Property Attachment Cannot Continue Once ITAT Order Attains Finality and Dues Are Cleared: Madras HC [Read Order]

The Madras High Court, held that property attachment cannot continue once the Income Tax Appellate Tribunal ( ITAT)’s order attains finality and all tax dues are cleared.

JSR Infra Projects Pvt.Ltd.,petitioner-assessee, through the counsel, submitted that the Department had conducted a search on 08.12.2016 and initiated proceedings under Section 153A of the Income Tax Act, 1961. Assessment orders were passed on 06.02.2020 for AYs 2011-12 to 2017-18.

For AYs 2015-16 to 2017-18, new additions were made, while for AYs 2011-12 to 2014-15, the assessments were completed with ‘Nil’ additions. Later, an attachment order was passed on 15.07.2022. The petitioner filed an appeal before the Commissioner of Income Tax (Appesls)[ CIT(A)], who on 15.09.2023 set aside the new additions. The order was confirmed by the ITAT on 30.04.2025.

Similarly, for AY 2016-17, additions made under Section 153C were deleted by the CIT(A) on 24.06.2024, and the ITAT upheld the order on 28.02.2025. Despite these orders, the Department had not lifted the attachment.

The petitioner stated that all dues mentioned in the counter had already been paid, as shown in the statement dated 28.08.2025, and hence no amount was outstanding. It was argued that once the ITAT’s order attained finality on facts, the Department was bound to lift the attachment.

Reliance was placed on Sri Lakshmi Brick Industries vs. Tax Recovery Officer and Coromandel Oils Pvt. Ltd. vs. Tax Recovery Officer, where the Madras High Court had held that once factual issues attained finality and dues were paid, the attachment must be lifted.

The Department’s counsel, however, submitted that the issue had not reached finality, as an appeal before the High Court was in process, though not yet numbered, but accepted the legal position stated in the cited judgments.

The Court heard the submissions of both sides and reviewed the records. It noted that the proceedings had been initiated under Section 153A of the Act, and assessment orders were passed on 06.02.2020. For AYs 2015-16 to 2017-18, the AO made new additions, while for AYs 2011-12 to 2014-15, the assessments resulted in nil additions.

The petitioner had challenged these assessment orders before the CIT(A), who partly allowed the appeal on 15.09.2023. The order was given effect on 19.12.2023. The Department filed an appeal before the ITAT, which upheld the CIT(A)’s decision through its order dated 30.04.2025.

The Court observed that the key question was whether the issue had reached finality on the factual aspect following the ITAT’s order dated 30.04.2025.

The High Court observed that the issue raised in the present case was no longer res integra. A similar matter had already been decided by the Madras High Court in W.P. No. 26821 of 2016 by order dated 14.09.2016, where it was held that once the ITAT’s order attained finality on the factual aspect and the tax demand had been paid or reduced to nil, the attachment could not continue.

In that case, the Court had also referred to earlier judgments, including Sri Lakshmi Brick Industries v. Tax Recovery Officer and Sri Mohan Wahi v. Commissioner of Income Tax, and held that once the tax liability stood wiped out pursuant to the ITAT’s order, the Tax Recovery Officer was bound to lift the attachment.

The Court noted that the same principle applied to the present case. Once the ITAT’s order had attained finality on facts and the amount had been paid in accordance with the Tribunal’s decision, no further recovery could be initiated, and the Authority was required to lift the attachment order.

The bench noted that the same issue had earlier been considered in W.P. Nos. 22913 to 22915 and 24101 of 2012, where an order dated 01.02.2013 had been passed. In that case, the Court had held that once the ITAT’s order, being that of the highest fact-finding authority, attained finality and was given effect to, the Tax Recovery Officer was required to implement it.

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The Court had also clarified that while the Department could pursue recovery if it succeeded in appeal, Section 225(2) of the Income Tax Act mandated the Tax Recovery Officer to act in accordance with the orders passed in appeal or related proceedings. Based on this, the Court had directed the authorities to lift the property attachment.

Applying the same reasoning, the bench held that the issue in the present case was no longer res integra. It found that the entire tax arrears had been paid as per the orders of the CIT(A) and the ITAT, and hence the earlier rulings directly applied.

Justice Krishnan Ramasamy, therefore, directed the Tax Recovery Officer to release the attached property covered under the order dated 15.07.2022 within four weeks from the date of receipt of the order. The writ petition was allowed without costs, and the connected miscellaneous petitions were closed.