent
WP(C) 9607/2024
For the Appellants/Petitioners: BEJOY JOSEPH P.J., P.RAGHUNATHAN, BONNY BENNY, GOVIND G. NAIR, BALU TOM, THASLEENA.K.K.
For the Respondents: GOPIKRISHNAN NAMBIAR, M K.JOHN MATHAI, JOSON MANAVALAN, KURYAN THOMAS, PAULOSE C. ABRAHAM, RAJA KANNAN, SRI.JUSTINE JACOB, SR.GP, NAVANEETH N. NATH
A bank account does not constitute 'property' under Section 281B of the Income Tax Act, and attachment requires tangible evidence of necessity.
Headnote:(A) Income Tax Act, 1961 - Section 281B - Provisional attachment of bank accounts - The petitioners challenged the Income Tax Department's attachment of their bank accounts under Section 281B, asserting that the attachment was unjustified as they had already provided sufficient security to the Magistrate Court. The court found that a bank account does not fall under the definition of 'property' as per Section 281B, leading to the conclusion that the attachment was not permissible. (Paras 11, 13, 17)
(B) Judicial Review - The court emphasized the need for tangible material to justify provisional attachment, stating that the absence of such material rendered the attachment proceedings invalid. (Paras 15, 16)
(C) Legal Precedent - The court referred to relevant Supreme Court judgments, asserting that the attachment of bank accounts under similar statutes requires strict adherence to legal provisions. (Paras 14, 18)
Facts of the case:
The petitioners sought to purchase a hotel and raised funds through loans and sales of ornaments. After police seized their cash during transport, the Magistrate ordered its release to the Income Tax Department, which later attached their bank accounts without sufficient justification.
Findings of Court:
The court quashed the provisional attachment orders, ruling that the Income Tax Department did not have the authority to attach bank accounts under Section 281B.
Issues: The main issues included whether a bank account qualifies as 'property' under Section 281B and whether the department had sufficient grounds for the attachment.
Ratio Decidendi: The court held that a bank account does not constitute 'property' under Section 281B and that the department failed to provide tangible evidence for the necessity of attachment, thus rendering the action invalid.
Result: W.P.
(C) No.9607 of 2024 is allowed, quashing the impugned proceedings at Exts.P7 and P8. For the same reasons, W.P.
(C) No.17460 of 2024 is also allowed, quashing Exts.P7 and P8.
| Table of Content |
|---|
| 1. writ petitions filed challenging provisional attachment of bank accounts. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. arguments presented by petitioners and the income tax department. (Para 8 , 9) |
| 3. court's analysis of the legality of attachment proceedings. (Para 10 , 11 , 12) |
| 4. interpretation of section 281b regarding attachment of bank accounts. (Para 13 , 14 , 15) |
| 5. court's reasoning against the justification of the attachment. (Para 16 , 17 , 18) |
JUDGMENT
These connected writ petitions have been filed by assessees under the provisions of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), challenging the proceedings initiated by the department under the provisions of Section 281B as against the bank accounts held by the respective petitioners with different Banks.
2. Short facts necessary for the disposal of these writ petitions, as culled out from W.P.(C)No.9607 of 2024, are as under:
The petitioners in these writ petitions state that they wanted to start a new business, and for that purpose, they identified a hotel in Bangalore, the price for which was around Rs.165 lakhs. The petitioners claim that they raised the amount required for purchasing the above hotel by way of selling ornaments and by obtaining loans from Co-operative Banks. Those amounts withdrawn from the Banks as also by selling the ornaments were taken to Bangalore. However, since the transaction did not take place, the amounts were brought back to Kerala, in a vehicle in which the petitioners were traveling. The Nilambur Police, on 12.04.2022, intercepted the vehicle and seized Rs.156 lakhs which was being carried by the petitioners in the vehicle. The said amounts were deposited with the Magistrate Court by the Nilambur police. The petitioners, as well as the Income Tax Department, filed applications before the Magistrate Court for custody of the cash. The Magistrate took up the applications together and passed an order, directing the release of the entire amount so seized to the Income Tax Department against bank guarantee. So, the amounts were released to the Income Tax Department. The petitioners challenged the above order of the Magistrate Court by filing Crl. MC Nos.5591 of 2022 and 5605 of 2022 before this Court. By Ext.P3 judgment dated 21.12.2023, this Court relying on its judgment in Crl. MC.No.5034 of 2023, allowed the Crl.MCs by setting aside the order issued by the Judicial First-Class Magistrate Court, Nilambur. The said Court was directed to release the amount to the petitioners, on their furnishing of a bond for a sum of Rs.1,56,00,000/- (Rupees One Crore fifty-six lakhs only) with two solvent sureties each for the like sum, to the satisfaction of the learned Magistrate.
3. The petitioners obtained the amount released from the Magistrate Court and credited the same to their bank accounts by 21.02.2024.
4. However, it appears that the 1st respondent issued Exts.P7 and P8 orders dated 21-02-2024, under Section 281B of the Act, by provisionally attaching the bank accounts of the petitioners with Canara Bank. It is also pointed out that, on 17.02.2024, the 1st respondent issued Exts.P9 to P16 notices under Section 148 of the Act as against the petitioners.
5. Complaining that the petitioners are not able to enjoy the fruits of the order issued by this Court at Ext.P3, in view of the attachment carried out by Exts.P7 and P8, the petitioners have filed the captioned writ petition, seeking to quash Exts.P7 and P8 as also for quashing Exts.P9 to P16 notices issued under Section 148 of the Act.
6. The learned Standing Counsel for the Income Tax Department has filed a statement in this writ petition, wherein the department has sought to sustain the impugned proceedings under Section 281B and Section 148 . The petitioners have also filed a reply affidavit, pointing out that the entire proceedings culminating in the orders at Exts.P7 and P8 are without any justification and arbitrary.
7. I have heard Sri. P. Raghunathan, the learned
