TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 418
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.... half storeyed residential building and later by a sale deed dated September 5, 1979, he transferred the suit property to Mrs. Rama Devi Khaitan. After Mrs. Rama Devi Khaitan's death on February 25, 1994 her husband, Mr. D.D. Khaitan became the absolute and exclusive owner of the said property as her heir. By conveyance deed dated September 26, 1997, the leasehold property was converted into freehold in Mr. D.D. Khaitan's name. After the death of Mr. D.D. Khaitan on March 5, 1999, by his will dated April 12, 1996, the sixth respondent became the sole owner of the property. Mr D.D. Khaitan was survived by his daughter Mrs. Indu Narain and his son the sixth respondent, Mr. Jagrit Khaitan. The daughter Mrs. Indu Narain relinquished all her rights in the property by relinquishment deed, dated December 20, 2005; the sixth respondent consequently became the exclusive owner of the suit property. 3. The sixth respondent, on February 1, 2006 entered into an agreement to sell the suit property, with M/s. BDR Builders and Developers Pvt. Ltd. (through its director, Mr. Rajesh Gupta) for Rs. 3,00,00,000 (rupees three crores). The agreement to sell dated February 1, 2006 stated that th....
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....demand and warrant of attachment of the said property. The petitioners were not provided the documents requested. They accordingly, on June 24, 2008 filed an application under the Right to Information Act (RTI) before the Trade and Tax Department. The petitioners received some information/documents in response to RTI application filed by them. Amongst the documents provided there was an assessment order dated March 19, 2001 in which demand of tax, interest and penalty was raised. The proprietorship M/s. Jagannath Dudadhar filed an appeal before the Appellate Tribunal and then preferred a writ before this court, which was dismissed; a special leave petition was also dismissed. One of the documents the petitioners received from the Department of Trade and Tax was the copy of the warrant of attachment dated March 9, 2004. From the record it appeared that the warrant of attachment had been served upon the sixth respondent's driver. On August 27, 2008 the petitioners filed their reply to the show-cause notice (SCN) resisting the demand and the attachment. They received no response to their reply to the SCN and therefore the petitioners sent a reminder to respondent No. 1 on November....
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....not disclose any encumbrance/attachment of the suit property and therefore it was duly registered in their favour. The petitioners further submitted that they applied for a home loan from the bank and before the loan amount of Rs. 2,00,00,000 (rupees two crores) was sanctioned the bank carried out due diligence of the said property. The bank would not grant a home loan on a property with encumbrances and therefore upon sanction of their loan, the petitioners believed that the said property had a clear title. The petitioners submitted that stipulations in the sale deed assuring them of a clear title combined with the registration of the property in their name at the Sub-Registrar's office led them to believe that the property was free of all encumbrances; even the bank believed the property to be free from all encumbrances and therefore granted the petitioners a home loan. 8. It is further argued by the petitioners' counsel that they were shocked and surprised on receiving the SCN dated April 30, 2008. It was through this SCN that they, for the first time became aware that the property was sought to be attached by the Department of Trade and Taxes by an order dated March 9,....
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....on notice be set aside. 11. The concerned respondents, i.e., the tax authorities urge that they had followed the due process of law in regard to the attachment of property by issuing notice of demand which was in turn followed by the writ of attachment. It was contended that the notices of demand and attachment were served not only upon the defaulter (the sixth respondent's) representative but the latter even had the knowledge of it. In this regard, the said respondent relied upon the fact that on March 5, 2004, the defaulter's bank account, i.e., with the Punjab National Bank (PNB), Shivaji Park as well as with the State Bank of Mysore, Punjabi Bagh, were attached. It relies upon the notices issued to the banks in this regard. Further, the letter written by the defaulter-M/s. Jagannath Dudadhar, of which the sixth respondent was the sole proprietor, to the Sales Tax Commissioner dated March 19, 2004, evidencing deposit of considerable sums of money, is relied upon. The defaulter/sixth respondent had tendered a sum of Rs. 2,06,69,711 through pay order and post-dated cheques, while requesting for release of bank account and the properties. It is urged that consequent to thi....
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....public auction. 5. That in the instant case it is pertinent to add that an entry pertaining to attachment of property bearing No. C-160, Defence Colony, New Delhi has been found recorded in a register. 6. That the above cited entry in a register does not bear either the date of its recording or signature of any of the officer/official of the office of S.R.-V. From the perusal of the said entry it cannot be ascertained as to how, when and by whom the said entry has been made. 7. That the copy of warrant of attachment dated March 9, 2004 is not available in the office of S. R.-V and there is no other record of its proper service in the office of S.R.-V, available in the office of the answering respondent. 8. That from the above averments cited above it may be concluded that: (a) It cannot be stated in unequivocal terms that warrant of attachment dated March 9, 2004 was properly served upon the office of S.R.-V. (b) It cannot also be conclusively stated as to if served, on which date it was served. 9. It is further respectfully submitted that admittedly no further steps were undertaken by the Sales Tax Department until November 8, 2007 when the Department indicated vide its afo....
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....004, and handed over to the reader Smt. Madhubala. (3) That Smt. Madhubala then reader made an entry in attachment register. (4) That at present none of the official can verify the seal/stamp affixed on the receipt of the attachment order. (5) That the said attachment register was not in use after April, 2004 since the latest entry made in the register is dated April 2004, and there is no further entry in this register. (6) That the alleged register was misplaced some time around April 2004. (7) That the registering officer registered the instruments bearing numbers 6265 and 6266 dated April 26, 2006, after checking the list of the disputed properties available with him and as per the statement no order of attachment was available in the record of this office. Moreover, the executants of the instruments have declared in both the instruments that the said property is free from all kinds of encumbrances, such as prior sale, gift, mortgage, disputes, litigation, acquisition, requisition attachment in the decree of any court, lien court injunction, lease, loan, surety, security, stay order, notices, claims, demands, will, trust, exchange, prior agreement to sell, etc." 16. It is ....
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....under section 114 of the Evidence Act. In this background of circumstances, the question is whether the court can accept the argument of the Revenue/tax authorities in this case that the petitioner is not an innocent purchaser, and is deemed to have constructive notice of the encumbrance created by the attachment, which consequently defeats and voids the sale in his favour. 18. To appreciate the submission, it would be essential to notice the relevant statutory provisions. Section 100 of the Transfer of Property Act, 1882, defines "charge": "Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the h....
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.... as against any person who was a party to or otherwise cognizant of the fraud." 19. The relevant provisions of the Delhi Sales Tax Act are as follows: "68. Transfers during pendency of proceedings void.-Where, during the pendency of any proceedings under this Act, any person creates a charge on or parts with the possession by way of sale, mortgage, gift or 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 any tax or any other sum payable by such person as a result of the completion of the said proceedings. ... 70. Application of the provisions of the Delhi Land Reforms Act, 1954 for purposes of recovery of sales tax recoverable as arrears of land revenue.-For the purposes of recovery of any amount recoverable as arrears of land revenue under this Act, the provisions of the Delhi Land Reforms Act, 1954 (Delhi Act 8 of 1954), as to recovery of arrears of land revenue shall, notwithstanding anything contained in the Act or in any other enactment, be deemed to be in force throughout Delhi and the provisions of the Revenue Recovery Act, 1890 (1 of 1890), shal....
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....prior statutory encumbrance, created in favour of the municipality. The court repelled the municipality's argument, holding that constructive notice could not be inferred in the absence of any actual notification about the prior charge or liability, on the property. This decision was discussed, and its ratio applied in State of Karnataka v. Shreyas Papers P. Ltd. [2006] 144 STC 331 (SC), by the Supreme Court, where it held as follows (pages 339-341 in 144 STC): "Ahmedabad Municipal Corporation was a case where a person was in arrears of property tax, due under the Bombay Provincial Municipal Corporation Act, 1949. Consequently, the Municipal Corporation created a charge over the property of the defaulter. However, the property was sold in execution of a mortgage decree. When the Municipal Corporation purported to exercise their charge over the property, the purchaser in court auction filed a suit for a declaration that he was the owner of the property and that the arrears of municipal taxes due by the transferor were not recoverable from him by proceeding against the property purchased in auction. In the appeal before this court, the Municipal Corporation's main argument w....
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.... and the Corporation. Thus, it is evident that the first respondent had no actual notice of the charge prior to the transfer. As to whether the first respondent had constructive notice of the charge, no substantive argument on this issue was made, either before the High Court or at any rate before us. Hence, we cannot hold that the first appellant had constructive notice of the charge. In these circumstances, we are of the view that the first respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent charge on the property. This would, therefore, attract the principle laid down by this court in Ahmedabad Municipal Corporation case AIR 1971 SC 1201, which is also embodied in the proviso to section 100 of the Transfer of Property Act. Thus, the property in the hands of the first respondent was free of the charge and it is not open to the appellants to enforce the liabilities of the defaulting company in this manner against the first respondent." 22. The preceding discussion would show that the warrant of attachment in this case, was not appropriately published in accordance with section 22 of the Punjab Revenue Act, whic....