TMI Blog1994 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... date and no person whatsoever has any right, title and/or interest of any kind whatsoever thereon. " Under cover of a letter dated April 11, 1989, addressed to the Reserve Bank of India, the petitioner enclosed the certificate of the bond as well as the form of transfer executed by Vishwanath More in her favour as well as the interest warrants issued in the name of Vishwanath More. The name of the petitioner has been noted by the Reserve Bank of India on the certificate as a transferee, the date of transfer being given as March 23, 1989. According to the petitioner, she has been paid interest on the said bond up to the year 1991 by the Reserve Bank of India. On February 16, 1992, Vishwanath More died. On February 18, 1992, an order was issued by respondent No. 1 under section 281 of the Act in respect of Vishwanath More stating that Vishwanath More had made an absolute irrecovable gift of Rs. 2 lakhs to the petitioner on July 27, 1988, and that Vishwanath More was in default in making payment of income-tax/wealth-tax and penalties to the tune of Rs. 18,79,773 which had been lying unpaid since 1978. This order (which has been impugned in these proceedings) concludes with the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner. The communication was to the effect that the interest warrant on the bond had been paid by the Reserve Bank of India through oversight as there was an attachment order by the income-tax authorities. The Bank of India through which the interest was to be credited to the petitioner's account was asked to stop the payment of interest to the petitioner's account. The petitioner has contended that section 281 merely stated the consequences of the transfer made during the pendency of assessment proceedings. The section did not contemplate any adjudication or passing of any order thereunder. It is submitted that the validity of the transaction to which section 281 of the Act may have any application could be adjudicated only by a competent civil court in a properly instituted suit/proceeding after considering the evidence and contentions of the parties. It is submitted that no authority under the Act is empowered to decide upon the questions relating to title. In the alternative, it has been submitted that if section 281 contemplated the passing of an order by the Income-tax Officer adjudicating upon title to property, then the provisions of the section were violative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer to adjudicate on questions of title. That section 281 allowed the Income-tax Officer to consider and decide the question whether the transaction was void or not without resorting to a suit. In any case, if the writ petitioner had disputed the question of transfer, there may have been a question of adjudication. In this case, she had accepted that the money had been transferred to her by Vishwanath More and had filed a wealth-tax return on such basis. It is submitted that if the petitioner was aggrieved by the order under section 281, she could have preferred an appeal. Reliance has been placed on the decision in C. A. Abraham v. ITO [1961] 41 ITR 425 (SC) in this context. (iii) that the conditions precedent to the exercise of the powers under section 281 of the Act had been fulfilled : (a) the proceedings were pending as far as Vishwanath More was concerned (b) there was an intention on the part of Vishwanath More to defraud the Revenue. This was clear from the fact that he had no money, but he had made a gift to a person of no known relationship ; (c) the relief bond would come within the definition of asset under section 281 ; (d) the relief bond could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by the assessee ; or (ii) with the previous permission of the Assessing Officer. (2) This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds five thousand rupees and the assets charged or transferred exceed ten thousand rupees in value. Explanation.--In this section, 'assets' means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee." On a plain reading of the section, it is clear that the section is declaratory and not procedural in the sense that it does not itself provide for any mode of enforcement of the rights created under the section. The language of section 281 may be compared with that of section 222. Section 222 provides-- " 222. Certificate to Tax Recovery Officer--(1) When an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may draw up under his signature a statement in the prescribed form specifying the amount of arrears due from the assessee (such statement being hereafter in this Chapter and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under rule 2. The procedure under the Second Schedule of the Act for enforcement of the rights of the Revenue, vis-a-vis the assessee would not be available for enforcement of a right under section 281 and, in my opinion, the procedure envisaged in the Second Schedule to the Act does not apply at a stage when section 281 operates, Even assuming that the procedure under the Second Schedule is available to the income-tax authorities at the stage of section 281, i.e., prior to issuance of notice under rule 2 of the Second Schedule the authorities are not benefited in this case as it is nobody's case that the procedure under the Second Schedule had been followed by the Income-tax Officer. Besides the further question would still remain, namely, whether the issue of invalidity of a transfer under section 281 could be determined in proceedings under the Second Schedule. The language of section 281 corresponds to section 53 of the Transfer of Property Act, 1882, and like section 53 of the Transfer of Property Act can only give rise to a cause of action which must, in the absence of any prescribed procedure under the Act, be enforced by recourse to the general remedy of a suit. In my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anath Ranade (No. 1) v. ITO [1989] 177 ITR 163 (Bom). The writ petitioner had challenged an order passed under section 281 by the Income-tax Officer after he had issued a show-cause notice, held an enquiry and recorded the evidence. It was argued that the Income-tax Officer had no jurisdiction to pass such an order. The court dismissed the writ application by upholding the submission of the Revenue that the order passed under section 281 was not an order in the proper sense of the term as it did not decide anything but merely demonstrated and recorded an intention on the part of the Revenue to proceed against the property of the defaulting assessee. The court held : " Neither section 281 of the Income-tax Act nor section 53, sub-section (1) of the Transfer of Property Act declares a transfer to be void ab initio, so that the title of the transferee is gone. It merely says what the law is. It is, therefore, really a substantive declaration of what the law of the land is. In the absence of section 281, recourse could certainly be had to the provisions of section 53, sub-section (1) of the Transfer of Property Act. But, as is clear, that would apply only in cases of transfers of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the ground that it was made while proceedings against him were pending with the intention of defrauding the Revenue. In other words, the court held that the tax authorities could sue the assessee and his transferee in the civil courts for relief upon the basis of the law enunciated in section 281 and obtain interim relief in such suit to protect the property. The decision in Inayat Hussain v. Union of India [1980] 122 ITR 227 (Bom) relied upon by the respondents is irrelevant. In that case, the scope of section 281 and rule 16 of the Second Schedule to the Act was compared in a suit filed by the transferee against the income-tax authorities. The decision does not touch the issue raised in this proceeding, but illustrates that the question of the rights under section 281 was being decided in a civil suit. The decision of a learned single judge of the Madras High Court in K. R. Loganathan v. Union of India [1988] 174 ITR 645 is a decision in three suits filed by the transferees of certain immovable property belonging to an assessee in respect of whom income-tax arrears were due and recovery proceedings pending. Issues were framed and evidence adduced for the purpose of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer has the power to pass an order on his own without holding any adjudication under section 281 of the Act. In an unreported judgment of the Division Bench of this court in ITO v. Shri Shri Ishwar Radha Govinda Jew relied upon by the respondents, no issue was raised in that matter regarding the scope of the power of the Income-tax Officer under section 281. It is further to be noted that the appeal was disposed of without any representation on the part of the assessee. The observations of the Division Bench, therefore, cannot be taken to be a decision on the issue. The next question is whether the notice under section 226(3) of the Act would subsist despite the striking down of the impugned order under section 281 : The section reads : " 226. Other modes of recovery.--(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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation and that where one transaction was made subject to different taxable events under different statutes, though cognate in nature, the concept of double taxation had no application. The case has no application to the facts in the case before me. In that case, taxation at two stages was not on the basis of the inconsistent assumptions of fact as is the case before me. If the amount of Rs. 2 lakhs was the undisclosed income of the assessee, there was no question of the income having been that of Vishwanath More. The entire proceeding under section 281 is based on the fact that it was Vishwanath More's money which had been sought to be transferred in contravention of section 281 to the petitioner. The argument of the respondent authorities, in order to sustain the action under section 281, must be that the amount of Rs. 2 lakhs never validly belonged to the petitioner. It would appear from the language in the transfer document executed by Vishwanath More that the gift had in fact been made. The Reserve Bank also transferred the bond presumably on the completion of all the necessary formalities by Vishwanath More, However, I rest my decision on the fact that as long as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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