2016 (9) TMI 153 - HC - Income Tax

Court orders investigation into objection to attachment order, requires response in 8 weeks.

The Court directs the first respondent to investigate the petitioner's objection to the attachment order, dated 26.07.2016, in accordance with Rule 11 of ... Attachment under Rule 48 of the Second Schedule - recovery from such assessee - defaulter as defined under Rule 1(b) of the Second Schedule - mode of recovery under Rule 4 of the Second Schedule - investigation of objection under Rule 11 of the Second Schedule - personal hearing before Tax Recovery Officer - appeal to the Commissioner under Rule 86 of the Second ScheduleInvestigation of objection under Rule 11 of the Second Schedule - personal hearing before Tax Recovery Officer - Obligation of the Tax Recovery Officer to investigate the petitioner's objection to attachment and afford a personal hearing. - HELD THAT: - The Court held that where an objection to attachment is raised, Rule 11 requires the Tax Recovery Officer to investigate the claim or objection. The first respondent is therefore obliged to take note of the representation dated 26.07.2016, afford the petitioner an opportunity of personal hearing, investigate the objection on merits and pass orders in accordance with law. The Court directed that the investigation and decision be completed within eight weeks from receipt of a copy of the order, and observed that the petitioner must cooperate and produce any documents called for during the investigation. [Paras 8, 10]The Tax Recovery Officer must investigate the petitioner's representation dated 26.07.2016, afford a personal hearing and decide the objection on merits within eight weeks.Attachment under Rule 48 of the Second Schedule - defaulter as defined under Rule 1(b) of the Second Schedule - mode of recovery under Rule 4 of the Second Schedule - Question whether the subject-property (claimed as HUF property) is liable to be attached for the firm's tax arrears has not been adjudicated on merits and is to be examined afresh by the Tax Recovery Officer. - HELD THAT: - The Court did not decide the substantive contention that the subject-property, said to belong to the HUF of which the petitioner is Karta, cannot be attached for the dues of the partnership firm. Instead, having noted the petitioner's contention and representation (including reference to property of another partner), the Court required the Tax Recovery Officer to investigate those claims under Rule 11 and determine the question in the course of that investigation. The merits of whether the property is chargeable to recovery for the firm's arrears are therefore remitted for fresh consideration in accordance with law. [Paras 3, 6, 8, 9, 10]The substantive question of attachability of the subject-property (claimed as HUF property) is remitted to the Tax Recovery Officer for fresh consideration and decision after investigation and hearing.Final Conclusion: Writ petition disposed by directing the Tax Recovery Officer to investigate the petitioner's representation dated 26.07.2016, afford a personal hearing and decide the objection on merits within eight weeks; the question whether the subject-property is liable to attachment is remitted for fresh consideration in accordance with law; no order as to costs. Issues:Challenge to order of attachment under Rule 48 of the Second Schedule to the Income Tax Act, 1961 - Property owned by Hindu Undivided Family (HUF) - Interpretation of Section 222 of the Act - Definition of defaulter under Rule 1 (b) of the Second Schedule - Procedure under Rule 11 of the Rules for Tax Recovery Officer to investigate objections - Appeal process under Rule 86 of the Rules.Analysis:The writ petition challenges the attachment order passed by the first respondent under Rule 48 of the Second Schedule to the Income Tax Act, 1961, attaching a property owned by a Hindu Undivided Family (HUF). The petitioner, a partner of the firm with tax arrears, argues that as the property belongs to the HUF, it cannot be attached for the firm's dues. The petitioner invokes Section 222 of the Act, emphasizing that recovery can only be made from the assessee, not the owner of the attached property, who is the HUF in this case.The petitioner's counsel highlights the definition of 'defaulter' under Rule 1 (b) of the Second Schedule, emphasizing that recovery can only be initiated against the assessee mentioned in the Certificate. Referring to Rule 4 of the Rules, it is argued that recovery can be done through attachment of the defaulter's properties, movable and immovable, and other specified measures. The counsel contends that the attachment order should be quashed based on these legal provisions.The petitioner submitted a representation pointing out the ownership of certain properties by another partner of the firm who is liable to pay the tax. The Senior Standing Counsel for the respondents argues that the Rules provide a procedure for the Tax Recovery Officer to investigate such claims or objections. Rule 11 empowers the Officer to investigate objections to attachment or sale of property, with provision for appeal to the Commissioner under Rule 86 against the Officer's decisions.The Court directs the first respondent to investigate the petitioner's objection to the attachment order, dated 26.07.2016, in accordance with Rule 11 of the Rules. The Officer is instructed to consider the petitioner's objection and investigate the property mentioned in the representation, belonging to another partner of the firm. The first respondent is required to pass orders within eight weeks, affording the petitioner a personal hearing and following due process. The petitioner is instructed to cooperate in the investigation and provide any requested details or documents. No costs are awarded in this disposition.