Question :Can the Cash Credit Account Attachment be done by the Income Tax department in case of Tax Demand ?
I discharge the attachment with regard to the cash credit account of the petitioner with Allahabad Bank, Bowbazar Branch. In this, I am supported by a decision of the Madras High Court in K.M. Adam v. ITO  33 ITR 26 (Mad.) which opines that a loan fund cannot said to be a debt of the bank to the customer nor could it be said to be money on account of the customer. Hence, it cannot be attached.
HIGH COURT OF CALCUTTA
P. C. Chandra & Sons (India) Ltd.
Deputy Commissioner of Income-tax
WP NO. 911 OF 2014
SEPTEMBER 18, 2014
1. The concerned assessment year is 2011-12. There is a demand from the Income-tax Department upon the assessee-writ petitioner for a sum of Rs. 12,11,86,487.
2. Against the assessment order in question, the assessee’s appeal before the Commissioner of Income-tax (Appeals) is pending.
3. By an order dated July 17, 2014, passed under section 220(6) of the Income-tax Act, 1961, the assessee was required to pay 50 per cent. of the total demand in the following manner :
Rs. 2.10 crores, i.e., 10 per cent. of the above demand immediately and the balance 40 per cent., i.e., Rs.8.40 crores in six monthly instalments of Rs. 1.40 crores each, starting from the end of July, 2014.
4. Although in the said order the assessee has been asked to pay 50 per cent. of the demand, a mere look at the demand would show that the assessee was asked to deposit 100 per cent. of the demand.
5. Being aggrieved the assessee approached the Commissioner of Income- tax, Kolkata-I. However, by his decision dated September 4, 2014, the request of the assessee for staying the demand was rejected.
6. A further approach has been made before the Principal Commissioner of Income-tax regarding which there is no response till date.
7. On September 10, 2014, the order dated July 17, 2014, was “annulled”.
8. Mr. J.P. Khaitan, learned senior advocate for the petitioner, tries to unfold the prima facie case of the assessee to show that the demand ex facie is unjust. To a substantial extent he has been able to establish such prima facie case.
9. On a reading of paragraph 10 of the assessment order it shows that a sum of Rs. 26,35,09,093 has been added to the income of the assessee. The ground on which this income has been added is that the quantity of the pure gold as declared was mixed with alloy bringing down the proportion of the pure gold in the product from 24 carats to 22 carats. An excess quantity than what was declared was produced and sold in the market for the “added back” amount. This, according to Mr. Khaitan, and I accept Mr. Khaitan’s contention, is not quite correct. According to the summary of stock which is annexed to the writ petition at page 177 thereof and is also part of the writ petitioner’s audited accounts, the quantity of the gold of 24 carats which was said to have been converted into 22 carats upon addition of alloy was in fact of only 22 carats. It is nobody’s case that that particular quantity of the gold was further converted into gold of lesser carat value. The addition of Rs. 26,35,09,093 made on the said basis is prima facie erroneous.
10. Therefore, in my opinion, the writ petitioner has a substantial case to be tried before the Commissioner (Appeals). After filing of the petitioner’s application before the Principal Commissioner of Income-tax the banks accounts including the cash credit accounts of the writ petitioner have been attached by the income tax authorities.
11. In my opinion, the petitioner should be relieved of some of the rigours of this attachment.
12. I discharge the attachment with regard to the cash credit account of the petitioner with Allahabad Bank, Bowbazar Branch. In this, I am supported by a decision of the Madras High Court in K.M. Adam v. ITO  33 ITR 26 (Mad.) which opines that a loan fund cannot said to be a debt of the bank to the customer nor could it be said to be money on account of the customer. Hence, it cannot be attached.
13. I direct the Commissioner of Income-tax (Appeals) to dispose of the appeal by December 31, 2014. Other bank accounts of the writ petitioner with Union Bank of India, Sealdah Branch and Bank of India, Bowbazar Branch, will continue to remain attached with a rider that the Department will not be able to appropriate any sum therefrom till the disposal of the appeal before the Commissioner (Appeals).
14. The continuance of attachment and operation of bank accounts will abide by the order to be passed by Commissioner (Appeals).
15. Nothing remains of this application.
16. It is disposed of by this order.
17. Allegations contained in the writ petition are deemed not to be admitted.