TaxTMI 
TaxTMI 
2011 (2) TMI 931
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.... application seeking a copy of order. Since the petitioner had purchased the property which was free from all encumbrances, the same could not be attached under section 222 of the Act. Moreover, the order was passed behind the back of the petitioner without affording any opportunity of hearing. 3. In the reply filed on behalf of the Income-tax Department, stand taken is that the sale in favour of the petitioner was a sham transaction to defraud the revenue. The property in dispute belonged to respondent No. 4 against whom outstanding demand since 1995 was pending for the dues from the year 1985-86 to assessment year 1992-93 as follows :- S. No. A. year Status Income Tax Interest Penalty Total 1. 85-86 Indl. 673575 139= 115734 2000 1826815 215= 1035506 2. 86-87 -do- 19010 139= 6888 2000 34742 215= 6844 3. 88-89 -do- 1906670 139= 2454748 2000 6913496 215= 2550078 4. 89-90 -do- 1155388 234A=1825573 ....
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....it to get such transaction annulled. Moreover, in the judgment of the Hon'ble Supreme Court, unamended provision of section 281 was interpreted since dispute involved was for period prior to amendment. In 1975, by amendment, the words "with the intention to defraud the revenue" have been deleted. In view of the said amendment, no suit was necessary and statutory declaration in section 281 could be invoked. 7. Thus, the question for consideration is whether the department could proceed against the property of the assessee in default ignoring a transfer thereof during pendency of any proceedings without filing a suit. 8. Sections 222 and 281 of the Act are as under :- "222. (1) When an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may draw up under his signature a statement in the prescribed form specifying the amount of arrears due from the assessee (such statement being hereafter in this Chapter and in the Second Schedule referred to as "certificate") and shall proceed to recover from such assessee the amount specified in the certificate by one or more of the modes mentioned below, in accordance with the rules lai....
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....and the assets charged or transferred exceed ten thousand rupees in value. Explanation.-In this section, "assets" means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee." 9. The Rules laid down in the Second Schedule to the Act contain procedure for recovery of tax by way of attachment and sale of the property. On transfer of property for recovery of dues, title to the property gets vested in transferee under Rule 6. Rule 11 provides that if any objection is raised to the attachment and sale, the same can be decided by the Tax Recovery Officer. Rule 11(6) provides that if the Tax Recovery Officer decides the objection by which an objector is aggrieved, such objector can file a suit to establish his case and subject to result of such suit, the order of the Tax Recovery Officer is conclusive. Rule 11 is reproduced below :- "11. (1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attac....
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....led to issue a certificate and recover the amount by way of attachment and sale of assessee's property. If such property is transferred during the pendency of proceedings, the same does not affect the recovery from the said property. The questions relating to validity of attachment and sale can be decided by the Tax Recovery Officer. Of course, such decision is final only subject to result of suit, if any, preferred by the objector. 11. Section 222 clearly provides that where assessee is in default, the Tax Recovery Officer (TRO) can issue the requisite certificate and proceed to recover the amount by attachment and sale or other modes specified therein. Section 281 statutorily declares creation of any charge or parting of possession to be void against any claim of tax except where such charge or transfer is for consideration without notice of pendency of proceedings or with the prior permission of the Assessing Officer. It is not the case of the petitioner that any previous permission of Assessing Officer was taken for the transfer. Question whether transfer was for adequate consideration and without notice, is a matter which is yet to be decided. According to the stand of the ....