The Rajasthan High Court has disposed of a writ petition challenging the provisional attachment of a company’s cash credit account under Section 281B of the Income Tax Act, 1961, observing that the attachment order no longer survived.
The bench of Justice Sudesh Bansal and Justice Ashutosh Kumar took into account the expiry of the six-month attachment period and the company’s counsel’s statement that no assessment proceedings or outstanding income tax dues remained for the relevant assessment year.
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The proceedings also raised the question of whether a cash credit limit can be attached as an assessee’s property. The company argued that such a facility represents a liability owed to the bank rather than property belonging to the account holder. However, the Court ultimately disposed of the petition on the basis of the expired attachment period and the statement concerning the absence of pending proceedings or tax dues.
The company had challenged an attachment order dated April 9, 2010, issued by the Income Tax Department in exercise of its powers under Section 281B of the Income Tax Act.
Under the impugned order, the company’s cash credit limit account had been provisionally attached for six months. The writ petition questioned the attachment of the account and the department’s authority to take such action.
When the matter came before the Division Bench, counsel for the company submitted that no proceedings concerning the assessment of income tax dues were pending against it. Counsel further stated that no outstanding amount remained payable for the relevant year of survey or assessment.
These submissions, together with the limited duration specified in the original attachment order, formed the basis of the Court’s disposal of the proceedings.
Apart from relying on the absence of pending proceedings and outstanding dues, the company challenged the attachment on the nature of the banking facility itself.
Its counsel submitted that, although Section 281B permits the attachment of an assessee’s property, a cash credit limit does not fall within the expression “any property”. According to the company, the facility constitutes a liability that the account holder owes to the bank for availing of credit.
In support of this argument, counsel relied on the Bombay High Court’s decision in Skytech Rolling Mill Pvt. Ltd. v. Joint Commissioner of State Tax Nodal, Writ Petition No. 1928 of 2025, decided on June 10, 2025.
The Rajasthan High Court recorded the submission and the cited authority. However, its operative conclusion did not separately determine whether cash credit accounts are categorically outside the scope of attachment under Section 281B.
The Division Bench noted that the impugned attachment had expressly been made effective for only six months and that this period had already expired.
It also took into consideration counsel’s statement that neither assessment proceedings nor outstanding income tax dues remained against the company for the relevant assessment year.
The Court observed that “the order of attachment no longer survives” and closed the writ proceedings.
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