GST Update

Desk of CA. Praveen Sharma – 954 Series (CAPS) 

Bombay High Court on GST Bank Account Attachment

In a recent case involving Bajaj International Realty Private Limited, the Bombay High Court examined the issue of provisional attachment of bank accounts by GST authorities.

The company is a real estate developer engaged in redevelopment projects in Mumbai. Under a redevelopment agreement, the developer constructed flats and handed over some units to existing society members and MHADA, while the remaining flats were sold as free-sale units.

During investigation, GST authorities alleged that the developer had not paid GST on construction services provided to society members and MHADA. A pre-show cause notice proposed a tax demand of around ?42.68 crore along with interest and penalty.

To protect government revenue during the investigation, the GST department provisionally attached the company’s bank accounts. The taxpayer challenged this action before the High Court, arguing that the attachment order was passed mechanically without proper reasons and that the flats were given as part of the redevelopment agreement without separate consideration.

The Bombay High Court observed that provisional attachment is an extraordinary power and should be used carefully. Authorities must record clear reasons and properly consider the objections filed by the taxpayer before passing such orders.

Since the court found that the attachment orders were not properly justified, it set aside the provisional attachment of bank accounts. The court directed the GST authorities to reconsider the matter and pass a fresh, reasoned order after giving the taxpayer an opportunity of hearing.

This judgment highlights that bank account attachment cannot be used casually by tax authorities and must follow due legal process.

LINK: CA. Praveen Sharma on Linkedin

Regards
CAPS