Provisional attachment to protect revenue in certain cases
[Section-500 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 500(1) of Income Tax Act 2025
500(1) Where, during the pendency of any proceeding for—
- 500(1)(a) the assessment of any income or for the assessment or reassessment of any income, which has escaped assessment; or
- 500(1)(b) imposition of penalty under section 444, where the amount or aggregate of amounts of penalty likely to be imposed under the said section exceeds two crore rupees,
the Assessing Officer is of the opinion that for protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Competent Authority by order in writing, attach provisionally any property belonging to the assessee in the manner prescribed in section 413.
Section 500(2) of Income Tax Act 2025
500(2) Every provisional attachment under sub-section (1) shall cease to have effect after the expiry of six months from the date of the order made under the said sub-section.
Section 500(3) of Income Tax Act 2025
500(3) The Competent Authority may, for reasons to be recorded in writing, extend the period referred to in sub-section (2) and the total period of such extension shall not exceed two years or sixty days after the date of order of assessment or reassessment, whichever is later.
Section 500(4) of Income Tax Act 2025
500(4) Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the fair market value of the property provisionally attached under sub-section (1), the Assessing Officer shall, by an order in writing, revoke such attachment.
Section 500(5) of Income Tax Act 2025
500(5) For the purposes of sub-section (4), where the Assessing Officer is satisfied that a guarantee from a scheduled bank for an amount lower than the fair market value of the property is sufficient to protect the interests of the revenue, he may accept such guarantee and revoke the attachment.
Section 500(6) of Income Tax Act 2025
500(6) The Assessing Officer may, for determining the value of the property provisionally attached under sub-section (1), make a reference to the Valuation Officer, who shall estimate the fair market value of the property in the manner provided under section 269(3) to (8), and submit a report of such estimate to the Assessing Officer within thirty days from the date of receipt of the reference.
Section 500(7) of Income Tax Act 2025
500(7) An order revoking the provisional attachment under sub-section (4) or (5) shall be made—
- 500(7)(a) within forty-five days from the date of receipt of the guarantee, where a reference to the Valuation Officer has been made under sub-section (6); or
- 500(7)(b) within fifteen days from the date of receipt of guarantee, in any other case.
Section 500(8) of Income Tax Act 2025
500(8) Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay that sum within the time specified, the Assessing Officer may invoke the guarantee furnished under sub-section (4) or (5), wholly or in part, to recover the amount.
Section 500(9) of Income Tax Act 2025
500(9) The Assessing Officer shall, in the interests of revenue, invoke the bank guarantee, if the assessee fails to renew the guarantee referred to in sub-section (4) or (5), or fails to furnish a new guarantee from a scheduled bank for an equal amount, before fifteen days of its expiry.
Section 500(10) of Income Tax Act 2025
500(10) The amount realised by invoking the guarantee referred to in sub-section (4) or (5) shall be adjusted against––
- 500(10)(a) the existing demand which is payable by the assesse; and
- 500(10)(b) the balance amount, if any, shall be deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in the branch of the Reserve Bank of India or the State Bank of India or any bank as may be appointed by the Reserve Bank of India as its agent under section 45(1) of the Reserve Bank of India Act, 1934 at the place where the office of the Principal Commissioner or Commissioner is situated.
Section 500(11) of Income Tax Act 2025
500(11) Where the Assessing Officer is satisfied that the guarantee referred to in sub-section (4) or (5) is not required any more to protect the interests of the revenue, he shall release that guarantee forthwith.
Section 500(12) of Income Tax Act 2025
500(12) In this section, “Competent Authority” means the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director.
FAQs on Section 500 of Income Tax Act 2025
What is the purpose of provisional attachment under Section 500 of the Income Tax Act, 2025?
The purpose of provisional attachment is to protect the interests of the revenue during the pendency of assessment or reassessment, or when imposing a penalty exceeding two crore rupees under Section 444.
Under what circumstances can provisional attachment be initiated by the Assessing Officer?
Provisional attachment can be initiated during proceedings for assessment or reassessment of income, or during penalty proceedings under Section 444 where the penalty likely exceeds two crore rupees, if the Assessing Officer believes it is necessary to protect revenue.
Is prior approval required before making a provisional attachment?
Yes, the Assessing Officer must obtain prior written approval from the Competent Authority before making a provisional attachment.
What is the initial validity period of a provisional attachment order?
The provisional attachment ceases to have effect after six months from the date of the order.
Can the validity of the provisional attachment be extended beyond six months?
Yes, the Competent Authority may extend the period, but the total extension cannot exceed two years or sixty days after the date of the assessment or reassessment order, whichever is later.
Can the assessee get the provisional attachment revoked?
Yes, the assessee can get it revoked by furnishing a bank guarantee from a scheduled bank for at least the fair market value of the attached property.
Is it possible to revoke the attachment with a lower value guarantee?
Yes, if the Assessing Officer is satisfied that a lower value guarantee is sufficient to protect revenue, he may accept it and revoke the attachment.
How is the fair market value of the attached property determined?
The Assessing Officer may refer to the Valuation Officer, who must estimate the fair market value as per the procedure in Section 269(3) to (8), and submit a report within 30 days.
What is the time limit for revoking the attachment after receipt of the guarantee?
If a valuation reference is made, the revocation order must be passed within 45 days from the date of receipt of the guarantee. In other cases, it must be done within 15 days.
What happens if the assessee fails to pay the demand specified in the notice?
The Assessing Officer may invoke the bank guarantee furnished under Section 500(4) or (5), wholly or partially, to recover the amount.
What happens if the assessee fails to renew the bank guarantee before expiry?
The Assessing Officer must invoke the guarantee if the assessee fails to renew it or provide a new one at least 15 days before its expiry.
How is the amount realised from invoking the bank guarantee adjusted?
It is first adjusted against the existing demand payable by the assessee. Any balance is deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner in an authorized bank.
When can the Assessing Officer release the bank guarantee?
The guarantee must be released immediately when the Assessing Officer is satisfied that it is no longer required to protect the interests of the revenue.
Who qualifies as the Competent Authority under Section 500?
The Competent Authority includes the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General, or Principal Director or Director.
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