1983 (2) TMI 16 - HC - Income Tax

Court quashes attachment orders, refunds profits, rules on partitioned properties

The court partly allowed the original petitions, quashing the attachment orders for the properties obtained through the partition deed by the petitioners. ... Agricultural Income Tax, Income Tax Dues Issues:Recovery of arrears of Agrl. Income-tax, applicability of Section 44 of the Act, validity of attachment of properties, interpretation of Section 40(2) of A.I.T. Act, legality of partition deed, jurisdiction of revenue authorities.Analysis:The judgment pertains to two original petitions concerning the recovery of arrears of Agrl. Income-tax assessed on a deceased individual for the years 1966 to 1970. The deceased owned extensive properties, and his properties were assessed for tax arrears. The revenue authorities initiated proceedings for recovery against the petitioners, who are children of the deceased's third wife. The properties in question were attached, leading to a challenge by the mother of the petitioners. The Board of Revenue held that the properties obtained by the mother through a partition deed were not liable for tax recovery. The subsequent attachment of properties under Section 36 of the Act was challenged through the original petitions. The petitioners sought to quash the order of attachment under Article 226 of the Constitution.The primary grounds raised by the petitioners were the inapplicability of Section 44 of the Act and Section 40(2) of the A.I.T. Act to the case. The Government pleader defended the orders but failed to counter the petitioners' arguments effectively. The judgment highlighted that Section 44 of the Act did not apply to the case, as confirmed by the Board of Revenue's order. The Government contended that Section 40(2) of the A.I.T. Act allowed for the recovery of tax arrears from the deceased's properties. However, the judgment clarified that the charge created under Section 40(2) did not extend to the separate properties obtained by the petitioners through a partition deed prior to the tax assessment.The judgment emphasized that the partition deed had established the properties as separate assets of the petitioners, not subject to tax recovery. It also noted that the provisions of Section 9(2) of the AIT Act did not apply to the case due to the absence of property transfers as required. The court concluded that the attachment and management assumption of the petitioners' separate properties were illegal and lacked jurisdiction. Consequently, the orders of attachment were quashed, except for specific properties not covered by the partition deed.In the final ruling, the original petitions were partly allowed, quashing the attachment orders for the petitioners' properties obtained through the partition deed. The judgment clarified that the ruling did not prevent the authorities from proceeding against other properties not covered by the partition. Additionally, the profits collected by the authorities from the petitioners' properties were to be refunded. The court also allowed the authorities to proceed against any separate properties of the deceased defaulter, if applicable.