Section 281 voids pendente lite transfers against tax recovery, leaving the transferee to pursue the statutory civil suit remedy.

A transfer of leasehold interest made while income-tax recovery proceedings were pending, and before service of notice under rule 2 of the Second Schedule, was treated as void against the revenue under section 281. The Court treated section 281 as declaratory during pending proceedings and after completion of assessment but before service of the recovery notice, so the Tax Recovery Officer did not need a prior civil court declaration to proceed. The transferee's proper remedy was a civil suit under rule 11(6) of the Second Schedule to establish title, and a writ challenge to the recovery action was not maintainable.

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Issues: Whether a transfer of leasehold interest made during the pendency of income-tax recovery proceedings, but before service of notice under rule 2 of the Second Schedule, could be treated as void under section 281 of the Income-tax Act, 1961, and whether the transferee could resist the revenue's recovery action without first obtaining a civil court declaration.

Analysis: Section 281 was held to operate declaratorily during the pendency of proceedings under the Income-tax Act and also after completion of assessment but before service of notice under rule 2 of the Second Schedule. On the facts, the formal lease deed was executed after reassessment had been completed and before notice under rule 2 had been served, bringing the transfer within the statutory mischief. The Court distinguished authorities dealing with post-notice or collateral disputes and held that, where the statute itself declares such a transfer void as against the revenue, the Tax Recovery Officer need not first approach a civil court for a declaration. The transferee's proper remedy was to institute a civil suit under rule 11(6) of the Second Schedule to establish its title, subject to the conclusive effect of the recovery order until then. The challenge to the revenue action through writ proceedings was therefore not tenable.

Conclusion: The transfer was void against the revenue under section 281, and the writ petition failed.

Ratio Decidendi: A transfer of assets made during the pendency of proceedings under the Income-tax Act, 1961, or after completion thereof but before service of notice under rule 2 of the Second Schedule, is void as against the revenue under section 281, and the transferee must pursue the statutory civil suit remedy under rule 11(6) rather than seek a prior declaration from the tax authorities or writ court.

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