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2015 (7) TMI 365 - HC - Income TaxRecovery of tax - Charge or transfer of property during the pendency of the Income Tax proceedings - Transfer by way of mortgage was without notice of pendency of the assessment proceedings - Held that:- In the matter on hand, there cannot be any dispute that the transfer was for adequate consideration. The records reveal that the term loan obtained by Veekay Developers and subsequently transferred to V.K. Clubs is to the tune of ₹ 211.00 lakhs. Whereas the notice under Section 143(2) of the Act by the Income Tax Department is for recovery of ₹ 80,03,376/-. Hence it is clear that the transfer was for adequate consideration. It is also clear from the records that, while the transfer by way of mortgage is effected, there was no notice of pendency issued to transferee, of the proceedings initiated by the department. As aforementioned, the notice was issued to the assessee by the Assessing Officer one day prior to sanctioning of the loan. The notice was issued on 12.9.1995, whereas the loan was sanctioned by the respondent – Corporation to V.K. Developers on 13.9.1995. Therefore it is clear that the transfer by way of mortgage was also without notice of pendency of the assessment proceedings. In view of the same, the transfer cannot be held to be void. Same views were rendered in the judgment of Gujarath High Court in the case of TAX RECOVERY OFFICER .vs. INDUSTRIAL FINANCE CORPORATION OF INDIA AND ANOTHER [2012 (8) TMI 541 - Gujarat High Court ]. Undisputedly, the respondent is a secured creditor. Hence it is needles to observe that even the Crown debt could be discharged only after the debt of secured creditors stand discharged. In that regard, consciously the concerned Tax Recovery Officer by his letter dated 27.1.2006 has clearly stated that the respondent – Corporation can proceed for sale of the properties involved as the respondent - Corporation has first charge over the properties and to treat the Income Tax Department as second mortgagor. It is also clearly stated in the said letter that after appropriation of sale proceeds towards dues of the respondent – Corporation, surplus, if any has to be handed over to Tax Recovery Officer, Range-2, Mangalore for appropriation of Income Tax dues. In view of the same, no interference is called for. - Decided against the revenue.
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