TMI Blog2018 (4) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... to the knowledge of this Court by the learned Counsel appearing for the appellant/writ petitioner that he also sought information under the Right to Information Act, from the Public Information Officer - the Joint Sub-Registrar, Tuticorin, as to the order of attachment by the Income Tax Officer in respect of the property concerned in registered document No.2212/2008, dated 18.06.2008 and vide communication dated 24.05.2011 bearing No.2099/mggp/2011,, the said official informed that no such document is available on file. Therefore, this Court is of the considered view that it is for the Income Tax Department, to file a suit to hold the transaction declared as null and void as per the ratio laid down by the Honourable Supreme Court of India reported in Tax Recovery Officer Vs. Gangadhar Viswanath Ranade[1998 (9) TMI 1 - SUPREME COURT] - W.A(MD)No.1186 of 2017 and C.M.P(MD)No.8250 of 2017 W.A(MD)No.1150 of 2017 and C.M.P(MD)Nos.7953 and 7954 of 2017 W.A(MD)No.1186 of 2017, W.A(MD)No.1150 of 2017 - - - Dated:- 13-4-2018 - M. Sathyanarayanan And R. Hemalatha, JJ. For the Appellant : Mr.P.S.Sundaram For the Respondents : Mr.C.M.Mari Chelliah PrabuMrs.S.Srimathy JUDGMEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to them, the entries which contained in the said encumbrance certificates, showed no encumbrance. 4.2. It is the case of the appellant in W.A.(MD)No.1186 of 2017/writ petitioner that the property which is the subject matter of the present litigation/attachment made by the second respondent/Tax Recovery Officer, Tuticorin, originally belonged to P.Jeyappan and after his demise, his daughter viz., the respondent No.11 had executed a release deed in favour of the private respondents 5 to 10, vide a registered Document No.1339 of 2008, dated 10.04.2008. 4.3. The appellant in W.A.(MD)No.1186 of 2017/writ petitioner was issued with a show cause notice, dated 23.09.2008 by the second respondent as to why the sale in their favour, should not be declared as void and the said notices were issued to the respondents 5, 8, 9 and 10 alone and not to all the legal heirs of the deceased P.Jeyappan. 4.4. The appellant in W.A.(MD)No.1186 of 2017/writ petitioner would further add that the assessment order was passed on 20.10.2009, after a search of original assessee's house after two years, four months and two days and after the sale of the said property in favour of the petitioner vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule of Income Tax Act, the Tax Recovery Officer has no power to declare the alienation as null and void and granted liberty to the Department to proceed against the properties of the defaulters which came to be attached on 06.01.1988 and granted liberty to the appellant/writ petitioner to approach the Tax Recovery Officer under Rule 11(1) of II Schedule of Income Tax Act claiming that the property purchased by them is not liable for attachment and with a further direction that as and when such claim is preferred, it has to be adjudicated and disposed of in accordance with law as stipulated in the Act. 5. The learned Counsel appearing for the appellant in W.A.(MD)No.1186 of 2017 has made the following submissions: 5.1. In the light of Rule 68B of Second schedule of the Income Tax Act, there cannot be a postponement of sale beyond the period of limitation. It is for the Department to move the civil Court to declare the transaction in the form of sale in their favour as null and void. 5.2. Admittedly in the encumbrance certificates obtained by the appellant/writ petitioner prior to their purchase, the attachment effected in respect of the said property, had not been refl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd would submit that as per Rule 16, private alienation shall be void in certain cases and in the case on hand, admittedly, after the attachment of the property was made, the legal representatives of the original assessee had alienated one of the properties in favour of the appellant/writ petitioner and as such, the claim made by them is unsustainable in law. 9. The learned Counsel appearing for the respondents/revenue in W.A.(MD)No.1186 of 2017 and the appellants in W.A.(MD)No.1150 of 2017 has further drawn the attention of this Court to the proceedings of the Commissioner of Income Tax, dated 03.03.2011 and would submit that the representation dated 23.09.2010 submitted in this regard, was rightly considered and categorically, a finding has also been recorded and that the Tax Recovery Officer has acted in accordance with Rule 16(2) of Second Schedule, after providing opportunity to both buyer and seller before declaring the said transaction as void and it is followed the proceedings of the Tax Recovery Officer, dated 09.08.2011 declaring the said sale transaction as null and void as per the provisions of the Income Tax Act and in the light of the said order, it is for the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een taken.] Other modes of recovery: 226. [ (1) where no certificate has been drawn up under Section 222, the Assessing Officer may recover the tax by any one or more of the modes provided in this section. (1A) where a certificate has been drawn up under Section 222, the Tax Recovery Officer may, without prejudice to the modes of recovery specified in that section, recover the tax by any one or more of the modes provided in this section. ] (2) If any assessee is in receipt of any income chargeable under the head ?salaries?, the (Assessing) Officer (or Tax Recovery Officer) may require any person paying the same to deduct from any payment subsequent to the date of such requisition any arrears of tax due from such assessee, and such person shall comply with any such requisitions and shall pay the sum so deducted to the credit of the Central Government or as the Board directs; Provided that any part of the salary exempt from attachment in execution of a decree of a civil Court under Section 60 of the Code of Civil Procedure, 1908 (5 of 1908), shall be exempt from any requisitions made under this sub-section. (3) (i) The [Assessing] Office [or Tax Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscovered that such statement was false in any material particular, such person shall be personally liable to the Assessing] Officer or Tax Recovery Officer] to the extent of his own liability to the assessee on the date of the notice or to the extent of the assessee' s liability for any sum due under this Act, whichever is less. (vii)The [Assessing] Officer [or Tax Recovery Officer] may, at any time or from time to time, amend or revoke any notice issued under this sub- section or extend the time for making any payment in pursuance of such notice. (viii)The [Assessing] Officer [or Tax Recovery Officer] shall grant a receipt for any amount paid in compliance with a notice issued under this sub- section, and the person so paying shall be fully discharged from his liability to the assessee to the extent of the amount so paid. (ix)Any person discharging any liability to the assessee after receipt of a notice under this sub- section shall be personally liable to the [Assessing] Officer [or Tax Recovery Officer] to the extent of his own liability to the assessee so discharged or to the extent of the assessee's liability for any sum due under this Act, whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, if the assessee has property in a country out side India (being a country with which the Central Government has entered into an agreement for the recovery of income-tax under this Act and the corresponding law in force in that country), forward to the Board a certificate drawn up by him under Section 222 and the Board may take such action thereon as it may deem appropriate having regard to the terms of the agreement with such country. (2) Notwithstanding the issue of a certificate under section 222 to the Tax Recovery Officer, where an assessee is in default or is deemed to be in default in making a payment of tax, the Income-tax Officer may, if the assessee has property in a country outside India (being a country with which the Central Government has entered into an agreement for the recovery of income-tax under this Act and the corresponding law in force in that country), forward to the Board a certificate specifying the amount of arrears due from the assessee and the Board may, take such action thereon as it may deem appropriate having regard to the terms of the agreement with such country. . 12. The following dates and events are relevant to adjudicate the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r proceedings dated 18.12.1987, attached on 06.01.1988 in favour of the appellant in writ appeal in W.A.(MD)No.1186 of 2017/writ petitioner and they are calling upon to show cause as to why the illegal transaction made by them should not be declared as null and void as per Rule 16(1) of the Second Schedule of the Income Tax Act. 15. The appellant/writ petitioner submitted a representation dated 23.09.2010 to the Commissioner of Income Tax, Madurai, narrating the events that had happened and claimed that they are innocent and bona fide purchasers for valid and consideration without any notice of prior encumbrance and therefore, prayed for appropriate direction to direct the Assessing Officer to drop any further proceedings pertaining to the said property and raise the attachment and also enclosed the supporting documents. 16. The Commissioner of Income Tax, Madurai, vide proceedings in C.No.TRC/CIT-I/2010-11, dated 03.03.2011, has taken into consideration the said representation and noted that on a perusal of the Assessing Officer's and the Tax Recovery Officer's report and other evidence, the attachment of the said property was made on 18.12.1987 and it was duly intim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Honourable Supreme Court of India, on the facts of the case, found that the Tax Recovery Officer could not have examined whether the transfer was void under Section 281 of the Income Tax Act and his adjudication of the transfer as void under Section 281 is without jurisdiction and granted liberty to the Income Tax Department to take appropriate proceedings in accordance with law for having the transfer declared as void under Section 281 of the Income Tax Act. 21. The said decision was followed by a Division Bench of Gujarat High Court in A.R.C.I. Ltd., Vs. Commissioner of Income-Tax, Range Others reported in 2012(1) D.R.T.C. 361 (Gujarat) (DB). The question arose for consideration is as to the priority over dues of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SRFAESI Act) and the Income Tax Act. 22. The Division of Gujarat High Court, in the above said decision, has considered the scope of Sections 222, 281 and Second Schedule, Rule 11(6) of the Income Tax Act. The earlier decision rendered by the Gujarat High Court, in Tax Recovery Officer Vs. Industrial Financial Corporation of India reported in 2011(3) G.L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther Vs. Oriental Bank of Commerce Ltd., and Others reported in (2008) Vol.306 ITR 234 (Bombay) has taken into consideration the decision in Tax Recovery Officer Vs. Gangadhar Viswanath Ranade (Decd.,) reported in AIR 1999 SC 427 : (1998)149 CTR (SC) 90:(1998)234 ITR 188(SC) and held that unless it is found that the property of the assessee is transferred by him to the third party with intention to defraud the revenue, the remedy open to them is to file a suit under Rule 11(6) to have the transfer as to declare as void as per Section 281 of the Income Tax Act. 27. The facts projected would also lead to the incidental question as to whether the sale by the legal representatives of the deceased in favour of the appellant/writ petitioner was done with a view to defraud the revenue. It is the categorical case of the appellant/writ petitioner that before purchasing the property, they got the legal opinion and also obtained encumbrance certificates and any entries therein have not declared any succeeding encumbrance including the attachment of the said property by the Income Tax Department. 28. In S.S.Karthikeyan Vs. Sivasalam and Another reported in (2009)2 MLJ 473 (Single Bench), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void. 33. In the light of the ratio laid down by the Honourable Supreme Court of India in Tax Recovery Officer Vs. Gangadhar Viswanath Ranade (Decd.,) reported in AIR 1999 SC 427, it is not open to the Tax Recovery Officer to declare the said sale as null and void. The above said decision also held that ?the Tax Recovery Officer is required to examine whether the possession of the third party is of a claimant in his own right or in trust for the assessee or on account of the assessee. If he comes to a conclusion that the transferee is in possession in his or her own right, he will have to raise the attachment. If the department desires to have the transaction of transfer declared void under Section 281, the Department being in the position of a creditor, will have to file a suit for a declaration that the transaction of transfer is void under Section 281.? [emphasis supplied.'] 34. In the light of the ratio laid down in the above cited decision, it is not open to the Tax Recovery Officer to declare the said transfer/alienation as null and void as per the provisions of the Income Tax Act. It is also brought to the knowledge of this Court by the learned Counsel appearing fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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