Cash credit limit is sanctioned for availing working capital facility with a condition that end use of the money is strictly for the purpose of getting stocks through payment from that account.
Hence CC account with debit balance can not be attached and it is the Banker's duty to inform facts to ITO.
It depends on the banker. The banker may open a fresh account and transfer such debit balance in the new account to old account and bring the balance as NIL and can permit cash credit operations in the new account.
Let the bank take instructions from higher authorities as they are shy in taking risks.