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TMI Blog2017 (7) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... e 3rd respondent Firm, M/s. Cosmo Foundation Limited, Chennai entered into an agreement of sale with the 1st respondent, M/s.Sree Foundation, Chennai, with respect to the vacant land measuring 8 grounds and 1290 sq.ft., situated at Old No.510, New No.6 Mint Street, Sowcarpet, Chennai-79 and comprised in old Survey No.6072, 6073 and 6075 and re-survey No.602 and registered with the Sub Registrar Office, Sowcarpet, under Document No.101 of 2010 on 20.01.2010. At the time of agreement, there were only the following two encumbrances over the aforesaid property : a) Mortgage Deed registered in Document No.109/2007 dated 01.02.2007, and b) Mortgage Deed registered in Document No.883/2007 dated 28.08.2007 with M/s.Hitech Projects Private Limited. The aforesaid mortgage and entire dues of the third respondent were cleared by the first respondent, from and out of the sale consideration. Necessary receipts have been obtained from the mortgagees, towards the clearance of dues. As the first respondent purchaser paid the entire sale consideration, the third respondent handed over vacant possession and all the original documents pertaining to the subject property. Thereafter, a Power of Attor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31.07.2010 was issued to the third respondent M/s. Cosmo Foundations Limited, to pay a sum of Rs. 162.86 lakhs, within 15 days from the date of receipt of the said notice. The said notice was duly served on the third respondent. But, the third respondent has failed to pay the income tax dues to the department, in time. Therefore, an order of attachment was passed on 08.04.2011. 4. As per Section 281 of the Income Tax Act, it is very clear that though during the pendency of any proceedings under this Act or after the completion thereof, but before the service of notice under Rule 2 of the II Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceedings or otherwise; Provided that such charge or transfer shall not be void, if it is made for adequate consideration and without notice of the pendency of such proceedings or, as the case may, without notice of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 11 Crores and by virtue of Power of Attorney dated 11.02.2010, executed by the third respondent, the writ petitioner / first respondent became eligible to execute a registered sale deed in their favour or his nominees, as and when required by them. Therefore, after completion of the sale agreement on 18.02.2010, the writ petitioner/ first respondent became the absolute owner of the subject property. 6. Learned counsel for the writ petitioner/ first respondent further submitted that after a span of one year, the department has attached the said property on 08.04.2011, which is illegal since the property does not belong to the third respondent. It is further submitted that the writ petitioner / first respondent, on enquiry from the third respondent, came to know that the Income Tax Department initiated action against the third respondent M/s. Cosmo Foundations Limited under Section 147 of the Income Tax Act, 1961 and the Assistant Commissioner of Income Tax, Company Circle I (3), Chennai has passed an order dated 31.12.2009 alleging that the third respondent is liable to pay a demand of Rs. 1,63,08,463/- towards arrears of Income Tax for the assessment year 2006-2007, and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er by the third respondent to the writ petitioner/ first respondent. However, a Power of Attorney dated 11.02.2010 was executed in favour of the writ petitioner/ first respondent and registered as Document No.41/2010 on the file of the Sub Registrar, Sowcarpet to enable the writ petitioner/ first respondent to register as and when required by them. Therefore, as per Section 2(47) of the Income Tax Act, 1961 the entire sale transaction was completed on 18.02.2010 and the writ petitioner/ first respondent has become the owner of the aforesaid property. Section 2(47) of the Income Tax Act, 1961 is extracted below :- "(47) "transfer", in relation to a capital asset, includes, (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner therein and accordingly, held that the order of attachment of the property claimed and held by the petitioner was not sustainable under the law. Taking into consideration the subsequent orders passed by the Commissioner of Income Tax, the appeal filed by the Revenue before the Income Tax Appellate Tribunal and the decisions cited supra, the Writ Court disposed of the writ petition with the following observations :- "14. Since the 3rd respondent failed to pay the dues to the department on time, the property in question has been attached. In the proceedings between the Department and the 3rd respondent, the tax liability was reduced by CIT (Appeals) and the same was also paid by the 3rd respondent. By virtue of the completion of the entire sale transaction and registration of the same, the petitioner became the absolute owner of the property in question. While so and when the 3rd respondent was not the owner of the property and when on the date of passing the order of attachment, the property in question did not belong to the assessee, namely, the 3rd respondent, the attachment of the property in question, which has been in absolute possession and enjoyment of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent by various proceedings was not disclosed. He further submitted that as per the sale agreement entered between the third and first respondent, the entire sale consideration was paid to the third respondent vendor and the said vendor had handed over the property to the writ petitioner/ first respondent. Hence, he has become the owner of the subject property. Section 281 of the Income Tax Act, reads as follows :- "(1) Where during the pendency of any proceedings under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceedings or otherwise; Provided that such charge or transfer shall not be void, if it is made : 1. For adequate consideration and without notice of the pendency of such proceedings or, as the case may, without notice of such tax or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. The writ petitioner/ first respondent is not the owner of the property as on the date of the order of attachment issued by the appellant department. The third respondent who is the vendor, is the owner of the subject property. 12. The appellant department relied upon the decision in the case of Suraj Lamp and Industries Pvt. Ltd., vs. State of Haryana and anr. vs. [2012] 340 ITR 1 (SC), wherein the Hon'ble Supreme Court, referring to the case of Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [2004] 8 SCC 614, has observed that a transfer of immovable property by way of sale can only be by a sale deed and in the absence of a deed, no right, title or interest in an immovable property can be transferred. Paragraphs 17 to 21 are extracted below :- "17. In Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [2004 (8) SCC 614] this Court held (page 619): "Protection provided under Section 53A of the Act to the proposed transferee is a shield only against the transferor. It disentitles the transferor from disturbing the possession of the proposed transferee who is put in possession in pursuance to such an agreement. It has nothing to do with the ownership of the proposed transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitations contained in the said deed, the same shall be read as if done by the donor. A power of attorney is, as is well known, a document of convenience. Execution of a power of attorney in terms of the provisions of the Contract Act as also the Powers-of-Attorney Act is valid. A power of attorney, we have noticed hereinbefore, is executed by the donor so as to enable the donee to act on his behalf. Except in cases where power of attorney is coupled with interest, it is revocable. The donee in exercise of his power under such power of attorney only acts in place of the donor subject of course to the powers granted to him by reason thereof. He cannot use the power of attorney for his own benefit. He acts in a fiduciary capacity. Any act of infidelity or breach of trust is a matter between the donor and the donee." 21. An attorney holder may however execute a deed of conveyance in exercise of the power granted under the power of attorney and convey title on behalf of the grantor. " 13. Therefore, as per the provisions of the Act, unless the property is transferred in the name of the purchaser, the writ petitioner herein cannot claim that he is the owner of the property. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be under provisional attachment as per section 281B and all other debts and security deposits due from third parties could be released from the provisional attachment. In the case on hand, the writ petitioner is only an agreement holder and is not the owner of the property as stated in the earlier paragraph. Hence, this decision would not apply to the facts of this case. 4. In the case of Gandhi Trading vs. Assistant Commissioner of Income Tax & Ors., reported in 239 ITR 337, Division Bench of Bombay High Court has held that two properties of the assessee, which have been attached under Section 281B of the Act, having been valued even by the departmental valuer at Rs. 2.66 crores against the anticipated liability of Rs. 2.68 crores there was no justification for allowing the continuation of attachment on the bank accounts and FDRs. In the instant case, the assessee has not challenged the order of attachment. Further, the decision relied by the writ petitioner/ first respondent would not apply to the facts, where the immovable properties were not attached to the department and that it was only the bank accounts and FDRs as stated in the above said judgment. 5.In the case of Kars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 302 ITR 126 ; However, the said decisions also would not apply to the facts of the instant case. 15. During the course of arguments, it is brought to the notice of this Court, the order passed by the Income Tax Appellate Tribunal dated 31.12.2015 in the appeal preferred by the appellant department, in ITA No.1469/Mds/2014. The relevant portion in paragraph 5, of the order passed by the Tribunal is extracted below :- "5. We have heard both the sides and perused the material on record. As per the sale deed of property dated 17th March 2006 the sale consideration was Rs. 5.6 crores. As per sale deed Smt.Vimalamma received full sale consideration of Rs. 5.6 crores and there was no mention about the allotment of share in lieu of share consideration. Further, on few occasions, she narrated in earlier para that she had denied making any investment in assessee company. However, the Commissioner of Income Tax (Appeals) gave a finding that Rs. 2.85 crores was made as investment by Smt. Vimalamma. In our opinion, the assessee shall furnish all details to prove the transaction. The onus to prove the identity, credit worthiness and genuineness of transaction is on assessee as the en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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