Fcs Manufacturing (India) Pvt. Ltd v. Deputy Director Of Income Tax (Investigation

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 15485 of 2022 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE SONIA GOKANI andHONOURABLE MRS. JUSTICE MAUNA M. BHATT ==========================================================FCS MANUFACTURING (INDIA) PVT. LTD. Versus DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION) ========================================================== Appearance:MR SAURABH SOPARKAR with MR DHINAL A SHAH(12077) for the Petitioner(s) No. 1MR. AH MOHAPATRA(6807) for the Petitioner(s) No. 1MR.VARUN K.PATEL with MR DEV PATEL (3802) for the Respondent(s) No.1,2 ========================================================== CORAM:HONOURABLE MS. JUSTICE SONIA GOKANIandHONOURABLE MRS. JUSTICE MAUNA M. BHATT Date : 29/11/2022 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1.The petitioner in the present petition challenges the attachment of the Bank Account No. 101040608001maintained in HSBC Bank situated at C.G.Road, Ahmedabadwith Rs. 10,97,72,399/- (Rupees Ten Crore Ninety-Seven LakhSeventy-Two Thousand Three Hundred Ninety-Nine) since18.11.2021 by letter nos. DDIT (Inv)/ Unit 6(1)/132 (9B) 2021-22 dated 18.11.2021 under Section 132(9B) of the Income TaxAct, 1961 (hereinafter referred to as ‘the Act’). This has beencontinued by a letter dated 21.12.2021 indefinitely till furtherorders. 1.1.The petitioner also challenges the continuing attachmentof its Bank Account No. 855210062222 maintained with DBSBank, Prahalad Nagar Branch, Ahmedabad since 18.11.2021under Section 132(9B) of the Act by letter No. DDIT (Inv)/Unit6(1)/132 (9B) 2021-22 dated 18.11.2021 and on expiry of sixmonths of the operation of the said order, under an orderdated 13.05.2022 passed by the respondent no.2 underSection 281(B) of the Act. Pursuant thereto, the respondentno.2 has attached the Fixed Deposit No. 552205260019 for anamount of Rs. 2,65,04,306/- (Rupees Two Crore Sixty-FiveLakh Four Thousand Three Hundred Six) of the petitioner inDBS Bank. 1.2.It is the say of the petitioner that the attachment of theHSBC Bank and DBS Bank account of the petitioner since18.11.2021 under the guise of securing the interest of therevenue is ex-facie bad in law and is passed without any basisor reason which has seriously jeopardized the businessoperations of the petitioner company. The continuing of theattachment after a period of six months from the date of theorder is also alleged to be bad in law and contrary to Section132(9C) of the Act. 2.The petitioner is a private limited company incorporatedon 27.04.2020 under the provisions of Companies Act and hasan authorized capital of Rs. 51,80,00,000/- (Rupees Fifty-OneCrore Eighty Lakhs) and the paid up capital of Rs.19,66,81,000/- (Rupees Nineteen Crore Sixty-Six Lakh Eighty-One Thousand). It is engaged in the business ofmanufacturing of Injection Molding Machines. It is whollyowned subsidiary of Fu Chin Shin (FCS) MachineryManufacturing Co. Ltd. (referred as “Fu Chun Shin MachineryManufacturing Co. Ltd.” in Memorandum of Association) - acompany incorporated in and under the laws of Taiwan. It has invested its funds in setting up its operations through FDIroute and currently has 52 employees under its employment.The details of which has been provided. 2.1.A search through the office of Deputy Director of IncomeTax (Inv), Unit 2(2) Mumbai has been conducted on17.11.2021 at the premises of the petitioner situated atAhmedabad which was concluded on 18.11.2021. Duringsearch, the statements were recorded and several materials,digital data, books of accounts and documents were seized bythe Income Tax Authorities. Copy of the order dated17.11.2021 under Section 133A(3)(ia) impounding the booksof accounts along with panchanama is also brought on record. invested its funds in setting up its operations through FDIroute and currently has 52 employees under its employment.The details of which has been provided. 2.1.A search through the office of Deputy Director of IncomeTax (Inv), Unit 2(2) Mumbai has been conducted on17.11.2021 at the premises of the petitioner situated atAhmedabad which was concluded on 18.11.2021. Duringsearch, the statements were recorded and several materials,digital data, books of accounts and documents were seized bythe Income Tax Authorities. Copy of the order dated17.11.2021 under Section 133A(3)(ia) impounding the booksof accounts along with panchanama is also brought on record. 2.2.The petitioner is impaired on account of the attachmentof the two of its accounts with the DBS Bank and HSBC Bankand has made a request to release the attachment of thecurrent bank accounts, however, the letter dated 02.12.2021directed the Branch Manager, BDS Bank to continue to freezethe bank account. Thereafter also, once again similar requesthas been made but, by virtue of the subsequent directions, theattachment has continued. Thus, what emerges is that thefirst order attaching the bank accounts was passed on 13.05.2022. This provisional attachment under Section 281(B)of the Act had continued by virtue of the order dated11.11.2022 which has been also challenged by way of draftamendment which is allowed by way of order dated15.11.2022. 2.3.According to the petitioner, after the initial order, theoffice of the Principal Commissioner of the Income Tax,Ahmedabad-1 intimated the petitioner in view of the CBDTguidelines for centralization of search cases and subsequentguidelines of the Board as proposed by CCIT (Central-1),Mumbai that the case of the petitioner was transferred to ITO,Ward2(1)(1), Ahmedabad to DCIT, Central Circle-2(4),Mumbai. On 16.02.2022, despite the objection on the part ofthe petitioner, the order under Section 127(2) of the Act waspassed. 2.4.By a communication dated 05.02.2022, a request hasbeen made by the respondent no.1 to release the provisionalattachment of the bank accounts held with DBS and HSBCBanks by emphasizing that it is not a Chinese Company norhas it evaded the tax obligations and on account of continuing freezing of amount in excess of Rs. 13 crores it is unable topay wages to the workers, purchase raw materials, makeexpenditure of day to day running cost of electricity chargesetc. The creditors or vendors are also not paid and hence, ithas led to the stoppage of supplies. The entire businessoperations have come to a halt and hence, the request is madeto release the provisional attachment of bank accounts. Hehas further ensured to give undertaking and guarantee to paythe tax liability if imposed eventually. Yet anothercommunication dated 14.02.2022 also has been sent,however, none of them had been replied to. 2.5. It is the say of the petitioner that it came to know ofthe issuance of notice under Section 148 of the Act for theyears 2019-20, 2020-21 and 2021-22 unmindful of the factthat the company itself has been incorporated on 27.04.2020.The orders of provisional attachment of the bank accounts ofthe petitioner attaching more than Rs. 13 crores passed by therespondent are ex-facie bad in law, patently arbitrary on theground that the orders are passed by the authority withoutany tangible material about any potential tax liability, evenwithout framing any opinion as to how the interest of revenue is required to be protected particularly, when the order ispassed raising the demand overlooking the investment andplant and machinery of the value of Rs. 2.16 crores (roundedoff). 2.5. It is the say of the petitioner that it came to know ofthe issuance of notice under Section 148 of the Act for theyears 2019-20, 2020-21 and 2021-22 unmindful of the factthat the company itself has been incorporated on 27.04.2020.The orders of provisional attachment of the bank accounts ofthe petitioner attaching more than Rs. 13 crores passed by therespondent are ex-facie bad in law, patently arbitrary on theground that the orders are passed by the authority withoutany tangible material about any potential tax liability, evenwithout framing any opinion as to how the interest of revenue is required to be protected particularly, when the order ispassed raising the demand overlooking the investment andplant and machinery of the value of Rs. 2.16 crores (roundedoff). 2.6.The proposition of law, according to the petitioner, iswell settled as interpreted in the analogous provision ofSection 83 of the Himachal Pradesh Goods and Services Act,2017 in case of Radha Krishnan Industries vs. State ofHimachal Pradesh [2021 (6) SCC 771]. Hence, attachment ofthe bank account, according to the petitioner, for amount inexcess of Rs. 13 crores is disproportionate and suffers frommalice of law and deserves to be quashed. 2.7.It is also urged that Section 132(9C) of the Act does notpermit any provisional attachment to be continued to beoperational after the expiry of period of six months from thedate of the order. On 18.11.2021, the order came to be passedand therefore, beyond 18.05.2022, it shall cease to operate.Without recording the reasons, when the powers ofprovisional attachment have been exercised, its continuationis seriously questioned by the petitioner with the following prayers:- “(A)This Hon'ble Court be pleased to issue writ ofMandamus or appropriate writ, order or direction toquash and set aside Letter Nos. DDIT (Inv)/Unit 6(1)/132 (9B)2021-22 dated 18.11.2021 along with letterdated 21.12.2021 issued by Respondent No. 1annexed hereto and marked as Annexure-A(colly) aswell as the order of provisional attachment passed byRespondent No. 2 dated 13.05.2022 along with orderdated 16.06.2022 freezing the FD No 552205260019of the Petitioner at Annexure-B (Colly) and the orderof provisional attachment passed by Respondent No.2dated 13.05.2022 attaching the HSBC bank accountNo. 101040608001 of the Petitioner at Annexure R-2;and the order dated 11.11.2022 passed by theRespondent No.2 extending period of provisionalattachment of HSBC bank account of the Petitionerbearing No. 101040608001 at Annexure R as well asthe order extending period of provisional attachmentpassed by Respondent No. 2 dated 11.11.2022freezing the FD No 552205260019 of the Petitionerat Annexure S; (B) Pending admission and final hearing of thepresent petition, this Hon'ble Court be pleased tostay the operation and implementation of the ordersof provisional attachment at Annexure-A andAnnexure-B and Annexure R-2, Annexure R andAnnexure S and be pleased to restrain Respondentsfrom taking any coercive actions against thePetitioner; (C)This Hon’ble Court be pleased to grant ex-parte ad-interim relief(s) in terms of pare 6(B) above; (D)This Hon’ble Court be pleased to grant anyother or further reliefs as may just and proper in theinterest of justice.” 3.Affidavit-in-reply is filed by the respondent no.2 – Mr. Uday Shakar, ACIT, Central Circle – 2(1), Mumbai where hehas denied each and every averment. According to him,search and seizure operation on certain Chinese ControlledIndian Shell Companies and some Indian Subsidiaries ofChinese Companies was carried out on 16.11.2021 and endedon 18.11.2021. (C)This Hon’ble Court be pleased to grant ex-parte ad-interim relief(s) in terms of pare 6(B) above; (D)This Hon’ble Court be pleased to grant anyother or further reliefs as may just and proper in theinterest of justice.” 3.Affidavit-in-reply is filed by the respondent no.2 – Mr. Uday Shakar, ACIT, Central Circle – 2(1), Mumbai where hehas denied each and every averment. According to him,search and seizure operation on certain Chinese ControlledIndian Shell Companies and some Indian Subsidiaries ofChinese Companies was carried out on 16.11.2021 and endedon 18.11.2021. 3.1.During the search, it was found that these entities wereinvolved in various methods of tax evasion like unaccountedcash sales, purchase through shell companies, diversion offunds to tax havens etc. The premises of the petitioner – M/s.FCS Manufacturing (India) Pvt. Ltd. was also covered underthe search and seizure action. During the course of the same,the bank account of the companies covered under the searchwere attached. The two of them have been attached on18.11.2021. The case of the petitioner was centralized underSection 127 of the Act on 16.02.2022 consequent to the saidact. Under Section 148 of the Act notices came to be issued on13.05.2022. The attachment of the account has continued byvirtue of the approval of Principal Commissioner of IncomeTax under Section 281(B) of the Act. The approval was alsotaken from the competent authority to convert the amount attached to BDS Bank into fixed deposit and accordingly, thebank was directed to convert the same. 3.2.On 16.06.2022 the bank account of DBS Bank wasreleased and the balance fund as on 18.11.2021 remainedunder attachment under Section 281(B) of the Act untilfurther order. 3.3.It is further the say of the respondent that theassessment proceedings were not completed on 13.05.2022.Notices were issued to the assessee and after verification ofthe reply, the proceedings will be completed. It is furtherstated that the requirement of provisional attachment wasbecause of the search/survey proceedings at the premises ofthe petitioner and on seizure of certain documents as well asdata back-ups. 3.4.It is further his say that Section 281(B) of the Act talksabout the provisional attachment to protect the interest of therevenue during the pendency of any proceedings for theassessment of any income or for the assessment orreassessment of any income which has escaped assessment. 3.5.According to the respondent, as per the BoardInstruction No. 08 of 2004, in search and seizure cases, whenhuge demands are raised under block assessment and therecovery of the same is tedious and time consuming, it isimportant for the assessing officer in central charges toexplore the possibility of invoking the provisions of section281(B) and it shall be the responsibility of the assessingofficer to follow the procedures given under the BoardInstructions No. 08/2004 dated 02.09.2004 and Instruction F.No. 404/22/2004-ITCC dated 05.11.2004. If the demandbecomes irrecoverable due to the failure of the assessingofficer to follow these guidelines, he shall be held accountablefor the loss caused to the Government regardless of hissubsequent posting. It is further his case that notices alsocame to be issued on 13.05.2022 under Section 148 of theAct. It is also denied that the assessment proceedings is not inprogress. 4.The rejoinder affidavit has come on record where it isurged that the petitioner company is not a Chinese Companybut is a wholly owned subsidiary of Fu Chin Shin (FCS) 4.The rejoinder affidavit has come on record where it isurged that the petitioner company is not a Chinese Companybut is a wholly owned subsidiary of Fu Chin Shin (FCS) Machinery Manufacturing Co. Ltd. a public listed companyincorporated under the laws of Taiwan incorporated under theCompanies Act, 2013 on 27.04.2020. The petitioner companywas incorporated under the FDI policy of India and fundsreceived through banking channels was recorded and thecompany has filed FCGPR in India and has duly complied withthe provisions of the FEMA Act. It is engaged in the businessof manufacturing of injection molding machines and hasattained goodwill and reputation worldwide. All allegationsmade on the part of the respondent have been denied and it isalleged that the provisional attachment of sum exceeding Rs.13 crores since 18.11.2021 de hors the provision of Section132(9C) of the Act. 4.1.It is alleged that the respondents have not been providedany sort of reason, opinion or document highlighting thereasons which had drawn the respondent to take such a harshsteps against the petitioner. The prior approval of thecompetent authority under Section 281(B) had been taken onthe strength of the documents, however, they have not beenprovided to the petitioner. There are misleading statements ofthe respondent about which the details have been provided. 4.2.Much reliance is placed on the Board Instruction No.08/2004 which says that Section 281(B) should be resorted toonly in cases where there is a reasonable likelihood of therecovery becoming difficult due to inadequacy of assets.Where there is sufficient asset to cover the demand, theprovisions of Section 281(B) should not be resorted to, exceptunder exceptional circumstances. 4.3. It is reiteratively emphasized that the petitionercompany has no connection with the Chinese Companydirectly or indirectly, however, in spite of the objectionsraised by the petitioner, the case of the petitioner wascentralized on 16.02.2022. 5.The affidavit-in-sur-rejoinder is filed by the respondentsstating that the petitioner is a wholly owned subsidiary of FuChin Shin (FCS) Machinery Manufacturing Co. Ltd. which wasincorporated under the laws of Taiwan. It is alleged thatmodus operandi of the petitioner under consideration aresimilar to the China based companies which were coveredalong with the petitioner for the search/survey proceedings. “It is noticed during the search/survey proceedings by theinvestigation wing that the petitioner have been showingpurchases from M/s. Tianchao Import Export Trading PrivateLimited and M/s. Pipeguard Trading Private Limited. TheChinese parent companies who used to supply materials to thepetitioner are also supplying material to these two shellcompanies. Further, the shell companies are selling suchimported goods again to the petitioner in India after adding 2-4% commission. It is also noticed that almost all fund receivedby the shell companies from the petitioner company wastransfer to their holding companies in Taiwan through thischannel. Further, it was found that M/s. Tianchao ImportExport Trading Private Limited and M/s. Pipeguard TradingPrivate Limited are just paper companies without any genuinebusinesses. These companies were used as conduit, to layerthe transactions from its parent company based in Taiwan.M/s. Tianchao Import Export Trading Private Limited and M/s.Pipeguard Trading Private Limited are ultimately purchasingfrom Fu Chun Shin based in Taiwan which is parent companyof the petitioner.” 5.1.According to the respondent, during the course of search 5.1.According to the respondent, during the course of search proceedings by the investigation wing, incriminating materialshave been found and seized which has been considered andverification of the same is under progress for the assessmentyear 2021-22. The attachment of the account under Section281(B) was made after obtaining statutory approval ofPrincipal Commissioner of Income Tax, Central-1, Mumbaiand the same is not liable to be disclosed to the petitioner.Each and every allegations in the affidavit-in-rejoinder havebeen denied. 5.2.It is thus emphasized on the part of the respondent isthat petitioner – FCS Manufacturing (India) Pvt. Ltd. is awholly owned subsidiary of M/s. Fu Chin Shin (FCS)Machinery Manufacturing Co. Ltd. incorporated under thelaws of Taiwan. The modus operandi of the petitioner issimilar to the China based companies which were coveredalong with the petitioner for the search/survey proceedings. 6.We have extensively heard learned Senior Advocate Mr.Saurabh Soparkar appearing with learned advocate Mr.Dhinal Shah for the petitioner. 6.1.Having noticed the need for the original papers,recording the satisfaction and also the approval, this Courthad called for the same from the respondent – department on09.11.2022. We could get the original file and for satisfactionof the Court, the same has been perused. 6.2.It was argued emphatically along the line of therejoinder affidavit that at no point of time, the details havebeen provided by the respondent by stating that recording ofreasons for attachment is an internal part of the officeprocedure and in absence of any opinion, reasons ordocuments highlighting the reasons which drew therespondent to take such a harsh step and attach the bankaccounts, ought to have furnished to the petitioner. The initialground of absence of any tangible reasons and recording ofsuch reasons, it has also gone on to the absence of any supply,resulting into the serious prejudice to the petitioner whiledealing with such matters. However, later on, this challenge isnot been actually incorporated in the petition and on aspecific query raised by this Court, it is urged that in thepresent matter what is already prayed for in the petition isbeing pursued. This larger challenge of non-supply is not being pressed into service. 6.3.The emphasis on the part of the petitioner is that onexpiry of six months period, when further extension is madeon 11.11.2022, let there be a provisional release of these bankaccounts as what is to be kept in mind by the Court is thesafeguard of the Revenue at the same time balancing thesame vis-a-vis the right of the petitioner to continue to do thebusiness. 6.4.Reliance is also placed on the following decisions:- (i)Principal Director of Income Tax (Investigation) vs.Laljibhai Kanjibhai Mandalia [(2022) 140 taxmann.com282 (SC)] (ii)Commissioner of Income Tax-II vs. Gujarat AmbujaExport Ltd. [(2014) 43 taxmann.com 244 (Gujarat)] (iii) Vodafone Idea Limited vs. Dy. Commissioner ofIncome Tax and Others [2019 SCC OnLine Bom 1786] (iv) VLS Finance Limited vs. Commissioner of IncomeTax [(2000) 112 TAXMAN 295 (DELHI)] 7.Learned Senior Standing Counsel Mr. Varun Patelappearing with learned advocate Mr. Dev Patel for theRevenue has strongly resisted this along the line of theaffidavit-in-reply. At the same time, he has urged that theCourt satisfaction to the material which has led the authorityto attach the bank accounts would be essential and not thesupply of these to the petitioner concerned. It is also urgedthat there are serious doubts in relation to the conduct of thepetitioner company and the Director of which is also notavailable for answering to the summons issued to him,therefore also, the Court shall need to regard the interest ofthe Revenue in mind. (iv) VLS Finance Limited vs. Commissioner of IncomeTax [(2000) 112 TAXMAN 295 (DELHI)] 7.Learned Senior Standing Counsel Mr. Varun Patelappearing with learned advocate Mr. Dev Patel for theRevenue has strongly resisted this along the line of theaffidavit-in-reply. At the same time, he has urged that theCourt satisfaction to the material which has led the authorityto attach the bank accounts would be essential and not thesupply of these to the petitioner concerned. It is also urgedthat there are serious doubts in relation to the conduct of thepetitioner company and the Director of which is also notavailable for answering to the summons issued to him,therefore also, the Court shall need to regard the interest ofthe Revenue in mind. 8.We could notice from the material on record that centralissuerevolves around the attachment of the HSBC Bank andDBS Bank accounts of the petitioner on 18.11.2021 underSection 132(9B) of the Act. This was on account of theoperation of search at the company premises at Ahmedabadwhich was concluded on 18.11.2021. This was through theoffice of Deputy Director of Income Tax(Inv), Unit 2(2),Mumbai on 17.11.2021 and 18.11.2021. Several materials, books of accounts and the digital data seized by the IncomeTax Authority are all part of the record and the order dated17.11.2021 impounding the books of accounts along withPanchanama is also forming part of this. 8.1.Section 132 of the Act speaks of the search and seizure.Profitable it would be to reproduce sub-sections (9B) and (9C)of Section 132 of the Act:- “(9B)Where, during the course of the search orseizure or within a period of sixty days from the dateon which the last of the authorizations for search wasexecuted, the authorized officer, for reasons to berecorded in writing, is satisfied that for the purposeof protecting the interest of revenue, it is necessaryso to do, he may with the previous approval of thePrincipal Director General or Director General or thePrincipal Director or Director, by order in writing,attach provisionally any property belonging to theassessee, and for the said purposes, the provisions ofthe Second Schedule shall, mutatis mutandis, apply. (9C) Every provisional attachment made under sub- section (9B) shall cease to have effect after the expiryof a period of six months from the date of the orderreferred to in sub-section (9B).” 8.2.In the instant case, it appears that at the end of searchand seizure, the authorized person, after being satisfied forthe reasons recording in writing and produced before us inthe form of material pursuant to our direction on 09.11.2022,has attached provisionally the two of the bank accountsbelonging to the assessee for protecting the interest of theRevenue. This attachment had been initiated on 13.05.2022which had been once again extended on 11.11.2022 by virtueof the order of the authorized officer after seeking thenecessary permission. 9.The first issue that requires to be addressed by thisCourt is as to whether in absence of any material and anyreasons recorded in writing that such a harsh step ofattachment of the property of the petitioner had been takenand that shall need to be straightway answered in negation.This, as a result of search and seizure that took place on17.11.2021 and 18.11.2021, that the officer who is authorized in this case has recorded reasons and has provisionallyattached both the bank accounts. One of them had been lateron converted into the fixed deposit and the bank account hasbeen released and not the fixed deposit. Thus, on 11.11.2022it is the fixed deposit which has been directed to be attached. 9.The first issue that requires to be addressed by thisCourt is as to whether in absence of any material and anyreasons recorded in writing that such a harsh step ofattachment of the property of the petitioner had been takenand that shall need to be straightway answered in negation.This, as a result of search and seizure that took place on17.11.2021 and 18.11.2021, that the officer who is authorized in this case has recorded reasons and has provisionallyattached both the bank accounts. One of them had been lateron converted into the fixed deposit and the bank account hasbeen released and not the fixed deposit. Thus, on 11.11.2022it is the fixed deposit which has been directed to be attached. 9.1.So far as availing the opportunity of furnishing thereasons to the petitioner at the time of provisionalattachment, the issue is not being pressed by the other sideand we would not like to delve into the same at this juncture,leaving it open to be decided at a future date in as much as inthe affidavit-in-reply which has been filed by the respondentbefore this Court, the reasons which are sufficient enough forthe other side to know as to why the order of provisionalattachment of the properties belonging to the assessee isbeing passed, have already come on record. Had it been acase where no information was divulged and the petitionerwas completely groping in dark, the Court could haveconsidered the very issue of furnishing the basic and bareminimum details. However, for present, when the assessmentproceedings are going on and entire issue is still at largebefore the authority concerned, the requisite details which can be culled out from the affidavit-in-reply and which havebeen also dealt with by the petitioner in its rejoinder affidavitas also in the further affidavit, we deem it appropriate not tofurther delve into this or dilate this issue. 9.2.What is far more necessary for this Court is to besubjectively satisfied about the satisfaction arrived at by theofficer at the time of attaching the properties, for which, thisCourt has examined the material which has been furnished topreliminary satisfy that it is not that without no reasons thatthe authority has chosen to attach the property, however, theaffidavit-in-reply of the respondent filed by Mr. Uday Shakar,ACIT, Central Circle – 2(1), Mumbai categorically says thatthe premise of the petitioner M/s. FCS Manufacturing (India)Pvt. Ltd. was covered under the search and seizure action andthe bank account of the companies covered under the searchwere attached. During the course of the search, it was foundthat these entities were involved in various methods of taxevasion like unaccounted cash sales, purchase through shellcompanies, diversion of funds to tax havens etc. Then afterobtaining the prior approval of the Principal Commissioner ofIncome Tax under Section 281(B) on 13.05.2022, the attachment of the accounts have been continued. 9.3.We also further noticed that as mentioned hereinabovethat the petitioners are alleged to have shown the purchasesfrom two of the shell companies namely M/s. Tianchao ImportExport Trading Private Limited and M/s. Pipeguard TradingPrivate Limited by alleging that the parent company hassupplied the material to the petitioner through these twocompanies which are shell companies and they are sellingsuch imported goods against the petitioner in India afteradding 2-4% commission. All funds received by the shellcompanies were transferred to the holding companies inTaiwan through a channel. Thus, these two companies havebeen alleged to be the paper companies and not having anykind of a genuine business. The purchase is said to be directlythrough Fu Chin Shin (FCS) Machinery Manufacturing Co. Ltdbased in Taiwan which is a parent company. 9.4.We can notice that from 2020-21 and 2021-22, the totalpurchase from M/s. Tianchao Import Export Trading PrivateLimited aggregates to Rs. 4.51 crores. The petitionercompany is said to have paid GST on the said purchase and the same forms part of the GST returns. According to them,they have not purchased any goods from M/s. PipeguardTrading Private Limited till date. This argument therefore bythe other side that at the best the case of the respondentauthority is taken, Rs. 4.51 crores of purchase from M/s.Tianchao Import Export Trading Private Limited would meetthe protection to the extent that taxes upto 5% of theaggregate amount is covered under the heading of sale. 10.The decision in case of Commissioner of Income Tax- II vs. Gujarat Ambuja Export Ltd. [(2014) 43taxmann.com 244 (Gujarat)], is a case where the AppellateTribunal has restricted the addition made by the assessingofficer to 5% of the total bogus purchases made from oneparticular company. The Tribunal did not accept the revenue’sstand that the purchases were bogus. The purchases havebeen shown to have been made through one company whohad supplied by some other agency. In absence of any otheradditional facts noted by the Court, the gross ad hoc additionof 25% was not held to be justified. The assessee couldproduce before the authorities the precise rate at which thepurchases were made and other suppliers to demonstrate that the purchases made on the same day carried the same price.The Court held that it would substantially eliminate the angleof the purchase price being artificially inflated. Additionally,the Tribunal had noted other parameters such as higher netand gross profit rate of the present year compared to theearlier years of the recent past through tax appeal which wasnot entertained by the Court. This is a case where on Appeal, the Commissioner (Appeals) though was of the opinion that purchases were notbogus, yet taxed 25% of the amount. On Second Appeal, theTribunal noted that the GP rate and the net profit rate of theyear under consideration were better than the previous year.The stock register was property maintained and the purchasesin question were reflected in such stock register. As therewere internal contradictions in the statements made by therepresentatives of the company and the person controllingthat company, the Tribunal reduced the addition of 5% of theamount. According to this Court, this matter would have noapplicability as after once the assessment was completed and the matter had travelled from CIT (Appeals) and to Tribunal, ithad reached to this Court. The entire detail was crystal clear.The additions made by the CIT (Appeals) was 25% whereasthe Tribunal has added 5% of the purchase. At the end of theentire assessment proceedings, when the question would ariseof the addition or labeling the same as a bogus purchasesadding the entire amount to the total income of the assessee,this decision may help the petitioner. Presently, when itcomes to protecting the interest of the Revenue and when thematter is in the realm of consideration before the concernedauthority, it would not be apt to decide by reducing theamount to 5% of the total amount or for that matter, 25% ofthe amount. 10.1. In case ofVodafone Idea Limited vs. Dy.Commissioner of Income Tax and Others [2019 SCCOnLine Bom 1786], the petitioner company was engaged inthe business of providing communication service. The Courthad an occasion to deal with Section 281(B) pertaining toprovisional attachment by the Revenue in certain cases. It wasa case where during the pendency of the proceedings forassessment or reassessment, the assessing officer is of the 10.1. In case ofVodafone Idea Limited vs. Dy.Commissioner of Income Tax and Others [2019 SCCOnLine Bom 1786], the petitioner company was engaged inthe business of providing communication service. The Courthad an occasion to deal with Section 281(B) pertaining toprovisional attachment by the Revenue in certain cases. It wasa case where during the pendency of the proceedings forassessment or reassessment, the assessing officer is of the opinion that for the purposes of protecting the interest ofrevenue, it is necessary so to do, he may with the previousapproval of the higher authority pass an order in writingprovisionally attaching the property belonging to theassessee. These are drastic powers permitting the assessingofficer to attach any property of an assessee even before thecompletion of assessment or reassessment. These powers arethus in the nature of attachment before judgment, the Courtheld they should be exercised in appropriate cases for properreasons that and cannot be exercised merely by repeating thephraseology used in the section and recording the opinion ofthe officer passing such order. In the matter before the Court, it was held thatpermitting the department to provisionally attaching thepetitioner’s refund for the current year on the ground that inthe final assessment, the demands are likely to be confirmed,would amount to ignoring the hard fact that for the earlierassessment years, the Tribunal has suspended the recoveriesarising out of the demands made by the assessing officer onsimilar issues. It further held that looking it from any angle,the occasion for the competent authority to exercise the drastic power under section 281(B) of the Act has not arisen,therefore, there was no justification to exercise such powers. 11.Going by the decision of Vodafone Idea Limited(supra), we can surely say that the assessing officer, for thepurpose of protecting interest of the Revenue, in the instantcase, with the prior approval of the higher authority haspassed an order in writing recording the reasons andprovisionally attaching the property belonging to theassessee. These are though drastic powers in a givencircumstances, we are satisfied that for the petitionerassessee to continue its business, the continuation ofprovisional attachment is not necessary and even otherwise,the interest of the Revenue can be safeguarded by directing aparticular amount to be furnished by way of a bank guaranteeto the authority concerned, that would sub-serve the purpose. 12.We are conscious of the fact that the order has came tobe passed in relation to the two of the companies which is saidto be the shell companies adding the commission and themain company of Taiwan is said to be benefiting. It is alsoalleged that the modus is adopted to shift the profit to the Chinese Company. 12.1. We also have taken note of some of the details whichhave been culled out from the file which, for the purpose ofsecrecy pleaded by the respondent, we choose not to revealthe same as that may prove to be deleterious for the on-goingassessment proceedings. However, if the past case of therespondent is taken into consideration along with its on-goingproceedings, in our opinion, the fixed deposit which has beenmade by the respondent of the DBS Bank of Rs. 2,65,04,306/-(Rupees Two Crore Sixty-Five Lakh Four Thousand ThreeHundred Six) would suffice to protect the interest of theRevenue for now. 12.2. We also would like to make a mention of the fact thatexcept one Director, the rest are from Taiwan and therefore,the Indian Director along with the Taiwan Directors are alsorequired to give the undertaking that in the eventuality if theassessment is more than the amount which is permitted to beprovisionally attached, they shall fulfill the obligations evenfrom their own personal funds. The said undertaking shall befiled before this Court within a period of one week from the 12.2. We also would like to make a mention of the fact thatexcept one Director, the rest are from Taiwan and therefore,the Indian Director along with the Taiwan Directors are alsorequired to give the undertaking that in the eventuality if theassessment is more than the amount which is permitted to beprovisionally attached, they shall fulfill the obligations evenfrom their own personal funds. The said undertaking shall befiled before this Court within a period of one week from the date of receipt of copy of this judgment. They shall alsofurnish the disclosure of the immovable assets of thecompany. At this stage, learned Standing Counsel uponinstruction has informed that the matter has been alreadyreferred to the Transfer Pricing Officer and therefore, theCourt shall need to regard the interest of the RevenueAuthority. 12.3. On furnishing the above aspect, once having verified thedetails in a week’s time thereafter, the attachment of theHSBC bank account bearing account no. 101040608001 shallbe then released. 13.The original file is returned to the respondent. Thepetition is accordingly disposed of. None of the observationsmade here will prejudice the interest of either side in anyfurther proceedings, if are undertaken. The original file is returned to the respondent. The (SONIA GOKANI, J) (MAUNA M. BHATT,J)