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[Section 281B] - Provisional Attachment to Protect Revenue in Certain Cases

(1) Provisional Attachment of any Property belonging to the Assessee [Section 281B(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 interests of the revenue, it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule.

(2) Period of Validity of the Attachment Order [Section 281B(2)]:

Every such provisional attachment shall cease to have effect after the expiry of a period of 6 months from the date of the order.

However, the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director may, for reasons to be recorded in writing, extend this 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 2 years or sixty days after the date of order of assessment or reassessment, whichever is later.

Provision for bank guarantee under section 281B [W.e.f. 1.6.2016]

Under the existing provisions of section 281B, the Assessing Officer may provisionally attach any property of the assessee during the pendency of assessment or reassessment proceedings, for a period of six months with the prior approval of the income- tax authorities specified therein, if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. Such attachment of property is extendable to a maximum period of two years or sixty days after the date of assessment order, whichever is later.

The Income Tax Simplification Committee (Easwar Committee) has recommended that provisional attachment of property could be substituted by a bank guarantee subject to fulfilment of certain conditions. Having considered this recommendation, the Act has inserted the following subsections (3) to (9) under section 281B:

(3) Assessing Officer to revoke attachment of property if a guarantee from a scheduled bank is furnished [Section 281B(3)]

Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the fair market value of the property provisionally attached under section 281B(1), the Assessing Officer shall, by an order in writing, revoke such attachment:

Provided that where the Assessing Officer is satisfied that a guarantee from a scheduled bank for an amount lower than the fair market value of the property is sufficient to protect the interests of the revenue, he may accept such guarantee and revoke the attachment.

(4) The Valuation Officer to estimate the fair market value of the property provisionally attached and submit report of the estimate within 30 days if reference is made by A.O. [Section 281B(4)]

The Assessing Officer may, for the purposes of determining the value of the property provisionally attached under section 281B(1), make a reference to the Valuation Officer referred to in section 142A, who shall estimate the fair market value of the property in the manner provided under that section and submit a report of the estimate to the Assessing Officer within a period of 30 days from the date of receipt of such reference.

(5) Time period for revoking the provisional attachment, if guarantee is provided under section 281B(3) [Section 281B(5)]

An order revoking the provisional attachment under section 281B(3) shall be made—

(i) within 45 days from the date of receipt of the guarantee, where a reference to the Valuation Officer has been made under section 281B(4); or

(ii) within 15 days from the date of receipt of guarantee in any other case.

(6) Invocation of guarantee [Section 281B(6)]

Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay that sum within the time specified in the notice of demand, the Assessing Officer may invoke the guarantee furnished under section 281B(3), wholly or in part, to recover the amount.

(7) Invocation of guarantee on failure to renew or furnish the new guarantee [Section 281B(7)]

The Assessing Officer shall, in the interests of the revenue, invoke the bank guarantee, if the assessee fails to renew the guarantee referred to in section 281(3), or fails to furnish a new guarantee from a scheduled bank for an equal amount, 15 days before the expiry of the guarantee referred to in section 281B(3).

(8) Adjustment of the Demand from the amount realized by invoking guarantee [Section 281B(8)]

The amount realised by invoking the guarantee referred to in section 281B(3) shall be adjusted against the existing demand which is payable by the assessee and the balance amount, if any, shall be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of the Reserve Bank of India or the State Bank of India or of its subsidiaries or any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of section 45(1) of the Reserve Bank of India Act, 1934 at the place where the office of the Principal Commissioner or Commissioner is situate.

(9) Release of the Guarantee [Section 281B(9)]

Where the Assessing Officer is satisfied that the guarantee referred to in section 281B(3) is not required anymore to protect the interests of the revenue, he shall release that guarantee forthwith.

 
 
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