High Court Directs Tax Recovery Officer to Lift Property Attachment After ITAT Order Attains Finality

The search was carried out on 08/12/2016, following which action was taken under Section 153A of the Income Tax Act. The assessments were finalised on 06/02/2020 for AYs 2011-12 to 2017-18. The initial four years had no additions, but the AO included new additions for AYs 2015-16 to 2017-18, which increased demand. Thus, the Tax Recovery Officer served an attachment order dated 10/12/2021 under Section 222 on the petitioner’s immovable properties, and the Sub-Registrar registered encumbrances based on the order.

CIT(A) Held: Aggrieved, the assessee filed appeals before the CIT(A), who vide order dated 15/09/2023 granted them partly and revoked the additions. The order was made effective with effect from 19/10/2023. The Department filed appeals before the ITAT, which on 30/04/2025 confirmed the CIT(A)’s order. Despite this, the attachment was not lifted. It was further brought to notice that the outstanding demands had already been reduced through rectification under Section 154, Rs. 41,841 for AY 2011-12, Rs. 644 for AY 2012-13, and Rs. 45,604 for AY 2014-15, showing that the petitioner was no longer in default.

Main Issue: Whether the Tax Recovery Officer was entitled in law to continue the attachment of immovable property under Section 222 after the ITAT had upheld the order of the CIT(A) and the tax demand had been discharged by rectification and payment.

High Court Held: The Court held that after the Tribunal’s order, the highest fact-finding authority, had upheld the findings of the CIT(A), and the rectification proceedings had brought down the tax demand to very marginal figures, the Tax Recovery Officer could not legally continue the attachment. Relying on Sections 222 and 225(2) of the Act and previous judgments of this Court in Sri Lakshmi Brick Industries v. Tax Recovery Officer and Coromandel Oils Pvt. Ltd. v. Tax Recovery Officer, the Court reiterated that when an appellate order attains finality on factual aspects and the arrears stand paid, the purpose of attachment ceases to exist. The Revenue’s argument that the order had not attained “finality” as an appeal was proposed was found untenable since no subsisting tax liability remained.

Therefore, the Court granted the writ petition and instructed the Tax Recovery Officer to withdraw the attachment order dated 10/12/2021 and inform the same to the Sub-Registrar within four weeks. The Sub-Registrar was directed to cancel the encumbrance from the records at once on receipt of the communication. The Court held that in the absence of an enforceable demand, insistence on attachment would be against the purpose of Sections 222 and 225(2). The writ petition was disposed of without any order as to costs, and all related miscellaneous petitions were terminated.

To Read Full Judgment, Download PDF Given Below