(A) Provision for bank guarantee under section 281B
Effective from: 1st June, 2016

(i) Assessing Officer’s power to provisionally attach property for protecting interests of the revenue :

Under section 281B, the Assessing Officer is empowered to provisionally attach any property of the assessee, by an order in writing, during the pendency of assessment or reassessment proceedings, with the prior approval of the income-tax authorities specified therein, if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. Such provisional attachment has to be made in the manner provided in the Second Schedule.

(ii) Validity of provisional attachment :

The provisional attachment shall be valid for a period of 6 months from the date of the order. However, such attachment of property is extendable to a maximum period of two years or sixty days after the date of order of assessment or reassessment, whichever is later.

(iii) Recommendation of Income Tax Simplification Committee:

The Income Tax Simplification Committee under the chairmanship of Justice R.V. Easwar (Retd.) has recommended that provisional attachment of property could be substituted by a bank guarantee subject to fulfilment of certain conditions.

(iv) Furnishing bank guarantee in lieu of provisional attachment of property – Enabling provisions inserted:

Accordingly, sub-sections (3) to (9) have been inserted in section 281B providing for furnishing of bank guarantee in lieu of provisional attachment of property. Further Explanation to section 281B(1), providing that proceedings under section 132(5)
would be deemed to be proceedings for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment, has been consequently omitted.

(v) Furnishing of bank guarantee in lieu of provisional attachment [Section 281B(3)]

The Assessing Officer shall, by an order in writing, revoke provisional attachment of property made under section 281B(1) in a case where the assessee furnishes a guarantee from a scheduled bank, for an amount not less than the fair market value of such provisionally attached property or for an amount which is sufficient to protect the interests of the revenue.

(vi) Reference to Valuation Officer [Section 281B(4)]

For enabling determination of the fair market value of the property provisionally attached, the Assessing Officer may, make a reference to the Valuation Officer, who is required to estimate of the fair market value of the property and submit the report of such estimation to the Assessing Officer within a period of 30 days from the date of receipt of such reference.

(vii) Time limit for passing order revoking the attachment of property [Section 281B(5)]

For ensuring revocation of attachment of property in lieu of bank guarantee in a time bound manner, an order revoking the attachment has to be made by the Assessing Officer within the following time period:

	Case	Time period for revoking attachment
(i)	in a case where a reference is made to the Valuation Officer	within 45 days from the date of receipt of such guarantee
(ii)	in any other case	within 15 days from the date of receipt of such guarantee

 

(viii) Assessing Officer empowered to invoke bank guarantee for failure to pay sum specified in notice of demand [Section 281B(6)]

Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay such sum within the time specified in the notice of demand, the Assessing Officer may invoke the bank guarantee, wholly or partly, to recover the said amount.

(ix) Power to invoke bank guarantee on assessee’s failure to renew or furnish new guarantee [Section 281B(7)]

In a case where the assessee fails to renew the bank guarantee or fails to furnish a new guarantee from a scheduled bank for an equal amount fifteen days before the expiry of such guarantee, the Assessing Officer shall, in the interests of the revenue, invoke the bank guarantee.

(x) Manner of adjustment of amount realized by invoking bank guarantee [Section 281B(8)]

(1) The amount realised by invoking the bank guarantee shall be adjusted against the existing demand which is payable by the assessee;

(2) The balance amount, if any, has to be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of Reserve Bank of India or the State Bank of India or of its subsidiaries or any bank as may be appointed by the Reserve Bank of India as its agent at the place where the office of the Principal Commissioner or Commissioner is situated.

(xi) Release of bank guarantee [Section 281B(9)]

In a case where the Assessing Officer is satisfied that the bank guarantee is not required anymore to protect the interests of the revenue, he shall release that guarantee forthwith.