Blog No. 42: Provisional attachment ceases on issue of assessment order

Hon’ble Supreme Court in the case of Radha Krishan Industries Vs State of HP 2021 (4) TMI 837 held that once the assessment order is issued, the provisional attachment shall cease. DC emphasized on the doctrine of proportionality i.e., the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure.

Following the above decision, Hon’ble Bombay High Court in the case of Fine Exims Private Limited Vs UOI ordered to lift the attachment of bank account as the matter under dispute is not pending and has been adjudicated by the proper officer. Read about the important observations laid down by SC in the case of Radha Krishan (supra) below:

1. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue.
2. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallized.
3. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules.
4. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power.
5. The Commissioner must be alive to the fact that such provisions are not intended to authorize Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue.
6. It is not open to the Commissioner to hold the view that the only safeguard under Rule 159(5) is to submit an objection without an opportunity of a personal hearing. Such a construction would be plainly contrary to sub-Rule 5 which contemplates both the submission of an objection to the attachment and an opportunity of being heard. The opportunity of being heard can be availed of as a matter of right by the person whose property is attached.
7. The Commissioner who hears the objections must pass a reasoned order either accepting or rejecting the objections. To allow the Commissioner to get by without passing a reasoned order will make his decision subjective and defeat the purpose of subjecting it to judicial scrutiny.