Tax recovery attachment can proceed against a void gift where limitation and mala fides objections are unsupported.
A transfer of house property made while tax arrears and pending assessment proceedings existed was treated as void against the revenue under section 281, and the attachment could continue. No rule required the department to proceed first against one attached asset before another, so the earlier attached Chandigarh property could be proceeded against. The limitation objection under rule 68B failed because the attached property fell within the special regime for pre-1 June 1992 attachments and the period of court-ordered stay had to be excluded. The plea of mala fides also failed for want of supporting material, leaving the recovery steps undisturbed.
Issues: (i) Whether the gift of the house property could be treated as void under section 281 of the Income-tax Act, 1961 and the attachment and proposed sale could proceed against it; (ii) whether the Department was bound to proceed first against the Gurgaon property instead of the earlier attached Chandigarh property; (iii) whether the sale was barred by limitation under rule 68B of the Second Schedule to the Income-tax Act, 1961; and (iv) whether the recovery proceedings were vitiated by mala fides.
Issue (i): Whether the gift of the house property could be treated as void under section 281 of the Income-tax Act, 1961 and the attachment and proposed sale could proceed against it.
Analysis: The property had been gifted when tax arrears were outstanding and assessment proceedings were pending. Section 281 renders a transfer void as against tax claims where the statutory conditions are met. The earlier order declaring the gift void had already been upheld and had attained finality, leaving no basis to reopen the issue in the present proceedings.
Conclusion: The challenge to the declaration that the gift was void failed and the attachment could proceed.
Issue (ii): Whether the Department was bound to proceed first against the Gurgaon property instead of the earlier attached Chandigarh property.
Analysis: No statutory provision required the Department to exhaust one attached asset before proceeding against another. The Chandigarh property had been attached much earlier, and once the gift was held void there was no legal bar to proceeding against that property for recovery of tax dues.
Conclusion: The objection that the Department should first sell the Gurgaon property was rejected.
Issue (iii): Whether the sale was barred by limitation under rule 68B of the Second Schedule to the Income-tax Act, 1961.
Analysis: Rule 68B, inserted with effect from 1 June 1992, contained a special deeming provision for properties attached before that date, and the period during which recovery was stayed by court order had to be excluded in computing limitation. Since the attached property fell within that regime and the recovery had been stayed, the limitation plea could not succeed.
Conclusion: The sale was not barred by limitation.
Issue (iv): Whether the recovery proceedings were vitiated by mala fides.
Analysis: Allegations of mala fides required supporting material, which was absent. The plea had not been properly pleaded and was unsupported by the record.
Conclusion: The allegation of mala fides was rejected.
Final Conclusion: The writ petition was held to be without merit, and the recovery steps against the attached property were permitted to stand.
Ratio Decidendi: A transfer found void under section 281 of the Income-tax Act, 1961 remains unavailable against tax recovery, and objections to attachment or sale will fail where no statutory bar, valid limitation objection, or proved mala fides is established.