Benami and trust property may be attached for tax recovery without prior notice to the ostensible owner.

Property held benami or in trust for an income-tax defaulter is within the recovery reach of section 222 of the Income-tax Act, 1961 read with the Second Schedule, subject to the statutory claim procedure and any civil suit. The Schedule does not require prior notice to the ostensible owner or a separate pre-attachment enquiry; it provides for notice to the defaulter and a later investigation of objections under rule 11. A writ court should not interfere with attachment of a trade mark interest at that stage where title and transfer issues can be examined in the recovery proceedings.

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Issues: (i) Whether property standing in the name of a third party but held benami or in trust for the income-tax defaulter can be attached and sold under section 222 of the Income-tax Act, 1961 read with the Second Schedule. (ii) Whether a prior notice to the ostensible owner and a preliminary enquiry are required before attachment under the Second Schedule. (iii) Whether the attachment of the trade mark interest could be interfered with at the writ stage.

Issue (i): Whether property standing in the name of a third party but held benami or in trust for the income-tax defaulter can be attached and sold under section 222 of the Income-tax Act, 1961 read with the Second Schedule.

Analysis: Section 222 authorises recovery from the assessee by attachment and sale of movable and immovable property in accordance with the Second Schedule. Rule 4 permits realisation from the defaulter's property, while rule 10 exempts only property protected by the Code of Civil Procedure. Rule 11 contemplates investigation of claims and objections and expressly addresses property in the possession of the defaulter or of some person in trust for him. The scheme of the Schedule therefore shows that benami property, or property held in trust for the defaulter, is within the reach of recovery proceedings, subject to the statutory claim procedure and any civil suit.

Conclusion: Yes. Such property is attachable and saleable, and the contention of the petitioners fails.

Issue (ii): Whether a prior notice to the ostensible owner and a preliminary enquiry are required before attachment under the Second Schedule.

Analysis: The Schedule requires notice to the defaulter and provides for a later claim enquiry under rule 11. It does not prescribe an anterior enquiry to the person in whose name the property stands. The attachment is a provisional step, subject to the claim proceedings and the right to institute a civil suit. Requiring a separate pre-attachment enquiry would duplicate the statutory process and is not supported by the language or structure of the Schedule.

Conclusion: No. No prior notice to the ostensible owner or preliminary enquiry is required before attachment.

Issue (iii): Whether the attachment of the trade mark interest could be interfered with at the writ stage.

Analysis: The petitioner relied on an assignment and registration of the trade mark in his name, but those matters were not before the Tax Recovery Officer. The statutory framework allows the officer to examine the claim and the date of the transfer, including whether the transfer pre-dated the attachment or was hit by the recovery rules. The writ court therefore declined to interfere at that stage and left the claimant to establish his title before the Tax Recovery Officer.

Conclusion: No. Interference was refused and the claim was left to be worked out in the statutory proceedings.

Final Conclusion: The recovery machinery under the Income-tax Act was held to extend to benami or trust property of the defaulter, and the challenge to attachment on the ground of want of prior notice or preliminary enquiry was rejected.

Ratio Decidendi: Where the recovery statute authorises attachment and sale of the defaulter's property and provides a specific post-attachment claim procedure, property held benami or in trust for the defaulter may be attached without a separate pre-attachment enquiry to the ostensible owner.

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