Validity of Sale Deed Upheld Despite Tax Proceedings

The court held that the sale deed dated 30.7.2002 was valid despite Income Tax Act proceedings against respondent no.5. The assessing officer's declaration of the sale deed as null and void was deemed void by the court, maintaining the petitioners' ownership until a civil court rules otherwise. The court directed the issuance of TDS certificates in the petitioners' name, quashed the attachment order, and instructed the Assessing Officer not to act on previous demands. The petitioners were prohibited from transferring the property for six months to allow the department to seek civil court orders.

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Issues involved:
1. Validity of the sale deed dated 30.7.2002 in light of Income Tax Act proceedings against respondent no.5.
2. Issuance of TDS certificate in the name of the petitioners.

Issue 1: Validity of the sale deed dated 30.7.2002:
The petitioners claimed they purchased a property from respondent no.5, who had pending Income Tax Act proceedings. The order of attachment was lifted before the sale, but later reinstated. Respondent no.5 had a loan from respondent no.1 secured by a mortgage and leave and license agreement. Despite the sale, respondent no.1 continued issuing TDS certificates to respondent no.5. The assessing officer declared the sale deed null and void, invoking Section 281 of the Income Tax Act. The court referred to precedent where transfers to defraud revenue require civil court action. The court held the assessing officer's order as void, maintaining the petitioners' ownership until a civil court rules otherwise.

Issue 2: Issuance of TDS certificate in the name of the petitioners:
The petitioners argued for TDS certificates in their name as property owners, but respondent no.1 continued issuing them to respondent no.5. The court found the sale valid and directed issuance of TDS certificates to the petitioners. The demand on the petitioners for not producing TDS certificates was deemed unjustified. The court ordered rectification of the TDS certificate in favor of the petitioners. The court also quashed the attachment order and directed the Assessing Officer not to act on previous demand notices. The petitioners were restricted from transferring the property for six months to allow the department to seek appropriate civil court orders.

This judgment clarifies the legal status of the property sale, emphasizing the need for civil court action to declare transfers fraudulent. It also highlights the obligation to issue TDS certificates to property owners and the consequences of unjustified demands by tax authorities. The court's decision protects the petitioners' ownership rights and provides guidance on rectification of legal documents to reflect property ownership accurately.

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