The Delhi High Court recently held in the case of VLS Finance Ltd v CIT (246 ITR 707) that for the operation of section 281-B of the Act, two factors are necessary to be noted. Firstly, the existence of opinion of the AO that for the purpose of protecting the interests of the revenue, it is necessary to provisionally attach any property belonging to the assessee in the manner provided in the Second Schedule to the Income-tax Act. Secondly, the previous approval of the chief commissioner or the commissioner, as the case may be, should be by an order in writing.

Section 281-B confers a power to be exercised during the proceedings for assessment so that the assessee does not conceal his resources from the department.

Section 94(b) of the Civil Procedure Code, 1908, provides that in order to prevent the ends of justice from being defeated, the court may, if it is so prescribed, direct the defendant to furnish security, to produce any property belonging to him and to place the same at the disposal of the court or order the attachment of any property.

Order 38, rules 5 and 6 of the Civil Procedure Code, 1908, prescribe that where at any stage of a suit, the court is satisfied that the defendant, with an intent to obstruct or delay the execution of any decree that may be passed against him, is about to dispose of the whole or any part of his property or is about to remove the same from the local limits of the court's jurisdiction, it may attach before judgment such portion of the defendant's property as is sufficient to satisfy any decree that may be passed.

The conditions of rules 5 and 6 of the CPC are not specifically stated in section 281-B but the underlying object that the ends of justice should not be defeated is implicit in section 281-B.

The court observed that "opinion" means something more than mere retailing of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question. It means a judgment or belief based on grounds short of proof. If a man is to form an opinion and his opinion is to govern, he must form it himself on such reasons and grounds as seem good to him.

According to the court, the scope of judicial review in matters of administrative decision has been highlighted by courts in many cases. In recent times, the distinction between administrative orders and judicial or quasi-judicial orders has practically ceased to exist in view of primacy of the rule of law. Administrative action is stated to be referable to the broad area of governmental activities in which the repositories of power may exercise every class of statutory function of executive, quasi-legislative and quasi-judicial nature. It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary.

The several principles can be conven iently grouped in two main categories : (i) failure to exercise a discretion; (ii) excess or abuse of discretionary power.

The two classes are not, however, mutually exclusive. Mere errors of government are not subject to judicial review. It is only palpably arbitrary exercise which can be declared void. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the court intervene.

The court further held that the question as to which of the assets of the assessee could be attached, depended on the subjective satisfaction of the assessing authority. It was for the AO to decide as to which of the assets could be liquidated without difficulty for realisation of tax assessed. The assessee could not compel the AO to attach any particular property.

In the instant case, the assets seized were those which were realisable without much difficulty and, therefore, the orders of attachment were passed in respect of those assets. Since the matter lay within the subjective view of the AO, no exception could be taken to the exercise of such power. Hence, the court held that the orders of attachment did not suffer from any infirmity to warrant judicial review.

In conclusion, it must be pointed out that provisional attachment made by the AO ceases to have effect after six months unless the commissioner extends the period {Sukhpal v CIT (156 ITR 480)}. The extension should be granted by the commissioner after properly applying his mind {Ilaben v Union of India (118 ITR 852)}.