AI Drafter 
TaxTMI 
TaxTMI 
2014 (4) TMI 411
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....p; The petitioners purchased different units in a constructed building situated in Bilimora Nagarpalika known as Mazda Estate constructed by Mazda Estate and Finance Pvt. Ltd. ('Mazda' for short). The construction was completed in the year 1991 or 1992. The petitioners had booked their respective shops in the said building. Upon completion of the construction, the petitioners were put in possession of such shops in the year 1991-92. On 17th/18th May 1995, all the petitioners executed separate sale deeds with Mazda for purchase of respective units. Mazda had defaulted in making payment of income tax dues to the extent of Rs.19.88 lacs arising out of various assessment orders. The case of Mazda wa....
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....roperties under attachment to recover the dues of Mazda. Thereupon, the petitioners filed the present petition. Learned counsel Shri Bandish Soparkar for the petitioners submitted that in terms of section 281 of the Act, the TRO had no jurisdiction to declare the transaction as void. If at all, the department would have to file civil suit for such purpose which in the present case was not done. He further submitted that the petitioners had purchased the properties for adequate consideration without notice of the dues of the defaulter. The petitioners could never bring such facts to the notice of the TRO and avail of the proviso to section 281(1) of the Act since the petitioners were never heard before....
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....s order was passed without any notice to the petitioners. Section 281 of the Act provides certain transfers to be void. Subsection (1) thereof, which is relevant for our purpose, reads as under: "281 (1) Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of nay tax or any other sum payable by the assessee a....
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....uring the pendency of any proceedings under the Act or after completion thereof, the eventuality of such charge or transfer being declared void can be avoided provided one of the two conditions contained in the proviso is satisfied. Under such circumstances, the transferee can demonstrate that the transaction had taken place with the previous permission of the Assessing Officer or that the same was entered into for adequate consideration and without notice of pendency of such proceedings or without notice of such tax or other sum payable by the assessee. This element of the transaction being with adequate consideration and without notice would equally apply to the assessee as well as the transferee. In a given case, it may even be open f....
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....Act, it is clear that the Tax Recovery Officer is required to examine whether the possession of the third party is of a claimant in his own right or in trust for the assessee or on account of the assessee. If he comes to a conclusion that the transferee is in possession in his or her own right, he will have to raise the attachment. If the Department desires to have the transaction of transfer declared void under Section 281, the Department being in the position of a creditor, will have to file a suit for a declaration that the transaction of transfer is void under Section 281 of the Income-tax Act." Later on, once again, the issue came up for consideration before a Division Bench of the Bombay High Court in the case of Ms.Ruchi Mehta (su....