1978 (4) TMI 78 - HC - Income Tax

Summary

Issues:
1. Interpretation of Rule 16 of Schedule II to the Income Tax Act of 1961
2. Validity of attachment by the first respondent
3. Effect of setting aside the sale on the attachment
4. Maintainability of the application under Section 151 of the Code of Civil Procedure

Analysis:

The judgment by Justice Suryamurthy of the High Court of Madras dealt with a civil revision petition challenging the dismissal of an application filed by the Union of India, Income-tax Department, seeking a declaration that the attachment of the properties of the judgment-debtor by the first respondent was void. The primary issue revolved around the interpretation of Rule 16 of Schedule II to the Income Tax Act of 1961. The rule restricts the defaulter from dealing with any property after receiving a notice under Rule 2, thereby depriving the civil court of jurisdiction to issue any process against the defaulter's property in execution of a money decree.

The judgment emphasized the significance of the notice served under Rule 2 and the subsequent attachment by the income tax department. The court clarified that the setting aside of a sale did not automatically lift the attachment. The attachment remained valid even after the sale was annulled. The court highlighted that the attachment made by the decree-holder after the notice under Rule 2 was void, as it contravened the provisions of Rule 16 of Schedule II of the Income Tax Act of 1961.

Regarding the maintainability of the application, the court ruled that the question of whether the application fell under Section 47 or Order 21, Rules 58 and 59 of the Code of Civil Procedure was unnecessary. The application was deemed to be filed under Section 151 of the Code of Civil Procedure. The court held that once the notice under Rule 2 and the provisions of Rule 16 were brought to the attention of the subordinate judge, further proceedings with the execution of the decree should have been halted.

In conclusion, the civil revision petition was allowed, setting aside the attachment made by the first respondent and staying the execution proceedings. The court directed that after the department realized the dues, the decree-holder could proceed with the execution. No costs were awarded in this matter.