Madras High Court Questions Fourth Consecutive Provisional Attachment of Same Properties Under Section 281B Without Substantive Reasoning

Case Background

Saravana Selvarathnam Retail Private Limited Vs PCIT (Madras High Court)

The Madras High Court recently took up a batch of writ petitions filed against a provisional attachment order dated 16.08.2023, issued by the Income Tax Department under Section 281B of the Income Tax Act, 1961. The attachment covered immovable properties belonging to the petitioners. Since all petitions revolved around a common legal question, the Court decided them through a consolidated order, with W.P. No. 25031 of 2023 serving as the lead case.

Who Are the Petitioners?

The petitioners — M/s. Saravana Selvarathnam Retail Private Limited and M/s. Rathna Akshaya Estates Private Limited — have operated in the wholesale and retail segments dealing in ready-made garments, jewellery, furniture, and household goods for approximately six decades. Both entities had maintained a consistent record of filing returns under the Income Tax Act, 1961 as well as under GST legislation.

Chronology of Events Leading to the Writ Petition

Search and Seizure Operations

The Income Tax Department conducted search operations spanning 01.12.2021 to 06.12.2021 across multiple locations including:

  • Business premises at T. Nagar
  • An incomplete construction site at Zamin Pallavaram, Coimbatore
  • Group company offices at Madurai and Tirunelveli
  • Residences of promoters and employees

During the search, the department seized loose sheets, electronic devices, and cash, and separate panchanamas were recorded for each location.

Sequence of Attachment Orders

Following the search operations, a series of attachment orders were issued against the same set of properties:

  1. 28.02.2022 — Warrant of attachment issued under Section 132(9B) covering properties of the petitioners, their group companies, and the Managing Director. This lapsed on 27.08.2022.
  2. 23.08.2022 — Provisional attachment order issued under Section 281B. Lapsed on 22.02.2023.
  3. 17.02.2023 — Another provisional attachment order under Section 281B. Lapsed on 16.08.2023.
  4. 16.08.2023 — A fresh provisional attachment order under Section 281B was issued on the very date the third order lapsed — this fourth order became the subject of the present writ petitions.

Note: In each of the above orders, the sole reason recorded by the department was that attachment was necessary "to protect the interest of the Revenue."

Arguments Advanced by the Petitioners

On the Legality of Repeated Attachments

The petitioners' Senior Counsel argued that the department had no legal authority to keep issuing fresh provisional attachment orders in a mechanical and repetitive manner. The contention was grounded in the statutory framework of Section 281B, which provides that: