The Gujarat High Court has once again lambasted GST officials for being high-handed and directed them to ensure that the powers to attach properties during an investigation of tax evasion cases must not be used to harass businessmen.
The division bench of Justice JB Pardiwala and Justice AC Rao also remarked that the attachment of properties of businessmen, including their bank accounts, might damage their business and such a power should be used sparingly.
The remarks came in response to cases filed by a certain Pranit Desai and his six companies, accused of fraudulently availing input tax credit of around Rs 43 crore without supply of goods.
Notably, the GST officials attached his personal and companies’ bank accounts during the course of an investigation. The petitioners claimed that the attachment enormously affected their business operations related to the manufacturing of refractive lining material.
The court while dealing with the powers conferred to GST officials for provisional attachment under section 83 of the GST Act also remarked that provisional attachment should be carried out by the assessing officer only if he thinks it to be absolutely necessary in the interest of revenue.
It also said the power of provisional attachment should neither be used as a tool to harass an assessee nor it should be used in such a manner which might have an irreversible detrimental effect on the business of the assessee.
The bench 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 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.”
Thereafter, the division bench ordered the tax authorities to release all the bank accounts of the petitioner and his companies. It said the attachment of bank accounts and trading assets should be resorted to only as a last resort because the attachment of the bank accounts would paralyse the functions and business of the assessee.
