Income Tax Department cannot indefinitely keep the properties attached: Delhi HC
Fasttrack Tieup Pvt. Ltd. Versus UOI
Case No.: W.P.(C) 15237/2023 and CM APPLs.60975/2023, 17044/2024
Facts:
1. Summit Aviation Pvt. Ltd. had availed financial assistance from Punjab National Bank (PNB) in 2008 for purchasing helicopters.
2. A hypothecation agreement was executed on 12.05.2008, wherein three helicopters were hypothecated in favor of PNB as security. Due to default in repayment, PNB classified the account as Non-Performing Asset (NPA) and decided to take possession of the helicopters.
3. The Income Tax Department (ITD) conducted a survey on 05.07.2017 at Summit Aviation’s premises. Due to non-payment of tax dues, a provisional attachment order under Section 281B was issued on 03.08.2018, including the helicopters. Reassessment under Section 148 led to tax dues of ₹27.83 crore (excluding interest).
4. On 18.11.2019, ITD issued a prohibitory order under Rule 26(1)(iii) of the Second Schedule to the Income Tax Act, restraining the maintenance agencies (Yathi Air Services & SAR Aviation) from releasing the helicopters.
5. On 06.09.2023, PNB informed ITD of its intention to auction the helicopters. Despite this, ITD did not respond or object. On 20.09.2023, PNB published an auction notice in Financial Express and Jansatta.
6. Fasttrack Tieup Pvt. Ltd. emerged as the highest bidder. Despite receiving intimation at multiple stages, Income Tax Department neither objected to the auction nor lifted the prohibitory order.
Hon Delhi HC held as below:
1. Section 222 of the Income Tax Act n empowers the Tax Recovery Officer to proceed with the “attachment and sale of the Assessee’s movable property” to recover the due taxes.
2. However, while the department initiated attachment proceedings by issuing the prohibitory order, no further action has been taken by the department towards the recovery of the outstanding amount.
3. It is impermissible to keep the properties attached indefinitely without pursuing subsequent steps to resolve the matter.
4. The dues of secured creditor takes precedence over the dues of department, the attachment order issued by department cannot be construed to be an impediment to the auction sale in favour of the petitioner.
The Copy Of the order is as under
