TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 107
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....mpugned order passed by the 2nd respondent is without notice to the petitioners, as provided under the Income Tax Act, 1961 (for short, 'the Act'), and the Schedule thereunder; and that by the date the 2nd respondent had initiated proceedings under the Act, the property in which the petitioners' residential flats are located are already in their possession and no notices calling for objections as contemplated in Second Schedule to the Act were issued to them. 3. The petitioners also contend that they were in possession and enjoyment of the said property purchased by them from the 3rd and 4th respondents, and when the petitioners were trying to alienate the same to meet the financial necessities during the year 2019 and approached the 6th respondent to obtain valuation and encumbrance certificates in August, 2019, they became aware of the proceedings issued by the 2nd respondent attaching immovable property bearing House No.6-2-42 situated at A.C.Guards, Hyderabad, vide Warrant of Attachment in ITCP-16 dt.04.10.2002; and on further enquiry, they came to know of the 2nd respondent passed the impugned order dt.05.05.2009 declaring the transfer of subject immovable property, as void. ....
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.... Schedule of the Act, the 3rd respondent cannot create any charge over the property in view of the restrictions placed under Section 281 of the Act, (which stipulates that, if assessee creates a charge by way of a 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, insofar as claim in respect of tax or any other sum payable by the assessee, as a result of completion of the said proceeding); that since, the assessment proceedings had commenced against the 3rd respondent on 25.09.1995 and the same were being attended to on behalf of the 3rd respondent by his authorized representative, the provisions of Section 281 of the Act would stand attracted; and that the General Power of Attorney (GPA) executed by the 3rd respondent on 11.06.1997 in favour of one Mr.Srinivas Reddy and another GPA given on 18.08.2000 to one Mr.U.Vijay Kumar are not valid in the eye of law for the above said reason. 9. It is also contended that no evidence has been produced by the petitioners to substantiate the stand that the GPA holder had executed the sale deeds in favour of the petitioners; that si....
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....stated therein that there are no other entries in the encumbrance certificate, including the encumbrance of the attachment issued by the office of the 2nd respondent on 04.10.2002. By the impugned order, while casting a doubt on the sale deeds executed by the GPA holder in favour of the petitioners, the 2nd respondent relied on the encumbrance certificate issued by the 6th respondent on 03.05.2004 (as it does not reflect the sale deeds executed in favour of various purchasers), and declared the transfer of the subject immovable property as one in violation of provisions of Section 281 of the Act and hence, void. 14. Having regard to the categorical stand of the 2nd respondent in the impugned order that the encumbrance certificate dt.03.05.2004, furnished by the 6th respondent did not reflect the sale deeds executed by the petitioners, this Court, on 28.06.2021, directed the learned Standing Counsel to place a copy of the said encumbrance certificate dt.03.05.2004 allegedly issued by the Sub-Registrar's Office, Sanjeev Reddy Nagar, Hyderabad, for perusal of this Court and directed the matter to be listed on 06.07.2021. 15. On 06.07.2021, at request, the matter was adjourned to 12.....
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.... and the Schedule. 20. In the said judgment rendered by this Court, the steps have been compartmentalized into three sections, viz., (1) the first, up to the issue of a certificate of recovery; (2), the second, from the issue of a certificate of recovery up to the attachment of the property for non-compliance with the demand made under Rule 2; and (3), the third, the voidity of all transfers from the date of the order of attachment. 21. In the above said decision, after noting the above three steps, the Court observed in paras 24 and 25 as under: '24. Section 281 (1) operates from the stage of commencement of proceedings under the Act upto the stage of service of a notice of demand under Rule 2. Rule 16 (1) operates from the stage of service of a demand under Rule 2 upto the stage of attachment. Rule 16 (2) takes over from the stage of attachment. Among these 3 provisions namely section 281 (1), Rule 16(1) read with Rule 2 and Rule 16(2), only the first (section 281) and the third (rule 16[2)) talk about voidity. Rule 16 (1) merely talks about prohibition of alienation. 25. Therefore the only way Section 281 (1) can be reconciled with sub-rules (1) and (2) of Rule 16 is....
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.... and void.' 22. In the light of the above discussion by this Court, it is to be noted that the provisions of Section 281(1) of the Act would stand attracted, only when a demand is raised and the same is not paid by the assessee, thereby, becoming an assessee in default. It is only when an assessee is declared as assessee in default and certificate of recovery is drawn up, the protection provided under the said Section 281(1) of the Act would be available. 23. In the facts of the case, it is not shown to this Court that the transfer affected by the 3rd and 4th respondents in favour of the petitioners is not for adequate consideration or that attachment of the subject property has been made before the petitioners had purchased the same. 24. Going by the admission of the 2nd respondent in the impugned order itself, it is evident that warrant of attachment in ITCP-16 was issued for the first time on 04.10.2002. On the other hand, the sale deeds under which petitioners 1, 2 and 4 had purchased the property are all registered on 19.07.1999 and that of the 3rd petitioner on 24.07.1999. Further, it is also to be noted that the order of attachment issued mentions that certificate of reco....