Vls Finance Limited And Others vs The Assistant Commissioner Of ...
2012 Latest Caselaw 1510 Del

*                IN THE HIGH COURT OF DELHI AT NEW DELHI

+               WRIT PETITION (CIVIL) NO. 19774-75/2005

                               Reserved on: 23rd February, 2011
%                            Date of Decision: 5th March, 2012

        VLS FINANCE LIMITED AND OTHERS          ...Petitioners
                           Through Mr. O.S. Bajpai, Sr.
                          Advocate with Ms. Manasvini
                          Bajpai & Mr. V.N. Jha, Advocates.

                                 VERSUS

        THE ASSISTANT COMMISSIONER OF INCOME TAX &
        ANOTHER                           .....Respondents

Through Mr. Sanjeev Rajpal, Sr. Standing Counsel.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V. EASWAR

SANJIV KHANNA, J.:

The petitioner No. 1, VLS Finance Limited, had filed this

writ petition in October, 2005, impugning and seeking quashing

of the order dated 28th July, 2005 passed under Section 281B of

the Income Tax Act, 1961 (Act, for short). Prayer for payment for

the refunds is also made.

2. The petitioner No. 1 has stated and claimed that they are

entitled to refund of Rs.3,85,35,158/- in respect of assessment

years 1998-99, 1999-2000, 2001-02 and 2004-05. Various

allegations have been made in the writ petition. However, in

view of the subsequent developments these need not be

adverted to and in fact no arguments were raised with reference

to the first order dated 28th July, 2005, under Section 281B of

the Act.

3. The petitioner No. 1 was subjected to search under

Section 132 of the Act resulting in initiation of block assessment

proceedings for the period 1st April, 1988 to 22nd June, 1998.

The impugned order dated 28th July, 2005 passed under Section

281 B of the Act records as under:

" Please refer to block assessment proceedings for the period 1.4.1988 to 22.6.1998 pending in your case. In this connection since the undisclosed income for the block period is yet to be ascertained/assessed and the regular assessment for assessment year 2003-04 and 2004-05 are pending, a provisional attachment u/s 281B in your case has been authorized by the Commissioner of Income Tax (Central)-II, New Delhi vide No. CIT ©-II 281B 2005-06/346 dated 26.7.2005 to protect the interest of revenue. The following refunds determined in you(sic) case are provisionally attached for a period of 6 months i.e. upto 25.01.2006 DETAILS OF PROPERTY

S. NO. A.Y. Amount of Refund (Rs.)

1. 1998-99 1,09,03,472

2. 1999-00 12,44,152

3. 2001-02 2,49,67,988

4. 2004-05 14,19,546

3,85,35,158

4. At this juncture, we may state that the initiation of block

assessment proceedings has been challenged by the petitioner

No. 1 and Appeal Civil No. 1620/2007 is pending before the

Supreme Court. By an interim order dated 5th February, 2007, it

has been directed that special audit may go on but no final

assessment order would be passed. The said order has been

made absolute till the disposal of the appeal.

5. The order dated 28th July, 2005 quoted above was

operative and the provisional attachment was to continue for a

period of six months, i.e., upto 25th January, 2006. The

petitioners have not challenged or questioned any

order/extension of provisional attachment under Section 281B

by the subsequent orders. However, we may note and record

here that it has been contended by the senior counsel appearing

for the petitioner No. 1 that they have not been communicated

and informed about orders extending the provisional attachment

after 25th January, 2006. In the affidavit, which was filed on 21st

April, 2008, we may note that the petitioner No.1 has not

contended or stated that they were not communicated or

informed about the extension orders for continuation of

provisional attachment on or after 25th January, 2006. However,

it is stated in the affidavit that the purport and spirit behind

Section 281B is not to deprive the assessee from the

money/refund due to him beyond the maximum period of

attachment of two years and six months.

6. It was noticing the aforesaid contention that an order

under Section 281 B of the Act can continue for a maximum

period of a 2 years and 6 months, on 3rd March, 2008, the

following order was passed:-

"It has been stated in the affidavit in reply to the show cause notice that the period of limitation for the order passed under Section 281-B of the Income Tax Act, 1961 would expire on 28th January, 2008. Since the period of limitation has expired, learned counsel for the Revenue seeks time to take instructions with regard to the refund allegedly due to the petitioner.

On request, adjourned to 12th March, 2008."

7. Thereafter, the respondents had filed an affidavit dated 9th

April, 2008. In this affidavit, it is stated that the block

assessment proceedings were to be completed by 25th August,

2007 but in view of the stay granted by the Supreme Court, the

proceedings were still pending. Reference was made to Section

158BE of the Act and it was stated that because of the stay

granted, the stay period has to be excluded for computing the

limitation period for completing the block assessment

proceedings. In the said affidavit, reference is made to decision

of the Punjab and Haryana High Court in Tek Chand versus

ITO, (2001) 252 ITR 799 and Madras High Court in NEPC India

Limited versus ACIT, 1999 (104) TAXMAN 651 and it is

averred that the order under Section 281B is not surviving and,

therefore, the writ petition of the petitioner should be dismissed.

It may be appropriate to reproduce the last paragraph in the

affidavit, which reads as under:-

"Therefore, if it is considered that the order u/s 281B is not surviving, then in view of above quoted judgments the writ petition of the assessee may be dismissed."

The aforesaid statement in the affidavit dated 9th April, 2008 has

been referred to below and ultimately forms basis for disposing

and deciding of the present writ petition.

8. Section 281B as it existed at the time of filing of the petition, i.e., before addition of the third proviso by the Finance (No.2) Act, 2009 with retrospective effect from 1st April, 1988, is as under:-

"281B. Provisional attachment to protect revenue in certain cases.--(1) Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, the Assessing Officer is of the opinion that for the purpose of protecting the interest of the revenue it is necessary so to do, he may, with the previous approval of the *Chief Commissioner, Commissioner, Director- General or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule.

Explanation.--For the purposes of this sub- section, proceedings under sub-section (5) of section 132 shall be deemed to be proceedings for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1):

Provided that the *Chief Commissioner, Commissioner, Director-General or Director may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years.

Provided further that where an application for settlement under section 245C is made, the period commencing from the date on which such application is made and ending with the date on which an order under sub- section (1) of section 245D is made shall be excluded from the period specified in the preceding proviso."

9. Sub-section 1 to Section 281B stipulates that an order provisionally attaching any property of the assessee can be passed during pendency of any proceedings for assessment/reassessment, if the Assessing Officer is of the opinion that such an order is necessary for purpose of protecting interest of the Revenue. The order can be only passed with the previous approval of the Chief Commissioner, Commissioner, Director General or Director. The order has to be in writing. Sub-section 2 to Section 281B states that the order for provisional attachment under sub-section (1) shall cease to have effect after six months. Thus, sub-section 2, provides the period during which an order of provisional attachment remains in force, i.e., six months. The first proviso to Section 281B states that the Chief Commissioner, Commissioner, Director General,

Director may for reasons recorded in writing extend the said period or periods, which shall not exceed two years. Thus, the total period for which extension can be granted is two years, after the first order of provisional attachment, which is valid for six months, comes to an end. The period of provisional attachment, therefore, cannot be for more than two years and six months. The said period in the present case, as the first attachment order was issued on 28th July, 2005, came to an end on 24th January, 2008.

10. The third proviso was inserted in 2009 by Finance (No. 2)

Act of 2009 with retrospective effect from 1st April, 1988 is as

under:-

"Provided also that the period during which the proceedings for assessment or reassessment are stayed by an order or injunction of any court shall be excluded from the period specified in the first proviso."

11. During the course of arguments, a number of contentions

were raised by the petitioner No.1 on whether or not the third

proviso would be applicable to the present case as the period of

2 years 6 months came to an end on 24th January, 2008.

Relying upon CIT vs. Oriental Rubber Works, (1989) 145 ITR

477(SC); Thanthi Trust v. Commissioner of Income-tax,

(1987) 167 ITR 397(Del); Metal Fittings P. Ltd. v. Union of

India, (1983) 141 ITR 758 (Del), it was submitted that these

extension orders under the proviso to Section 281B(2) were

required to be communicated. The aforesaid decisions pertain

to Section 132(8) of the Act and it was stated that the

requirement and need to communicate an order under the said

section, are equally applicable to the Section 281 B of the Act.

12. As we perceive, we are not required to go into the said

aspects and contentions raised by the petitioner No.1 in the

present case. Pursuant to the order dated 10th January, 2011,

the Revenue has produced before us the original file and we find

that the last order under Section 281B was passed on 19th July,

2007. The said order extended the period of provisional

attachment upto 24th January, 2008. Thereafter, no order under

Section 281B has been passed even after the third proviso to

Section 281B was inserted by the Finance (No. 2) Act of 2009

with retrospective effect from 1st April, 1988. As no order as of

now has been passed by the Revenue under Section 281B after

insertion of the third proviso, we need not examine and go into

the legal issues and contentions raised. These aspects and

legal issues can be examined in an appropriate matter or when

and if at all the respondents pass a fresh order under Section

281B of the Act. The contention relating to communication of the

order also need not be decided as there is no order extending

the provisional attachment under Section 281B on or after 24th

January, 2008. We may also note that it is not the contention of

the Revenue and it was not urged and in our opinion rightly that

the third proviso incorporates a deeming provision, which has

the effect of continuation or extension of the last order under

Section 281B dated 19th July, 2007 which was upto and valid till

24th January, 2008. The said proviso quoted above states that

the period pursuant to which assessment/reassessment

proceedings have been stayed due to injunction or stay order,

shall be excluded from the period of two years mentioned in the

first proviso. It does not stipulate that the provisional attachment

order issued, shall be deemed to be effective and continue

beyond the stipulated period mentioned in the order, when there

is an injunction or an order by a Court staying the

assessment/reassessment proceedings. Injunction/stay order

does not on its own or by deeming friction extend the period

stipulated/mentioned in an order under Section 281B.

13. Before we conclude, we must refer to one contention

raised by the petitioner with reference to our order dated 19th

May, 2011, which reads as under:-

"Mr. Sanjeev Rajpal, learned counsel appearing for the revenue, submitted that this writ petition should await the verdict of the Apex Court in Civil Appeal arising out of SLP(C) No.1620/2007. Mr. Bajpai, learned senior counsel appearing for the petitioner-assessee submitted that the lis which is pending before the Apex Court has nothing to do with the present case. The aforesaid aspect shall be adverted to on the next occasion and if this court would be prima facie satisfied that there is no connection between the nature of litigations, the hearing shall proceed. Call on 18th August, 2011.

The requisite file that was directed to be produced shall be produced by Mr. Rajpal on the next date."

14. The contention of the petitioner is that there is no

connection between the block assessment proceedings and the

refunds which are due to the petitioner. We may note that in the

written submissions the petitioner No.1 has referred to refunds

due for assessment years 2001-02 onwards. Some of these

refunds are not a subject matter of the writ petition and we are

not concerned with the same. It is also averred that the

Supreme Court has granted stay against the block assessment

proceedings as the restraint order under Section 132(3) was

clamped or revoked fifteen times in respect of one of the

premises. The "connection" referred and mentioned in the order

dated 19th May, 2011, does not refer to the nature and character

of the additions made or reason for the refunds or the

assessment years involved. The "connection" mentioned in the

said order has reference to the reasons stated in the order of

provisional attachment and whether the said reasons have any

nexus or connection with the assessment/reassessment

proceedings, which have been stayed by the Supreme Court.

There is certainly nexus and connection between the reasons

stated in the order under Section 281B, i.e., pendency of the

block assessment proceedings and the proceedings subject

matter before the Supreme Court i.e. the block assessment

proceeding. We may again note that the Supreme Court has

stayed the block assessment proceedings.

15. We wish to further clarify as a matter of abundant caution

and state that we have not considered and examined whether

the Revenue can pass a fresh order under Section 281B in view

of the third proviso to the said Section introduced/inserted by

Finance (No. 2) Act of 2009 with retrospective effect from 1st

April, 1988. If required, the said issue and question will be

examined in case the Revenue passes any such order. We

have not barred or prohibited the Revenue from passing any

such order or expressed any opinion whether any such order

should be or could be passed. These aspects can be examined

by the respondents. It will be premature to decide these

contentions now. We do not want to express any opinion in

vacuum on the assumption that an order may be passed. This

caveat is necessary least there be any confusion. We may also

note that this aspect has not been raised in the pleadings, i.e.,

the affidavit dated 9th April, 2008 and the reply affidavit dated

21st April, 2008 filed by the petitioner. These affidavits were filed

prior to the retrospective amendment vide Finance (No. 2) Act of

2009. The petitioner in fact had filed an application CM No.

2845/2010 challenging the retrospective amendment, which was

dismissed as withdrawn vide order dated 26th May, 2010.

Thereafter, the petitioner No.1 had filed a writ petition to

challenge the said retrospective amendment and it is pointed out

that the said writ petition was dismissed as withdrawn on 10th

January, 2011. This was right as till the said date, (for that

matter even now) no order under Section 281B relying upon the

third proviso has been passed.

16. In view of the aforesaid position, we accept the prayer

made by the respondents in their affidavit filed on 9th April, 2008,

which has been quoted above with one modification that the writ

petition filed by the petitioner will not be treated as dismissed. It

is only recorded that the respondents admit that there is no

order under Section 281B in operation. The respondents are at

liberty and should proceed in accordance with law. The writ

petition is disposed of. No costs.

(SANJIV KHANNA) JUDGE

( R.V. EASWAR ) JUDGE

MARCH 5th, 2012 VKR