Global Economy

Taxmen have power for provisional attachment before final assessment


NEW DELHI: The income tax act empowers the department to go in for provisional attachment of assets even before assessment is complete. Section 281b of the Income Tax Act allows assessing officers to go for provisional attachment for protecting revenue, sources said, rejecting charges of “tax terrorism” in the aftermath of the suicide of Cafe Coffee Day owner V G Siddhartha .

Criticism had mounted against the tax department after the coffee baron committed suicide. Harassment by tax authorities was cited as one of the reasons that perhaps drove him to take the extreme step.

Sources pointed out that tax officers are entitled to go in for provisional attachment, pending final assessment to “protect the interest of revenue.” The asset is attached and when the assessment is complete, if the tax dues are paid then the assets are released to the assessee. “There is nothing in law which bars provisional attachment,” said the source.

The department has enough checks and balances to ensure that all procedures are followed before going in for provisional attachment of assets. There are fixed timelines up to which an asset can be put under provisional attachment. Approval from senior officers are needed to proceed beyond these particular timelines. The total time does not exceed beyond two years.

The assessee also has the flexibility to exchange the assets, in case he intends to sell the attached assets. He has to ensure that he provides similar unencumbered assets to the department for attachment to replace the provisionally attached assets. The assessing officer, if he is satisfied about the new assets, can release the assets attached provisionally.

In Siddhartha’s case the department had seen news reports about his stake sale in tech firm Mindtree.

The assessing officer had attached the shares owned by Siddhartha to “protect the interest of revenue”.

Siddhartha had filed a request for releasing the Mindtree shares and had offered shares of Coffee Day Enterprises, which the tax authorities had accepted. The authorities had revoked the attachment of Mindtree shares on February 13 with a provision that the sale proceeds will be used for repayment of loans raised against the Mindtree shares by opening an escrow account and the balance would be provided for attachment against the tax liability.





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