TMI Blog1998 (9) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... rty originally belonging to the assessee (since deceased). The property was claimed by the wife of the assessee (since deceased) and his daughter, original respondent No. 2 as of their ownership and in their possession in the objections which they had filed against attachment proceedings under rule 11. For the period relevant to the assessment years in question, the assessee was carrying on business as a partner of a firm known as United Capital Construction Company and also as a contractor. For the assessment years 1962-63, 1963-64 and 1964-65, he was assessed to income-tax and the amounts of tax so assessed became final on August 7, 1967. There were also income-tax demands which were outstanding for the subsequent assessment years at the time when the Tax Recovery Officer served notices on the assessee under rule 2 of the Second Schedule to the Income-tax Act, 1961, on October 21, 1972. Thereafter, on October 23, 1972, an immovable property being a residential house of the assessee in Ramdaspeth, Nagpur, was attached by the Tax Recovery Officer. In the objections filed by the assessee, original respondent No. 1, it was stated that on December 2, 1967, he had executed a mortgage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Recovery Officer, in the proceedings under rule 11, overruled the objections filed by the objectors and declared that the mortgage dated December 2, 1967, the trust deed dated February 21, 1969, and the conveyance dated February 27, 1969, were illegal and void and that the said property was liable to attachment and sale. This order of the Tax Recovery Officer was challenged by the assessee and the other respondents by filing a writ petition before the High Court. The High Court by its impugned judgment has set aside the order of the Tax Recovery Officer. The High Court has upheld the contention of the respondent/s that the Tax Recovery Officer has no power under rule 11 of the Second Schedule to the Income-tax Act, to declare as void a transfer of property effected by the assessee during the pendency of proceedings against him under the Income-tax Act on the ground that the transfer was with the intention to defraud the Revenue and was void as against the Department under section 281 of the Income-tax Act as it then stood. The High Court also negatived the contention of the Department that by reason of the judgment of the High Court in the earlier proceedings, the respondent/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention to defraud the Revenue. The powers of the Tax Recovery Officer, however, under rule 11 of the Second Schedule to the Income-tax Act are somewhat different. Under rule 11(1) where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. Under rule 11(4), (5) and (6) it is provided as follows :--- "Rule 11(4). Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of the property under some kind of a title, the property will have to be released from attachment. The procedure is not meant to decide intricate questions of law as to title to the property. Therefore, where a claim is made to the property attached, by someone claiming to be a transferee from the judgment-debtor and the claim is disallowed, the claimant can institute a suit under Order XXI, rule 63, to establish his title to the property. In such a suit it would be open to the attaching creditor to plead in defence that the transfer was in fraud of the general body of creditors and was void under section 53 of the Transfer of Property Act. Similarly, if the claim of the transferee is allowed, the attaching creditor may sue on behalf of himself and all other creditors under section 53 of the Transfer of the Property Act for a declaration that the transfer was void as it was in fraud of the creditors. In the case of C. Abdul Shukoor Saheb v. Arji Papa Rao, AIR 1963 SC 1150, at page 1158, this court considered, inter alia, the nature of proceedings under Order XXI, rules 58 to 61, prior to the amendment of the Civil Procedure Code in 1976. This court observed : "In the summary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not set aside this order of the Income-tax Officer, the High Court has expressly held that the order amounted only to an intention or declaration on the part of the Department 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 section 281 by relying on the order of May 9, 1974, or otherwise. His jurisdiction relates to examining possession, and only incidentally, any question of right to possession as claimed by the objector. The High Court has, therefore, rightly set aside the order of the Tax Recovery Officer. However, the right of the Department to have the transfer declared as void under section 281 of the Income-tax Act, as it stood at the relevant time, is not thereby taken away. We are informed that the property continues to be under attac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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