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2024 (2) TMI 1115 - HC - Income TaxRecovery proceedings - Attachment of assets of the 4th respondent - alienation/transfer as contrary to section 281 of IT Act - claim of ownership of the property - void sale agreement - as alleged sale by an assessee in default with an intention to defraud revenue Whether the impugned order is liable to be quashed or whether the petitioner or the fourth respondent should be relegated to approach the Civil court in terms of the Section 11(6) of the Second Schedule to the Income Tax Act, 1961 or whether the fourth respondent who has failed to file the Civil suit in terms of decision of the Hon'ble Supreme Court in [2017 (10) TMI 1648 - SC ORDER] is entitled to have audience before this Court. HELD THAT:- Tax Recovery Officer has to examine who is in possession of the property and in what capacity. Tax Recovery Officer can attach property in possession of the assessee in his own right, or in possession of the tenant or 3rd party on behalf of/for the benefit of the assessee. The Court however concluded that Tax Recovery Officer cannot declare sale made by the assessee in favour of a 3rd party as void, if he finds that the property of the assessee was transferred by the assessee to a 3rd party with “ an intention to defraud the revenue". As mentioned above, the expression “intention” has been deleted in the amended Section. The Court further held that, the Income Tax Department will have to file a suit in terms of Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, though under Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, the party against whom an order of attachment is made, has to institute a suit in a civil court to establish the right which he claims over the property in dispute and subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive. Therefore, the ratio laid down by the Hon'ble Supreme Court in Tax Recovery officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade [1998 (9) TMI 1 - SUPREME COURT] cannot be applied to the facts of the present case. Further, Tax Recovery officer is not required to declare the sale between the petitioner and the fourth respondent as invalid as the sale is void abinito. The petitioner has to institute a suit in a civil court to establish the right which he claims over the property in dispute. Therefore, this writ petition is liable to be dismissed and it is accordingly dismissed.
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