Second Schedule recovery notice compliance and void transfer principles upheld against the assessee and transferees.

Absence of a formal notice under rule 2 of the Second Schedule to the Income-tax Act did not invalidate the recovery proceedings where the assessee had actual knowledge of the proceedings, participated in them, and had been served with notices stating the arrears and time for payment; the statutory requirements were treated as substantially complied with. The Court also accepted that a transfer made after initiation of recovery steps could be treated as void against the Revenue under section 281 and the Second Schedule. The objection to non-service of rule 2 notice failed, and the attachment and transfer were upheld as valid against the assessee and the transferees.

---

---

Issues: Whether the absence of a specific notice under rule 2 of the Second Schedule before the sale rendered the recovery proceedings and consequential attachment invalid, and whether the alienation was void under section 281 and the Second Schedule.

Analysis: The challenge turned on the effect of rule 2 notice under the Second Schedule to the Income-tax Act, the operation of rules 16(1), 16(2), 48 and 51 of that Schedule, and section 281. The Court found from the recovery file that the assessee-vendor had knowledge of the tax recovery proceedings, had participated in them, and had been served with notices showing the arrears and the time for payment. On that basis, the absence of a formal rule 2 notice before the sale did not vitiate the proceedings, since the statutory requirements were held to have been substantially met. The Court further accepted that the transfer made after initiation of recovery steps was liable to be treated as void against the Revenue.

Conclusion: The objection based on non-service of a formal rule 2 notice failed, and the transfer and attachment were upheld as valid against the assessee and his transferees.

---