Section 281(1) protection for bona fide flat purchasers defeated void transfer declaration over attached property.

Flats purchased by the petitioners were held to remain protected under section 281(1) of the Income-tax Act because the registered sale deeds were executed before the warrant of attachment and before the assessee could be treated as in default for recovery purposes. Applying the statutory scheme under section 281(1) and the Second Schedule, the Court treated the proviso as preserving bona fide transferees who buy for adequate consideration and outside the attachment's reach. On the facts, there was no material to displace consideration or bona fides, so the declaration that the transfers were void could not stand insofar as it affected the petitioners' flats.

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Issues: Whether the petitioners' purchase of flats in the attached property was protected against declaration of voidness under section 281(1) of the Income-tax Act, 1961, and whether the order declaring the transfers void could stand as against the petitioners' properties.

Analysis: The transfer in question was executed and registered before the warrant of attachment and before the stage at which the assessee could be treated as being in default upon the drawing up of the recovery certificate. The Court applied the statutory scheme under section 281(1) and the Second Schedule, as explained in the earlier binding decision relied upon, to hold that transfers made during pendency of proceedings are not automatically void; the proviso protects transferees who purchased for adequate consideration and without the transfer being hit by attachment. On the facts, the petitioners had registered sale deeds well before the attachment and there was no material to show absence of consideration or any basis to deny bona fides.

Conclusion: The petitioners were entitled to the protection under section 281(1), and the declaration that their transfers were void could not be sustained.

Final Conclusion: The impugned declaration was set aside insofar as it affected the petitioners' flats, and their title was protected from the revenue's voidness finding.

Ratio Decidendi: A transfer made for adequate consideration before attachment, and before the transferee can be deprived of the statutory protection under section 281(1), cannot be declared void against a bona fide third-party purchaser.

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