No Final Demand? HC Quashes Bank Attachment Order

No Final Demand? HC Quashes Bank Attachment Order

A company with multiple accounts in HDFC Bank found its finances frozen under a provisional attachment order dated 24 April 2025, despite the absence of any adjudicated tax demand. Although show cause notices were issued later on, dated 5 June 2025, there was no final determination of liability.

The petitioner approached the High Court, arguing that no lawful demand existed to justify such harsh action. The company voluntarily offered to retain Rs. 36 lakhs, which was 10% of the stated Rs. 3.56 crore potential liability, in one of its bank accounts in case a future appeal became necessary.

Issue Before the Court: Could a provisional attachment stand when no adjudication or demand had been issued against the taxpayer at the time of freezing the bank accounts?

HC Held: The Hon’ble High Court agreed with the petitioner’s argument. It ruled that since there was no clear tax demand, freezing the bank account was premature and unjustified. Considering the petitioner’s genuine offer to keep Rs. 36 lakhs for future pre-deposit, the Court cancelled the attachment order. However, it ordered the petitioner to keep this amount in HDFC Account specified, to be used if needed.

As a result, the High Court cancelled the provisional attachment dated 24 April 2025, told the authorities to inform HDFC Bank, and allowed the company to operate its accounts freely, except for the set-aside Rs. 36 lakhs. No costs were imposed.

To Read Full Judgment, Download PDF Given Below