TaxTMI 
TaxTMI 
2018 (3) TMI 1931
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....considered by the Tax Recovery Officer, the petitioners herein filed W.P(MD)Nos.19829 to 19840 of 2016 before this Court. This Court by order dated 18.10.2016 directed the Tax Recovery Officer II, Madurai to conduct enquiry in accordance with Rule 11 of the Second Schedule to the Income Tax Act. Pursuant to the aforesaid direction, the orders impugned in these writ petitions came to be passed. The respondent not only declined to vacate the attachment earlier made but also declared the sale transactions effected by the said Rajendran in their favour as null and void. 2.The learned counsel appearing for the petitioners contended that the issue on hand is no longer res integra. He drew the attention of this Court to Section 281 of the Income Tax Act, 1961. This Section was considered by the Hon'ble Supreme Court in the decision reported in (1998) 6 SCC 658 (Tax Recovery Officer II, Sadar, Nagpur vs. Gangadhar Vishwanath Ranade). It was held therein that the Tax Recovery Officer will not have the jurisdiction to declare the transaction that according to him falls under Section 281 of Income Tax Act as null and void. The Tax Recovery Officer has to examine who is in possession of t....
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....e respondent under Rule 11(6) of the Second Schedule to the Income Tax should be quashed. 5.Per contra, the learned standing counsel appearing for the respondent submitted that Rules 11, 16, 48 and 51 of the second schedule to the Income Tax Act must be read together and that the orders impugned in these writ petitions ought to be sustained. She would also point out Section 281 of the Income Tax Act and Rule 11 and 16 of the second schedule to the Income Tax Act operate in distinct fields. 6.This Court carefully considered the rival contentions. Two facts are not in dispute. The vendor of the writ petitioners herein is a defaulter- assessee and that he alienated the subject properties only after receipt of notice under Rule 2 of the Second Schedule to the Income Tax Act. Secondly, the orders of attachment were issued by the respondent only after such purchase by the writ petitioners herein. 7.Section 281(1) of the Income Tax Act, 1961 reads as follows:- 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 posses....
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....ail Singh vs. Union of India] observed as follows:- "12.We, may, however, notice the contention raised on behalf of the petitioner that in TRO vs. Gangadhar Vishwanath Ranade (Dead) (supra), the Hon'ble Supreme Court held that the TRO cannot declare any transfer by the assessee in favour of a third party to be void. The TRO can only examine who is in possession and in what capacity. He can attach property in possession of the assesee in his own right or in possession of a tenant or third party on behalf of or for the benefit of the assessee. The contention is no doubt borne out from the judgment but it is explained on behalf of the Revenue that even if declaration by the TRO that the transfer was void is ignored, the statutory declaration of the transaction being void cannot be ignored. No doubt, it may be open to the Revenue to file a suit to seek such a declaration but the Revenue can also rely upon statutory declaration under S.281 though the TRO cannot grant such a declaration. We may also notice the statutory change in s.281 on account of amendment vide Taxation Laws (Amendment) Act, 1875 w.e.f 1st October 1975. In the amended provision, the words, with the intention to ....
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....h the notice to pay the arrears, issued under this Schedule, was served upon the defaulter . 10.There cannot be any doubt that a sale is a contractual transaction. For a contract to be valid, it must be made by the free consent of parties competent to contract. Section 11 of the Contract Act, 1872 reads as under:- "11.Who are competent to contract- Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject." 11.Thus, there are three ingredients in section 11 of the Contract Act 1872. This Court is concerned with the third ingredient. The person executing the contract must not be disqualified from contracting by any law to which he is subject. In Pollack & Mulla on the Indian Contract & Specific Relief Acts (15th Edition by R.Yashod Vardhan and Chitra Narayan), the following commentary is found : "Persons Otherwise Disqualified by Law : Certain classes of persons may be disqualified under certain enactments from entering into contracts in respect of matters specified in those enactments. A person in Oudh declared as 'dis....
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....e petitioners laid considerable emphasis on the fact that on the date when attachment was made, the assessee ceased to have any interest in the subject matter and that the writ petitioners herein were absolute owners of the properties in question. He would therefore call upon this Court to be guided by the ratio set out in the Ranade case (cited supra). Though on the face of it the submission of the learned counsel appearing for the petitioners is formidable, on a closer scrutiny, the legal position is totally otherwise. As per Rule 11(3) of the second schedule, the objector or claimant must adduce evidence to show that in the case of immovable property on the date of the service of the notice issued under this schedule to pay arrears, he had some interest in or was possessed of the property in question. The notice referred to in Rule 11(3)(a) is obviously the notice under Rule 2. It cannot be disputed that on the said date the present writ petitioners did not have any interest in the property in question and they were also not in possession of it. 14.Rule 11(3) of the Second Schedule to the Income Tax Act deals with two categories. One is immovable property and the other is movab....
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....unsel appearing for the petitioners would further contend that Rule 16(2) of second schedule clearly states that where the attachment was made under the schedule, any alienation that takes place thereafter alone shall be void. But then Rule 16(2) cannot be read in isolation. It is not a standalone provision. It must be read together and in conjuction with Rule 51. Hence, the submission of the learned counsel appearing for the petitioners cannot be accepted. 19.The learned counsel appearing for the petitioners also emphasised that this Court should defer to the decision rendered by the Division Bench of the Gujarat High Court. But this Court is unable to agree with the said submission. It is true that the Division Bench of this Court in the decision reported in [1986]159 ITR 646 (Mad) observed that it is an acceptable principle in the matter of construction of an Indian statute as far as possible that there must be uniformity of construction and if the provision of law which falls for consideration before the Court has already been construed by another High Court, normally that construction should be accepted. But then the Honourable Division Bench also added a caveat that if there....