Don’t indiscriminately attach bank accounts: Gujarat HC

The Gujarat high court on Friday directed GST officials not to use their powers to attachproperties during tax evasion probes to “harass” businessmen.

The high court observed that attachment of properties, especially bank accountsof businessmen, may damage their business. Hence the power should be used sparingly.

The high court was dealing with cases filed by one Pranit Desai and his six companies after GST officials attached various bank accounts during their investigation into input tax credit fraud to the tune of Rs 43 crore. Desai complained that the attachment was affecting his business badly because he was unable to make transactions since March. He is into manufacturing of refractive lining material.

The issue before the high court was the powers conferred on GST officials under Section 83 of the GST Act. The bench of Justice J B Pardiwala and Justice A C Rao observed that provisional attachment under Section 83 should be made after the assessing officer feels that it is absolutely necessary in the interest of revenue.

The court said, “The power conferred upon the Assessing Authority under Section 83 is very drastic, far-reaching power and that power has to be used sparingly and only on substantive weighty grounds and for valid reasons. To ensure that this power is not misused, no safeguards have been provided in the Section 83…It should not be exercised unless there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of the whole or any part of his property with a view to thwarting the ultimate collection of the demand.”

The court made it clear, “It (attachment) should neither be used as a tool to harass the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee.”

The high court ordered the government to release all bank accounts belonging to Desai and his six companies with the observation, “The attachment of bank accounts and trading assets should be resorted to only as a last resort because, the attachment of the bank accounts of the assessee would paralyse the functions and business of the assessee.”