By TIOL News Service

KOLKATA, AUG 09, 2017: THE ISSUE BEFORE THE COURT IS - Whether notices issued u/s 281 of I-T Act for attachment of bank A/c, deserves to be quashed, in case no proceedings were initiated even after expiry of period in excess of seven months of noticing undisclosed income during search & seizure u/s 132. YES is the verdict.

Facts of the case:

The Assessee had preferred the present appeal challenging the order, whereby the Department had issued two notices purportedly u/s 281B of Income Tax Act. The counsel for Assessee submitted that, the ingredients necessary for the purpose of invocation of such section, had not been fulfilled in the present case. He submitted that, there were no assessment proceedings pending and the AO was yet to arrive at a finding that, there was income escaping assessment warranting attachment of bank account as sought to be done. He further urged that although the search & seizure was undertaken in the month of December, 2016, the assessment proceedings were to be initiated.

On appeal, the HC held that,

++ it appears that, the department had undertaken a search and seizure operation u/s 132 in respect of Rajlakshmi group of companies on December 28, 2016. In such search and seizure the Assessee was found to have deposited nearly Rs.20 crores in cash in the bank account. The department suspects that, such deposit was made out of undisclosed income. It is sad to note that, even after expiry of period in excess of seven months, the department has chosen not to initiate any proceedings for the Assessment Years 2011-12 to 2016-17. Such stand is declared in the affidavit-in-opposition filed on behalf of the department. In such circumstances, since the pre-conditions for invoking Section 281B are absent in the present case, the impugned notices are set aside.

(See 2017-TIOL-1514-HC-KOL-IT)