High Court directs immediate release of bank accounts attached under Section 226(3) after 20% deposit of demand; allows assessee to seek relief before CIT for remaining balance
Meetu Kumari | Oct 8, 2025 |
Delhi High Court Allows De-Attachment of Bank Accounts on Deposit of 20% Demand
The petitioner challenged the order dated 23 September 2025, passed by the Assessing Officer, which rejected the stay application for the demand and the notice issued on 24 September 2025 under Section 226(3) of the Income Tax Act, 1961, directing HDFC Bank to attach thirteen of its bank accounts.
The petitioner contended that the AO’s action was abrupt and unjustified since the rejection of its stay application was immediately followed by bank account attachment, leaving no opportunity to approach the CIT. It was argued that the company needed access to its accounts to disburse salaries and meet statutory obligations, and that freezing all its accounts would result in severe financial hardship.
Issue Raised: Whether the AO could attach the petitioner’s bank accounts under Section 226(3) immediately after rejecting the stay application, without affording an opportunity to seek relief from higher authorities.
HC’s Ruling: The Hon’ble Court considered the urgency and the financial impact caused by the attachment. On instructions from the Department, the Revenue’s counsel stated that the authorities would release the attached accounts if the petitioner deposited 20% of the total outstanding demand. Accepting this arrangement, the Court directed the petitioner to deposit 20% of the demand (approximately Rs. 1.65 crore) by 03 October 2025 and forward the payment challan to the Assessing Officer. Upon receipt of proof of payment, the Department was instructed to immediately detach and release all thirteen bank accounts.
The Court further granted liberty to the petitioner to move the Commissioner of Income Tax within one week to seek a stay or relief for the remaining 80% of the demand, which shall be considered on its merits. It was also clarified that failure to make the 20% deposit within the prescribed time would invite serious consequences. With these directions, the writ petition was disposed of.
To Read Full Judgment, Download PDF Given Below
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