High Court sets aside Income Tax Act order, emphasizing due process and jurisdictional limitations.

The High Court set aside the order under Section 281 of the Income Tax Act, 1961, declaring the transfer void, citing jurisdictional limitations outlined in a Supreme Court precedent and a previous decision by a co-ordinate bench. The Court emphasized the importance of due process and adherence to natural justice principles, indicating that the Respondents could pursue the matter through proper procedures while upholding legal standards and fairness.

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Issues:
Challenge to order under Section 281 of the Income Tax Act, 1961.

Analysis:
The Petitioner challenged the order dated 27th June, 2007, passed by Respondent No. 2 under Section 281 of the Income Tax Act, 1961. The Petitioner claimed to have purchased a property comprising land and a farmhouse, with Vendor No. 1 transferring the land and Vendor No. 2 transferring the farmhouse. The Respondent alleged that a charge was created on the property during the assessment proceedings against the assessee, rendering the transfer void under Section 281(1) of the Act. The section states that any charge or transfer made during the pendency of proceedings shall be void unless made for adequate consideration or with the permission of the Assessing Officer.

The Petitioner contended that the impugned order was contrary to the Supreme Court judgment in Tax Recovery Officer v. Gangadhar Vishwanath Ranade (1998), where it was held that the Tax Recovery Officer's jurisdiction is limited to examining possession and not determining the validity of transfers under Section 281. A Division Bench of the Bombay High Court in a similar case also declared an order under Section 281 as void and without jurisdiction, emphasizing the need for due process and adherence to natural justice principles.

In light of the Supreme Court judgment and the previous decision of the co-ordinate bench, the High Court held that the impugned order declaring the transfer as void under Section 281 was without jurisdiction and set it aside. However, the Court clarified that the Respondents could proceed in the matter by following the due procedure, indicating that the matter should be handled in accordance with the law and principles of natural justice.

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