Money In Bank Account Is 'Property', Liable For Provisional Attachment U/S 281B Of Income Tax Act: Kerala High Court

The Division Bench of Justices Sathish Ninan and Shoba Annamma Eapen observed that “mere fact that Bank account is not explicitly provided under Section 281B of the Income Tax Act, unlike the GST Act, 2017 which specifically mentions the same, cannot lead to the conclusion that Bank account is not liable to be attached under Section 281 B of the Act.”

Section 281B of the Income Tax Act empowers the Assessing Officer to use provisional attachment of property as a tool/deterrence to pre-empt the possibility of default in tax payment raised after an assessment/re-assessment.

In this case, the police seized a huge amount of cash from the car of assessee. Upon investigation and being satisfied that there was no explanation for the cash nor was it accounted, proceedings were initiated in relation to the same by the issuance of notice under Section 148 of the Income Tax Act.

Finding that the expected demand on assessment including penalty would be a substantial amount exceeding two crores, the payment of which the assessee would evade, the competent authority of the Department, ordered provisional attachment of the Bank accounts of the assessee under Section 281B of the Income tax Act.

The said orders were challenged in the writ petition which was allowed. The department has challenged this order before the Kerala High Court.

The issue before the bench was is cash in a Bank account 'property' liable to attachment under Section 281B of the Income Tax Act, 1961?

The assessee after referring to sub-sections 3 and 4 of Section 281B of the Income Tax Act submitted that the term 'property' mentioned in sub-section 1 can only relate to immovable property. The provision for assessment of fair market value of the property and furnishing of Bank guarantee to get release of attachment, is a sufficient indicator that the term 'property' mentioned in sub-section (1) is only, immovable property. At any rate, the term cannot encompass Bank deposits.

The bench opined that “Section 281B(1) provides for provisional attachment of “any property”. The prefix “any” to the word property has much significance. It indicates that the word 'property' occurring therein, is not to be comprehended in a restricted sense. Therefore, “any property” mentioned in Section 281B(1) would take within its sweep, money lying in Bank account also.”

The bench stated that as Section 281B(1) stipulates, to consider whether a provisional order of attachment is to be issued, the assessing officer must be satisfied that the possible demand and penalty would exceed Rupees Two Crores. Therefore, evidently, the authorities need to form an opinion with regard to the probable demand, which of course could not be stated with exactitude at that stage. However, the extent of the property attached, including attachment of the money in the Bank accounts, should be commensurate with the probable demand including the penalty.

“The proviso to Section 281B(3) indicates that the security required need only be to the extent sufficient to protect the interest of the revenue. Therefore, orders of provisional attachment under Section 281B should be commensurate with the probable demand including penalty, and should not be blanket orders attaching properties, the value of which would be much higher than the probable demand,” added the bench.

In view of the above, the bench allowed the appeal.

Case Title: Assistant Commissioner Of Income Tax v. Mohammed Salih

Case Number: WA NO. 1413 OF 2024

Citation: 2025 LiveLaw (Ker) 59

Counsel for Appellant/Department: Navaneeth. N. Nath, Susie B Varghese, Jose Joseph

Counsel for Respondent/Assessee: Gopikrishnan Nambiar M, K. John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C. Abraham, Raja Kannan

Click Here To Read/Download The Order