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Commissioner of Income Tax, Tax Recovery Officer Versus Karnataka State Industrial Investment Development Corporation Ltd.

2015 (7) TMI 365 - KARNATAKA HIGH COURT

Recovery 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 t .....

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.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 ].

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d 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. - Writ Appeal No. 3015/2013 (T-IT) - Dated:- 10-6-2015 - Mohan M. Shantanagoudar And Aravind Kumar,JJ. For the Appellant : Sri Jeevan J Neeralagi, Adv .....

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Limited ( V.K. Clubs for short) on 26.3.1997. The borrower created an equitable mortgage in favour of the respondent by deposit of title deeds on 28.4.1998. The title deeds of the properties so mortgaged are relating to portions of the land and buildings measuring about 4,390 square feet on the ground floor, 2100 square feet on the first floor, 3,515 square feet and 1020 square feet on the third floor and about 18,435 square feet on the 4th, 5th and 6th floors of the commercial building, togethe .....

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he Assessing Officer. Subsequently, the Tax Recovery Officer, Mangalore Range passed an order dated 5.12.2000 attaching the immovable properties including the properties mortgaged by Veekay Developers and V.K. Clubs to the respondent invoking Rule 48 of Second Schedule to the Act to recover tax dues of ₹ 80,03,276/- from Sri Vivian Kamath D Souza, M/s Veekay Developers, M/s Shalimar Constructions and M/s Canara Builders. The order of attachment of immovable properties was issued on 5.12.20 .....

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inita Chaterjee, learned advocate appearing on behalf of the respondent. 3. We do not find any ground to interfere in the impugned order. Section 281 of the Act declares certain transfers to be void. Section 281 of the Act states that where, during the pendency of any proceeding under the Act or after the completion thereof, but before the service of notice under rule 2 of Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or .....

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id ab initio and therefore the respondent - Corporation has no locus standi to question the order of attachment. 4. The above submission cannot be accepted having regard to the proviso to Section 281 of the Act. Section 281 of the Act will have to be read in its entirety and homogeneously. On reading the said provision, it is clear that Section 281 of the Act lays down that charge or transfer of property during the pendency of the Income Tax proceedings shall be void. However under the proviso t .....

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khs. 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 .....

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ND ANOTHER reported in (2012) 346 ITR 11 (Guj). In yet another judgment in the case of TAX RECOVERY OFFICER .vs. GANGADHAR VISWANATH RANADE reported in (1998) 234 ITR 188 (SC), the Apex Court has observed that Section 281 will have to be read homogeneously with the Rule 11(1) of Second Schedule to Act. The Apex Court in the said judgment has observed thus: In the present case, the Tax Recovery Officer could not have examined whether the transfer was void under section 281 of the Income-tax Act. .....

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artment to treat the transaction as void under Section 281. Such a declaration cannot affect the legal rights of the parties affected under rule 11. The High Court expressly held that the rights of the parties under rule 11 were not affected in any way by this declaration. The Department, therefore, cannot proceed on the assumption that the transaction is void under section 281, nor can the Tax Recovery Officer, while proceeding under rule 11, declare a transaction of transfer as void under sect .....

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