TMI Blog1982 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... a loan of Rs. 75,000 obtained for the purposes of firm in which he was a partner. The mortgage was executed after the tax authorities had given the first petitioner a certificate under section 230A. In June or July 1968, the partnership business ceased. On February 21, 1969, the first petitioner executed a trust deed, which was registered, in favour of his wife and daughter (the second petitioner) in respect of the property. On February 25, 1969, the first petitioner's wife agreed in writing to take over the mortgage liability. She had her own assets and was partner in two partnership firms. On February 27, 1969, the first petitioner conveyed the property to his wife and the second petitioner by registered deed. On December 9, 1969, the first petitioner was asked by the bank to pay it about Rs. 86,000 in respect of the mortgage dues. On March 5, 1970, the first petitioner's wife informed the bank that she would pay the mortgage dues in instalments of Rs. 1,000 per month. On March 6, 1970, the bank agreed to accept the mortgage dues from the first petitioner's wife by such instalments. On April 22, 1970, the Nagpur Improvement Trust intimated that the property had been transferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was examined before the Tax Recovery Officer. On September 17, 1981, the Tax Recovery Officer passed the impugned order upon the objections. He held that the provisions of section 281 were applicable to the case and that the mortgage deed of December 2, 1967, the trust deed of February 1, 1969, and the conveyance deed of February 27, 1969, were all illegal and void. As such, he held that the property vested in the hands of the first petitioner at the time of the service upon him of the notice under rule 2 of the Second Schedule. He, therefore, rejected the objections filed originally by the first petitioner, by his late wife, by the second petitioner, by the first petitioner thereafter as executor of his wife's will and by the bank. This petition filed on September 28, 1981, impugns the Tax Recovery Officer's order of September 17, 1981, and seeks that he be restrained from proceeding with the recovery of the arrears of the first petitioner's taxes from the property. There are three contentions that have to be considered, the first and third of which are raised on behalf of the petitioners and the second on behalf of the respondent : (i) The Tax Recovery Officer has no powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 per son 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, wholly or to such extent as he thinks fit, from attachment or sale." Rule 11(5) : "Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim." Rule 11(6) : "Where a claim or an objection is preferred, the party against whom an order is made may institute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such investigation as to who is in possession of the property attached, a question of some legal right, interest or title arises and if it affects the determination of the question as to who is the person really in possession, he can take such legal right, interest or title into account. Mr. Natu, learned counsel for the petitioners, urged, upon this basis, that it was not open for the Tax Recovery Officer, acting under rule II of the Second Schedule, to go behind a document of title and declare it void. Mr. Shelot, learned counsel for the respondent, on the other hand, contended that the court, acting under the provisions of Order 21, rule 58, had jurisdiction to try the question whether the transfer of property attached was a sham or nominal or whether it had really transferred the rights. It could go behind the deed for the deed which purported to transfer the rights was not sacrosanct. Equally, it was open to the Tax Recovery Officer, acting under rule 11 of the Second Schedule, to try the question whether the transfer of property attached was sham or nominal or whether it had really transferred rights. He could go behind the deed and declare it void. Mr. Shelot placed grea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty in his own right and not on behalf of the judgment-debtor. When a transfer was real, though it was liable to be impeached as a fraud on creditors, and the transferee had entered into possession, he would succeed in the summary proceedings, with the result that it was the defeated attaching creditor who would have to figure as a plaintiff. If he figured as a plaintiff, the suit would have to be in a representative capacity, that is, under Order 1, rule 8, Civil Procedure Code. In every case, therefore, when a transfer was real but was liable to be set aside under section 53 (1 ) or the provisions of Order XXI, rules 58 to 61, Civil Procedure Code, the transferee was bound to succeed in the summary proceedings and the attaching decree-holder would have to figure as a plaintiff and the suit would be a representative suit. It followed that in no case could the attaching creditor who defended the suit to set aside a summary order in his favour resist it on the plea of fraud under section 53(1)." The Supreme Court observed that (at p. 1159): "It would, however, be seen that this last step which was vital for the argument to have force did not follow . The argument only establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the claim on behalf of the tax authorities that the transfer by the assessee was void upon the ground that it was made while proceedings against him were pending with the intention of defrauding the Revenue. Mr. Shelot urged that it had been held that section 281 applied to the stage of tax recovery (See [1980]122 ITR 227) and if it were held that the Tax Recovery Officer had no power to apply section 281, it could never be applied. The short answer is that nothing prevents the tax authorities from suing the assessee and his transferee in the civil courts for relief upon the basis of the law enunciated in section 281 and from obtaining interim relief in such suit to protect the property. It was also submitted by Mr. Shelot that the power to hold a transfer void vested in the Tax Recovery Officer under rule 11 of the Second Schedule where the transfer was demonstrably sham. The ambit of the power does not depend upon the strength or weakness of the particular case. This brings us to the judgment in the earlier petition. The earlier petition challenged the order of the Income-tax Officer dated May 9, 1974. It concerned, inter alia, the property. The order stated that the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the functions to be performed under the Income-tax Act would operate as conclusive or adjudicatory. The conclusion or declaration merely had the character of an expression of an intention or opinion on the part of such authority, that he intended to treat the transfer as affected by section 281 and, therefore, not standing in the way of recovery proceedings to be taken. The court observed, and upon this observation Mr. Shelot emphatically relied, that the jurisdiction of the Tax Recovery Officer as contemplated by rule I 1 was not taken away by the expression of any opinion or intention of the Income-tax Officer under, or purporting to act under, section 281 ; that the adjudicatory process still survived and could be availed of by the claimant to claim that the transfer was not made either during the pendency of proceedings or with the intention to defraud the Revenue. The court, in conclusion, observed that it did not appear that after the attachment, the properties were being put to sale under rule 11. The petitioners, other than the first petitioner, would be entitled to make claims and objections, which, if made, should be decided in accordance with the law. It will t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no doubt that the Tax Recovery Officer was exercising quasi-judicial power, upon the assumption that such power vested in him under rule 11 of the Second Schedule. The order contains no discussion of the merits or demerits of the evidence and the contentions. It contains no statement of reasoning. There is no way of determining whether or not the Tax Recovery Officer came to his conclusion upon evidence. We have no doubt that upon this ground the impugned order must, in any event, be set aside. In the premises, the Tax Recovery Officer is restrained from proceeding to recover the tax arrears of the first petitioner by sale of the property attached. The order of attachment of the property is quashed. No order as to costs. Rule accordingly. Mr. Shelot applied for leave to appeal to the Supreme Court. The decision that we have come to is based upon the judgment of the Supreme Court in Abdul Shukoor Saheb's case, AIR 1963 SC 1150. No case arises for the grant of such leave. Mr. Shelot applies that the order quashing the attachment should not take effect for a period of eight weeks. In our view, it is enough that the order quashing the attachment should not become operative unti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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