Bombay HC rules it is a serious invasion into the private domain of the taxpayer
Bank accounts of family members of a GST assessee in default should not be attached, the Bombay High Court has ruled.
Dharmesh Gandhi had approached the High Court after nine bank accounts of his and his family members were provisionally attached by the GST Department. The court noted that only three accounts belonged to Gandhi, while the rest were of his family members’.
The Division Bench quoted some portions of a ruling in a similar matter in Siddhart Mandavia Vs Union of India (November, 2020) by the same court. According to the ruling, “It goes without saying that pre-assessment attachment of property, including bank account, even if provisional, is a drastic measure. Its sole purpose is to protect the interest of government revenue. It cannot be used as a punitive measure. It is a serious invasion into the private domain of a tax payer.”
Kins’ accounts not involved
The order observed that family members are not the taxpayer concerned here. “To be more specific, there is no allegation or any averment made by the respondents that any money belonging to the petitioner or to his firm have been credited into the joint accounts of the petitioner with his wife or with his minor son or into the account of his wife,” the order had said.
Based on this precedent, the Court last week ordered the release of six bank accounts belonging to the family members of Gandhi. As for the accounts of the taxpayer, the Bench permitted the petitioner to file an objection within seven days. Tax officials will have to dispose this application within three weeks from the date of filing of objections.
Even the Central Board of Indirect Taxes & Custom (CBIC) had, in a circular dated February 23, said that the “remedy of attachment (of property including bank accounts) needs to be resorted to with utmost circumspection and with maximum care and caution”. It normally should not be invoked in cases of technical nature and should be resorted to mainly in cases where there is an evasion of tax.
Aditya Singhania, Partner at Singhania’s GST Consultancy & Co, pointed also to two rulings by the Gujarat High Court saying attachment of bank accounts and trading assets should be only as a last resort and can be effected only against taxable person.
Though the Finance Bill proposes to widen the provisional attachment powers, its use may be seen only in extraordinary cases, going by the CBIC guidelines, ” Singhania said.