TaxTMI 
TaxTMI 
1978 (12) TMI 42
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....spondent (writ petitioner) against the recovery proceedings initiated by the income-tax department, and attachment of a property in pursuance of the said proceedings. One M. K. Raru was a defaulter to the income-tax department to the tune of Rs. 1,59,641 plus interest and process fee. The tax recovery certificates for recovery of the said amount had been issued by the ITO and demand notices under r. 2 of the Second Schedule of the I.T. Act, 1961, were served on the defaulter, and, after his death, on his legal representative between March 24, 1967, and March 29, 1972. The defaulter died on December 24, 1971. The immovable properties of the defaulter were attached under r. 48 of the Second Schedule to the I.T. Act on April 27, 1972. One item....
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....ate of service of the notices. Under r. 15 of the Rules of the Second Schedule, an alienation effected subsequent to the attachment would be void against all claims enforceable under the attachment. On this ground the, TRO rejected the claim of the respondent. It was this order (Ext. P-1) that was sought to be quashed in the writ petition. The learned judge noticed s. 281 of the I.T. Act which provides for the avoidance of fraudulent transfers effected with intent to defraud the income-tax department. That section contained a proviso protecting bona fide transfers effected for valuable consideration without notice of the attachment. The argument advanced before the learned judge was that this protection in favour of bona fide transferees fo....
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....e opportunity of being heard. Subject to what is stated above, the original petition is allowed. There will be no order as to costs." We are unable to agree with the conclusion and the reasoning of the learned judge. We may extract s. 281 of the Act as it stood at the relevant time: "281. Transfers to defraud revenue void.- Where, during the pendency of any proceeeding under this Act, any assessee creates a charge on or parts with the possession by way of sale, mortgage, exchange or any other mode of transfer whatsoever, of any of his assets in favour of any other person with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee a....
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....edule--an innovation introduced by the 1961 Act--, which deals fully with the modus operandi of recovering the tax arrears in the different modes open to the department under the law. Rule 16 of the said Schedule enacts : "16. Private alienation to be void in certain cases.-(1) Where a notice has been served on a defaulter under rule 2, the defaulter or his representative-in-interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. (2) Where an attachment has been made under this Schedule, any private transfer o....
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....well. There is neither reason nor logic in doing so and we are unable to accept this process of reasoning of the learned judge. Counsel for the respondent invited our attention to s. 281 as amended by Act 41 of 1975 with effect from October 1, 1975. The section as amended reads as follows: "281. Certain transfers to be void.-(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 a....