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January 28, 2022

Can Adhoc payments be a sufficient reason for lifting provisional attachment of bank

by CA Shivam Jaiswal in Legal Court Judgement

Can Adhoc payments be a sufficient reason for lifting provisional attachment of bank

Introduction:

We are aware that the provisional order shall come to an end when 1 years has been lapsed from the date of order. However, it may interest you to know and be aware that if a taxable person agrees to pay Adhoc payment as agreed and decided by the Revenue and by the High court the provisional order can be lifted before the time lapse of 1 year. On the direction of the High court the Revenue may uplift the order of provisional attachment of the bank after considering the circumstances of the person. We shall understand this with the help of an interesting case law of Mutharamman Iron and Steels v. Principal Additional Director General [2021] (Madras).

What do you mean by Ad hoc payments?

The term “ad hoc” is a Latin phrase that literally means “to this” and is commonly understood as meaning “for this purpose.” An Ad Hoc Payment is a payment outside of the normal invoicing and check request process. Ad Hoc Payments are done for various reasons, including payroll needs such as late or adjusted time sheets, missed payments, tax payments, extra costs, and other special requests.

In the case of Mutharamman Iron and Steels v. Principal Additional Director General [2021] (Madras)

Facts of the Case:

  1. The petitioners’ business has been entirely crippled since all the bank accounts of the petitioner have been attached.
  2. The petitioner states that some bank accounts of the petitioner, sufficient to protect the interest of the revenue remain under attachment, whereas the remaining bank accounts be released so as to enable the operation and conduct of the business.
  3. This petition has been filed challenging the provisional attachment of bank accounts of the petitioner pending the proceedings for investigation.

Issues raised:

Can the bank account of the petitioner pending proceedings for investigation be used as provisional attachment?

Observations:

  1. After being heard by the petitioner the High court directed the petitioner to appear before the respondent with the request to release some bank accounts so as to let the working capital flow continue to run the operations and conduct of business.
  2. The petitioner on the direction of the High court appeared before the Authority requesting for upliftment of provisional attachment of bank accounts.
  3. Further, Hon’ble Court held that the petitioner has made certain Adhoc payments pending investigation as a consequence of which the attachment of the bank account of the petitioner has been lifted.

Judgement:

Since the petitioner made certain Adhoc payments pending investigation as a consequence of which the attachment of the bank account of the petitioner has been lifted, the challenge to the provisional attachment does not survive any longer, and recording the aforesaid, this writ petition stands to be closed.

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