Section 281B — Provisional Attachment of Assets During Assessment

Section 281B of the Income Tax Act empowers the Assessing Officer (AO) to provisionally attach any property of the taxpayer during the pendency of assessment proceedings — to protect the interest of Revenue and ensure that assets are not dissipated before the final demand is raised. Here is the complete guide.

When Can Section 281B Be Invoked?

• During any assessment or reassessment proceedings under Sections 143, 147, 153A or 153C
• The AO must have reason to believe that: (a) the taxpayer is likely to defeat the tax demand by concealing, transferring or alienating assets, AND (b) it is necessary to protect Revenue's interests
• AO requires prior approval of the Principal Commissioner or Commissioner (PCIT/CIT) before making any provisional attachment

What Can Be Attached?

• Bank accounts (current/savings/FD) — the bank is served a notice and the account is frozen
• Immovable property (land, building) — sub-registrar/revenue authority notified; no sale or mortgage possible
• Shares and securities
• Business assets — machinery, stock, receivables
• Vehicles, jewelry (though physical assets are less commonly attached provisionally)

Duration of Attachment

• Provisional attachment is valid for 6 months from the date of attachment order
• Can be extended by PCIT/CIT for further periods — but total extension cannot exceed the date of completion of assessment proceedings
• Once assessment is completed and demand raised: The provisional attachment may be converted to a regular recovery attachment (Section 222 — Tax Recovery Officer)

Remedies for the Taxpayer

• Object before PCIT/CIT: File a written objection within 7 days of receiving the attachment order — PCIT/CIT must consider and pass an order within 2 weeks
• Furnish security: The taxpayer can offer alternative security (bank guarantee, property) to get the attached account or asset released
• Writ petition: If the attachment is arbitrary or without proper application of mind — a writ petition before the High Court can be filed (HC courts have consistently quashed 281B attachments made without proper PCIT approval or basis)
• Stay of assessment: If the underlying assessment is successfully challenged, the provisional attachment falls away

Section 281B vs Section 281

• Section 281: Makes a transfer of assets void against IT Department if made after proceedings commence
• Section 281B: Allows the IT Department to proactively FREEZE assets before the assessment is completed — without waiting for the taxpayer to transfer them

Conclusion

Section 281B provisional attachment is a powerful Revenue protection tool — but it must be exercised with proper application of mind and PCIT approval. Businesses facing 281B attachments must respond immediately with objections or writ petitions. SPOTON provides income tax dispute representation, Section 281B objections and High Court writ filing for businesses in Kerala. Contact us for expert income tax litigation services.