Declaratory effect of section 281 cannot support tax authority's own void-transfer order or consequential attachment notice.

Section 281 of the Income-tax Act is declaratory and does not confer independent adjudicatory power on income-tax authorities to declare a transfer void. In the absence of any prescribed statutory procedure, enforcement of the Revenue's claim had to be pursued through properly constituted civil proceedings, not by an internal tax order. The court also held that an order made against a deceased assessee could not survive. Because the section 281 declaration was unsustainable, the consequential attachment notice under section 226(3) also failed: that provision applies only where money is due or may become due to the assessee or is held on the assessee's account, which could not be established on the invalid premise relied on by the Revenue.

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Issues: (i) Whether section 281 of the Income-tax Act, 1961 empowered the income-tax authorities to pass an independent adjudicatory order declaring a transfer void; (ii) Whether the attachment notice under section 226(3) of the Income-tax Act, 1961 could survive.

Issue (i): Whether section 281 of the Income-tax Act, 1961 empowered the income-tax authorities to pass an independent adjudicatory order declaring a transfer void.

Analysis: Section 281 was treated as declaratory in nature and not as conferring any separate adjudicatory machinery upon the income-tax officer. The provision created a legal consequence as to voidness against the Revenue, but it did not prescribe any procedure for adjudication by the tax authorities. The scheme of recovery under section 222 and the Second Schedule was distinguished as operating after certificate proceedings had commenced, whereas section 281 operated at an earlier stage. The court also relied on the parallel with section 53 of the Transfer of Property Act, 1882, to hold that, in the absence of a prescribed statutory procedure, enforcement had to be through a properly constituted civil proceeding. An order under section 281 passed against a dead person was also held incapable of surviving.

Conclusion: The income-tax authorities had no power to pass an independent order under section 281 declaring the transfer void; the impugned order was invalid.

Issue (ii): Whether the attachment notice under section 226(3) of the Income-tax Act, 1961 could survive.

Analysis: Section 226(3) applies only where money is due or may become due to the assessee or is held on the assessee's account. The notice rested on the premise that the transfer had already been declared void under section 281 or, alternatively, that no transfer had in fact taken place. Since the section 281 order was unsustainable, the Revenue could not treat the Reserve Bank as a debtor of the defaulter on that basis. The court further held that the Revenue could not simultaneously rely on inconsistent factual stands to sustain recovery. The notice was also unsustainable as it had been issued after the death of the assessee.

Conclusion: The attachment notice under section 226(3) could not be sustained.

Final Conclusion: The statutory scheme did not permit the tax authorities to adjudicate and declare the transfer void by their own order, and the consequential recovery attachment based on that order also failed.

Ratio Decidendi: Section 281 of the Income-tax Act, 1961 is declaratory and does not itself confer adjudicatory power on the income-tax authorities; in the absence of a prescribed statutory procedure, the Revenue must seek enforcement through properly constituted legal proceedings, and consequential attachment under section 226(3) cannot stand on an invalid declaration of voidness.

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