Bona fide purchaser protection bars encumbrance on property bought before assessment for the dealer's tax dues.

Revenue cannot direct creation of an encumbrance over property purchased by a bona fide third-party purchaser before the dealer's assessment order, particularly where the properties were never attached and were free from encumbrance at the time of sale. The petitioner was unconnected with the dealer and had acquired the properties through earlier sale deeds, so the defaulter's tax liability could not be enforced against those assets. Relying on prior decisions protecting purchasers for value without notice, the court held the recovery action against the petitioner's properties was unsustainable and set aside the impugned communication.

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Issues: Whether the revenue could direct creation of encumbrance over properties purchased by the petitioner prior to the assessment order against the dealer, where the properties had never been attached and the petitioner was a third-party purchaser.

Analysis: The properties had been purchased by the petitioner through sale deeds executed much before the assessment order fastening liability on the dealer. The petitioner was unconnected with the dealer, the properties were not shown to have been attached at any point of time, and they were free from encumbrance at the time of purchase. In these circumstances, the direction to create encumbrance for recovery of the dealer's tax dues against the petitioner's properties was unsustainable. The view was reinforced by prior decisions protecting bona fide purchasers for value without notice from enforcement of the defaulter's tax liability against the purchased property.

Conclusion: The impugned communication directing creation of encumbrance on the petitioner's properties was illegal and was set aside.

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