i) The provisional attachment is to be made in accordance with the provision contained in the Second Schedule which relates to the procedure for recovery of tax from tax defaulters.

ii) The power is to be exercised with the previous approval of the chief commissioner, commissioner, director general;

iii) The attachment order by the AO has to be in writing;

iv) It can be in respect of any property, movable or immovable belonging to a tax payer;

v) The provisions of this section were later made applicable in respect of proceedings under Section 132(5) of the Act also. However, in the new scheme of assessment in search cases with effect from July 1, 1995, no order is required to be passed under Section 132(5);

vi) Initially, the attachment order is to be for a period of six months. However, the period can be extended by the authorities mentioned at (ii) above for reasons to be recorded in writing for such further period as these authorities may deem appropriate up to a period of two years. No attachment shall be effective after a period of two years from the date of the first order.

The power conferred by this section is of wide amplitude and the only safeguard provided is that before taking any action for attachment, prior approval of the senior functionaries of the department would be taken. Court decisions however, show that this safeguard has not been effective. In the case of Illaben Ramanlal Zariwala vs UOI (1979) 118 ITR 852, the Gujarat high court had to observe that the commissioner's order can not be a mere apology for reasons and the other passed was held to be invalid because the commissioner, instead of passing a reasoned order, merely endorsed the ITO's proposal for extension of time on an indefinite ground eg, some enquiry is pending. Hence the assessees would be within their rights to demand disclosure of reasons of attachment or for extension of the time period, if such orders are passed in their cases, to see if the requirements of the section have been complied with by the concerned authorities in depriving the taxpayers from use of their properties.

In this context, a reference needs to be made to the decision of the Supreme Court in the case of CB Gautam vs UOI (1992) 65 Taxman 440. This was a case where property of the petitioner proposed to be sold by him was acquired by the Centre with reference to Chapter XXC of the I-T Act, 1961 on the ground that there is significant under valuation of the concerned property. However, the provisions of this chapter did not contain any provision for giving the purchasers and sellers an opportunity of being heard before an order for compulsory purchase of the property by the Centre is passed though there was a requirement that reasons for acquiring the property by the government would be recorded in writing. In this context, the court noticed that Section 269 UD (2) cast an obligation on the authority that it shall cause a copy of its order under sub Section (1) in respect of any immovable property to be served on the transferor. It was, therefore, inconceivable that the order which is required to be served by theappropriate authority under sub Section (2) would be the one which does not contain the reasons for the passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. Therefore, reasons for the order must be communicated to the affected party.

The Supreme Court has also said that it must be borne in mind that courts have generally read into the provisions of relevant sections a requirement of giving a reasonable opportunity of being heard before an order is made which would have adverse civil consequences for the parties affected. Thus, the requirement of a reasonable opportunity being given to the concerned parties, particularly, the intending purchaser and the intending seller, must be read into the provisions of Chapter XX-C. Unless an intending purchaser or seller is given an opportunity to show cause against the proposed order for compulsory purchase, he will not be in a position to rebut the presumption of tax evasion. The observance of principles of natural justice is the pragmatic requirement of fair play in action. Therefore, the requirement of an opportunity to show cause before an order for compulsory purchase is made by the Centre must be read into the provisions of Chapter XX-C. Subsequently Section 269UD has been amended by insertionof sub Section (1A) for giving a reasonable opportunity of being heard to the transferors and the transferees.

The logic of this decision should equally apply in cases where properties are proposed to be provisionally attached to safeguard the interest of revenue more so when the authorities concerned have been found to exercise this power in a routine manner.

Further, reference to Schedule II in the section which applies to situations where demands have been raised and have not been recovered does not seem appropriate in the context of provisional Section 281-B deals with a situation where demand is likely to be raised - not actually created - and the AO on the basis of his subjective satisfaction desires to subject the taxpayers to adverse civil consequences in situations where no tax is due without even giving them an opportunity to have their say! This prima facie, seems to be inequitable and unfair and hence makes the power conferred by Section 281-B unbridled and one-sided and needs to be exercised in the background of guidelines mentioned by the apex court in its judgment in the case of CB Gautam (supra) whose views have been incorporated in Section 269UD in the form of sub Section (1A) with effect from November 17, 1992.

The author is former chairman of CBDT