Bank Attachment Issued Without Prior Hearing Held Prima Facie Unsustainable and Kept in Abeyance

By | August 13, 2026
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Bank Attachment Issued Without Prior Hearing Held Prima Facie Unsustainable and Kept in Abeyance

Issue

Whether a bank attachment notice issued under Section 79 to recover tax demands without providing a prior opportunity of hearing to the assessee is legally sustainable.

Facts

  • The bank account of the assessee was attached by the tax authority through a recovery notice issued directly to the assessee’s banker.
  • The assessee was completely unaware of any pending tax demand or the initiation of recovery proceedings.
  • The assessee learned about the attachment only when informed by the banker, who cited a departmental letter directing the attachment.
  • The assessee filed a writ petition challenging the recovery communication and bank attachment on the ground that no prior hearing or notice was provided.
  • The Revenue argued that the attachment was a valid exercise of its statutory recovery powers under Section 79.

Decision

  • The High Court held that the governing procedure mandates providing an opportunity of hearing before contemplating any adverse action against a taxpayer.
  • Since no opportunity of hearing was afforded to the assessee prior to attaching the bank account, the action was found prima facie unsustainable.
  • The communication issued to the banker effecting the attachment was directed to be kept in abeyance pending further consideration of the writ petition.
  • Interim protection was granted to the assessee, holding that the bank attachment cannot operate without compliance with the principles of natural justice and hearing requirements.

Key Takeaways

  • Mandatory Natural Justice: Statutory recovery powers under Section 79 cannot be invoked arbitrarily without providing the taxpayer an opportunity of hearing or serving notice of the underlying tax demand.
  • Prior Notice Required for Recovery: Attaching a taxpayer’s bank account without prior communication or hearing violates the principles of natural justice, rendering such administrative recovery actions prima facie invalid.
  • Interim Relief via Stay: Courts will stay or keep in abeyance recovery communications sent directly to third parties/bankers if fundamental procedural safeguards are bypassed by tax authorities.
HIGH COURT OF KARNATAKA
Padmavati Engineerings
v.
State of Karnataka Department of Finance
C.M. Poonacha, J.
WRIT PETITION NO.104670 of 2026 (T-RES)
JULY  23, 2026
Ganesh V. Shandage and Pratima Shipurkar, Advs. for the Petitioner.
ORDER
1. Learned counsel for the petitioner seeking for grant of interim relief submits that the bank account of the petitioner has been attached pursuant to the notice dated 06.09.2025 (Annexure-G to the writ petition), issued by the authorities to the banker of the petitioner. That the petitioner being unaware of the demand for tax, as also the consequential attachment, had requested for details of the attachment vide his letter dated 25.05.2026 (Anncxure-F to the writ petition) from his banker. In the said letter, the banker made a hand written endorsement dated 25.05.2025, that the attachment has been made consequent to a letter received from the GST department.
2. It is the contention of the petitioner that Rule 142(B)(1) of Central Goods and Sendees ‘Fax Rules, 2017 , requires a notice of seven days to be given before the tax amounts have to be recovered. Further, it is submitted that by virtue of sub-section 4 of Section 75 of the Act, an opportunity of hearing is to be granted, where any adverse decision is contemplated against such person. The said sub Rule 4 of Section 75 reads as under:
“(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.”
3. Although, it is the vehement contention of the learned AGA that die recovery of tax is made consequent to the powers contemplated under Section 79 of die Act, it is clear from a prima facie reading of Rule 142(B) of the Rules as well as sub-section 4 of Section 75 of the Act, that an opportunity of hearing is to be granted before any adverse decision is contemplated.
4. It is clear that no opportunity of hearing has been granted before the bank account has been attached. In view of the same, the communication dated 06.09.2025 addressed by the concerned audiorities to the banker of the petitioner shall be kept in abeyance till the next date of hearing.
5. Re-list on 17.08/2026“