Attachment Of Bank Accounts Is A Draconian Step, Attachment Is Subject To The Condition Mentioned U/s 83 Of GST Act: Delhi High Court

The Delhi High Court has held that attachment of bank accounts is a draconian step and the action can only be taken in case conditions specified in Section 83 of the GST Act, are fully satisfied.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has observed that it is not open for the department to attach the bank accounts of other persons on the mere assumption that the funds were owned by any taxable person.

Section 83 of the GST Act empowers the Commissioner to provisionally attach the assets of a taxable person. The attachment can be made where, after initiation of any proceedings, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue. The commissioner may, by order in writing, attach provisionally any property, including a bank account, belonging to the taxable person or any person specified in sub-section (1A) of section 122.

The petitioners/assessee challenged an order passed by the respondent, Principal Additional Director General, DGGI, DZU by which the petitioner’s savings bank account was provisionally attached.

The respondent had also directed the Bank Branch Manager, HDFC Bank, not to permit any withdrawal from the bank accounts of the petitioners which were operated under the same PAN numbers, without the permission of the Department.

The respondent had attached the petitioners’ bank account in view of the statement made by one, Shri Rajiv Chawla during the course of an investigation relating to fake firms involved in passing off fake Input Tax Credits.

During the course of proceedings, the statement of Kamal Kumar was recorded on 06.02.2023. He had stated that he and his wife, Mrs. Pooja Khattar, were partners in M/s Shankar/Shankar Trading Company and were authorized to operate the bank account. However, he used to sign his chequebooks in blank and hand them over to Sumit Maggo and Rajiv Chawla, for payment of funds. He would receive a minor commission for it.

Harpreet Singh states that Rajiv Chawla was in judicial custody at the material time and his custodial statement was recorded on 06.02.2023. In his statement, he stated that his firm maintains a bank account with South Indian Bank and he and his wife, Shipra Chawla, were partners in the firm - M/s Hindustan Paper Machinery Industry.

The funds lying in the account of the petitioners belonged to the partners of M/s Hindustan Paper Machinery Industry and, therefore, had proceeded to attach their bank accounts.

It is also the petitioners’ case that the funds received by them were in return of advances and loans that were extended by the petitioners.

The petitioners have annexed the statement of account which indicates that over a period of 9 years, Rs. 12.62 crores had been withdrawn from the account of the petitioner in favor of M/s Hindustan Paper Machinery Industry or Mr. Rajiv Chawla. The statement also indicates that the petitioner had received Rs. 6,05,50,000.

The court noted that it is not necessary for the Court to examine the nature of the payment made by Rajiv Chawla to the petitioners. Clearly, it cannot be a subject matter of adjudication in the proceedings. However, it is clear that the petitioners are not taxable persons. The power under Section 83 of the Act, to provisionally attach assets or bank accounts is limited to attaching the bank accounts and assets of taxable persons and persons specified under Section 122(1A).

Case Title: Sakshi Bahl Versus The Principal Additional Director General

Citation: 2023 LiveLaw (Del) 282

Date: 29.03.2023

Counsel For Petitioner: Aditya Kumar

Counsel For Respondent: Harpreet Singh

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