The Kerala High Court has held that Money in bank account is a ‘property’ and liable for provisional attachment under section 281B of the Income Tax Act, 1961.
Mohammed Salih, the assessee, had a large sum of money taken from his vehicle by the police. Following an examination and the conclusion that the money was not accounted for or explained, actions were started in connection with it by issuing a notice under Section 148 of the Income Tax Act.
The Department’s competent authority ordered the temporary attachment of the assessee’s bank accounts under Section 281B of the Income Tax Act after concluding that the expected demand on assessment, including penalty, would be a substantial amount exceeding two crores, the payment of which the assessee would evade.
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The writ petition, which was granted, contested the aforementioned orders. The Kerala High Court has received a challenge to this order from the department.Is money in a bank account “property” that can be attached under Section 281B of the Income Tax Act of 1961? That was the question on the bench.
The assessee argued that the term “property” in sub-section 1 could only refer to immovable property after citing sub-sections 3 and 4 of Section 281B of the Income Tax Act. The clause requiring the evaluation of the property’s fair market value and the production of a bank guarantee to obtain the release of attachment is a sufficient indication that the term “property” as used in sub-section (1) refers exclusively to immovable property. In any case, bank deposits cannot be included in the word.
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According to the bench, “any property” may be temporarily attached under Section 281B(1). The term property’s prefix “any” has a lot of meaning. It suggests that the word “property,” which appears there, should not be interpreted narrowly. As a result, “any property” as defined in Section 281B(1) would include funds in a bank account.
“The mere fact that a bank account is not explicitly provided under Section 281B of the Income Tax Act, unlike the GST Act, 2017 which specifically mentions the same, cannot lead to the conclusion that a bank account is not liable to be attached under Section 281 B of the Act,” noted the Division Bench, which was composed of Justices Sathish Ninan and Shoba Annamma Eapen.
The Assessing Officer may employ temporary property attachment as a weapon or deterrent to avoid the likelihood of tax payment failure following an assessment or reassessment, according to Section 281B of the Income Tax Act.
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The verdict stipulated that in accordance with Section 281B(1), the assessing officer must be convinced that the potential demand and penalty would exceed Rupees Two Crores in order to decide whether to issue a provisional order of attachment.
As a result, it is clear that the authorities must make a determination on the likely demand, which at that point is obviously impossible to specify precisely. The amount of property that is attached, including the money that is attached to bank accounts, should, nevertheless, be in proportion to the likely demand, including the penalty. The bench allowed the appeal.
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