TaxTMI 
TaxTMI 
2018 (4) TMI 1135
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty as void under Rule 16(2) of Second Schedule of the Income Tax Act, came to be rejected as well as the consequential order of the second respondent, dated 09.08.2011, wherein the second respondent communicated that the transfer of property by way of sale is declared as null and void as per the provisions of Income Tax Act. 2. The writ petition, after contest, came to be allowed partly and observed that the right of the Department to proceed against the property on the basis of the attachment dated 06.01.1988 is protected with liberty to the writ petitioner to move the Tax Recovery Officer under Rule 11 seeking adjudication of his claim. 3. The writ petitioner/appellant in W.A.(MD)No.1186 of 2017 as well as the Income Tax Department/Revenue/the appellant in W.A.(MD)No.1150 of 2017, aggrieved by the said order, had filed these writ appeals. 4. The facts leading to the filing of these writ appeals briefly narrated and necessary for the disposal, are as follows: 4.1. The appellant/writ petitioner, in the affidavit filed in support of the writ petition in W.P.(MD)No.10885 of 2011, would aver, among other things, that it is a private limited company engaged in real estate business ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... attachment, when an attempt to sell the property, cannot be sustained in law. 4.5. It is also the stand of the appellant/writ petitioner that the tax payable through the attachment notice dated 18.12.1987 was intimated belatedly on 28.09.2000 and vide proceedings, dated 09.08.2011, the said official has declared the sale effected on 18.06.2008 in favour of the appellant/writ petitioner as null and void and he has no jurisdiction to declare so for the reason that it is only a civil Court having jurisdiction to do so. The appellant/writ petitioner, after purchase, also changed the revenue records in their favour and continued to be remained in possession of the sale and therefore, prayed for quashment of the impugned notice. 4.6. The second respondent had filed the counter affidavit contending among other things that before passing the impugned order, the appellant/writ petitioner was given an opportunity of hearing and the last assessment order was passed on 20.10.2009. As per Rule 68-B(1) of II Schedule of the Income Tax Act, no sale of immovable property shall be made under the said Act after the expiry of three years from the end of the financial year, in which, the order whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he appellant/writ petitioner, upon making his submissions, has placed reliance upon the following decisions: (i) Tax Recovery Officer Vs. Gangadhar Viswanath Ranade (decd.,) reported in AIR 199 SC 427; (ii) Smt. Shanty Devil. Singh and another Vs. Tax Recovery Officer and others reported in AIR 1991 SC 1880; (iii) Chaturbhuj and another Vs. Recovery Officer and another reported in MANU/MAHARASHTRA/0227/1991; (iv) A.R.C.I. Ltd., Vs. Commissioner of Income-Tax, Range & Others reported in 2012(1) D.R.T.C. 361 (Gujarat) (DB); 7. Per contra, Mrs.S.Srimathy, learned Counsel appearing for the respondents/revenue in W.A.(MD)No.1186 of 2017 and the appellants in W.A.(MD)No.1150 of 2017 made the following submissions: 7.1. Under Section 222 of the Income Tax Act 1961, if 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 and shall proceed to recover from such assessee the amount specified in the certificate by one or more of the modes mentioned in accordance with the rules laid down in the Second Sche....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Income Tax Act: "Certificate to Tax Recovery Officer. 222: ?[(1) When an assessee is in default or is deemed to be in default in 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 laid down in the Second Schedule - ] (a) attachment and sale of the assessee's movable property; (b) attachment and sale of the assessee's immovable property; (c) arrest of the assessee and his detention in prison; (d) appointing a receiver for the management of the assessee's movable and immovable properties. [Explanation ? For the purposes of this sub-section, the assessee's movable or immovable property shall include any property which has been transferred, directly or indirectly on or after the 1st day of June, 1973, by the assessee to his spouse or minor child or son's wife or son's minor child, otherwise than for adequate consideratio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he whole of the money when it is equal to or less than that amount. (ii)A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the assessee at his last address known to the [Assessing] Officer [or Tax Recovery Officer], and in the case of a joint account to all the joint holders at their last addresses known to the [Assessing] Officer [or Tax Recovery Officer]. (iv)Save as otherwise provided in this sub- section, every person to whom a notice is issued under this sub- section, shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. The [Assessing] Officer [or Tax Recovery Officer] may apply to the court in whose custody there is money belonging to the assessee for payment to him of the entire amount of such money, or, if it is more than the tax due, an amount sufficient to discharge the tax. 5. The [Assessing] Officer [or Tax Recovery Officer] may, if so authorised by the [[Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] by general or special order, recover any arrears of tax due from an assessee by distraint and sale of his movable property in the manner laid down in the Third Schedule.] Recovery of tax in pursuance of agreements with foreign countries. "228A. (1) Where an agreement is entered into by the Central Government with the Government of any country outside India for recovery of income-tax under this Act and the corresponding law in force in that country and the Government of that country or any authority under that Government which is specified in this behalf in such agreement sends to the Board a certificate for the recovery of any tax due under such corresponding law from a person having any property in India, the Board may forward ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pertaining to the above said property. 13. The legal representatives of the original assessee viz., P.Jeyappan in respect of the assessment made under Section 143(3) read with Section 147 of the Income Tax Act pertaining to the assessment years 1978-1979 to 1983- 1985, filed appeals before the Commissioner of Income Tax (Appeals) and vide orders, dated 12.12.1988, the said Authority had confirmed the majority of the additions and remanded back to the same Assessing Officer in respect of some points for reconsideration. The legal representatives of the assessee filed Second Appeal before the Income Tax Appellate Tribunal and the Income Tax Appellate Tribunal, vide order dated 23.05.1995 in ITA Nos.283, 626 and 628/Mds/89, had set aside the assessment with direction to allow the legal representatives of the assessee to inspect all the seized documents and to re-do the assessment after giving reasonable opportunity and accordingly, fresh adjudication was done and after doing so, the Income Tax Officer, Ward I(2), Tuticorin, has adjusted the excess payments towards interest charged under Section 220(2) of the said Act and also communicated that the penalty proceedings under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eed dated 18.06.2008 and since it has been sold after service of the demand notice, it has to be declared as null and void as per the provisions of the Income Tax Act. 18. In Tax Recovery Officer Vs. Gangadhar Viswanath Ranade (Decd.,) reported in AIR 1999 SC 427, the scope of Section 281 of the Income Tax Act and Rule 11 of the Second Schedule came up for consideration. The question arose for consideration before the Honourable Supreme Court of India is whether in a proceedings under Rule 11 of the Second Schedule of the Income Tax, the Tax Recovery Officer can declare a transfer as void under Section 281. The Honourable Supreme Court of India has noted that Rule 11 of the Second Schedule is analogous to those of Order 21, Rules 58 to 61 and 63 of the Code of Civil Procedure, 1908, as they stood prior to the amendment of the Civil Procedure Code in the year 1976. 19. In the above said decision, the Honourable Supreme Court of India has observed as follows: "The Tax Recovery Officer, therefore, has to examine who is in possession of the property and in what capacity. He can only attach property in the possession of the assessee in his own right, or in the possession of a tenant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t petition was filed by the third party and the suit has to be filed by the revenue to get the transfer declared as void. 24. The learned Counsel appearing for the revenue/appellants in W.A.(MD)No.1150 of 2017 placed reliance upon the decision rendered by a single Bench of Bombay High Court in Inayat Hussain Fakhruddin and another Vs. Union of India and another reported in 1979 Maharashtra L.J. 514. The Single Bench of Bombay High Court in paragraph No.16 has observed that ?As I pointed out, the heart of Section 281 is the intention to defraud and if the intention to defraud the Revenue is absent or is not claimed to be present, Section 281 cannot be invoked.? 25. The Single Bench of Bombay High Court has also considered the Rules 2, 16, 48 and 51 of the Second Schedule of the Income Tax Act and observed that ?as per sub-rule (2) of Rule 16, all transfer of immovable properties void as against claims enforceable under the attachment. ...... No question of bona fide transfer with value or any other question as contemplated in Section 281 or an intention to defraud the Revenue arises at all and by the force of attachment itself the property becomes open to be taken and sold for sat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Code of Civil Procedure, the order of attachment as well as the order raising the attachment by removal, determination or removal passed under Rule 55 shall be communicated to the Registering Officer within the local limits whose jurisdiction the whole or any part of the immovable property comprised in such order is situated. 31. Now, coming to the facts of the case, the order of attachment was made on 18.12.1987 and as per the additional affidavit of the second appellant, dated 12.12.2011, filed in W.P.(MD)No.10885 of 2011, the intimation was sent to the Joint Sub-Registrar, Tuticorin, on 28.09.2007 and it was acknowledged by him on 03.10.2007 and notice for settling a sale proclamation under Section 53 of the Second Schedule of the Income Tax Act was served on the legal heirs of the original assessee as such the sale of the property to the writ petitioner was to be held as null and void on 09.08.2011 which was the subject matter of challenge in the writ petition. 32. Admittedly, the entry relating to attachment is not reflected in the encumbrance certificates issued by the Joint Sub-Registrar, Tuticorin and the stand taken by the writ petitioner in W.P.(MD)No.10885 of 201....