Introduction : Tax Dept Cannot Indefinitely Attach Properties
The Delhi High Court has ruled that the Income Tax Dept cannot indefinitely attach properties on suspicion of tax evasion without taking further steps to resolve the issue. The court emphasized that the attachment must lead to a sale for tax recovery.
Case Background
A private company had challenged a prohibition order from the Income Tax Dept. It restrained the release of helicopters purchased in an auction. The helicopters originally belonged to Summit Aviation Private Limited. This defaulted on tax payments and loans from Punjab National Bank (PNB). The bank auctioned the helicopters, leading to the petitioner acquiring them.
Tax Department Argument Regarding Indefinite Attachment Of Properties
The Income Tax Department argued that the auction was illegal. It violated a prohibitory order and failed to prioritize tax recovery. However, the petitioner claimed to have fulfilled all auction terms, and PNB supported the petitioner. Thus, asserting that the tax authorities were informed in advance but did not object at the time.
Secured Creditors Precedence
The High Court ruled that secured creditors, like PNB, have priority over government tax dues. The court noted that despite being notified, the tax authorities neither objected nor took action to challenge the auction.
Court’s Decision
Citing Section 222 of the Income Tax Act, the court found that the Income Tax Department failed to take further steps after attaching the helicopters. The court held that keeping properties attached indefinitely without action is impermissible. As a result, the petition was allowed, and the restriction on the helicopters was lifted.
Conclusion
The tax department in India plays a crucial role in revenue collection and economic regulation. It enforces tax laws, ensures compliance, and prevents tax evasion. The department collects direct and indirect taxes, including income tax and GST. It also conducts audits, investigations, and digital monitoring. Efficient tax administration supports government projects, infrastructure, and public welfare.
