TMI Blog2018 (3) TMI 1931X X X X Extracts X X X X X X X X Extracts X X X X ..... er on 05.01.2013 and that the sale transactions executed by the said defaulter-assessee took place thereafter. Therefore, this Court is of the view that it would not be open to the purchasers to claim the benefit of the proviso to Section 281(1) of the Act. More than anything else, as rightly pointed out by the learned standing counsel for the respondent Department, any attachment of an immovable property made under the second schedule would relate back to and take effect from the date on which the notice to pay the arrears issued under II schedule was served on the defaulter. This legal effect of Rule 51 of second schedule cannot be overcome. In this case, this Court therefore comes to the conclusion that the attachment made subsequent to the purchase by the writ petitioner would relate back to and take effect from 05.01.2013 onwards. As strongly contended by the learned counsel for the petitioners, if two interpretations are possible, the one that is beneficial to the assessee must be preferred. But in this case, this Court has absolutely no doubt that on a plain reading of the relevant provisions, only one interpretation is possible and that one is in favour of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties that are the subject matter of these writ petitions from the said defaulter-assessee thereafter. Subsequent to the said purchases, orders of attachment were made on 21.12.2015. The petitioners lodged their objections with the Tax Recovery Officer for raising the attachment. Since the said objections were not considered by the Tax Recovery Officer, the petitioners herein filed W.P(MD)Nos.19829 to 19840 of 2016 before this Court. This Court by order dated 18.10.2016 directed the Tax Recovery Officer II, Madurai to conduct enquiry in accordance with Rule 11 of the Second Schedule to the Income Tax Act. Pursuant to the aforesaid direction, the orders impugned in these writ petitions came to be passed. The respondent not only declined to vacate the attachment earlier made but also declared the sale transactions effected by the said Rajendran in their favour as null and void. 2.The learned counsel appearing for the petitioners contended that the issue on hand is no longer res integra. He drew the attention of this Court to Section 281 of the Income Tax Act, 1961. This Section was considered by the Hon'ble Supreme Court in the decision reported in (1998) 6 SCC 658 (Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C)].) These principles have been followed by the High Courts of Madras, Bombay and Delhi. (1. (CIT v. G.V.Venugopal Para 20 (2005) 145 Taxman 784 (Mad). 2. DI (Int. Taxation v. Krupp Udme GMBH Para 5 (2013) 354 ITR 173 (Bom). 3. CIT v. Kamal Wahal Para 6 (2013) 351 ITR 4 (Del).) He therefore prayed that the orders passed by the respondent under Rule 11(6) of the Second Schedule to the Income Tax should be quashed. 5.Per contra, the learned standing counsel appearing for the respondent submitted that Rules 11, 16, 48 and 51 of the second schedule to the Income Tax Act must be read together and that the orders impugned in these writ petitions ought to be sustained. She would also point out Section 281 of the Income Tax Act and Rule 11 and 16 of the second schedule to the Income Tax Act operate in distinct fields. 6.This Court carefully considered the rival contentions. Two facts are not in dispute. The vendor of the writ petitioners herein is a defaulter- assessee and that he alienated the subject properties only after receipt of notice under Rule 2 of the Second Schedule to the Income Tax Act. Secondly, the orders of attachment were issued by the respondent only after such pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision reported in 1998-2-L.W.288 (Abdul Jamil and 5 others vs. The Secretary, Income Tax Department and 2 others) it was held that the person referred to in the proviso to Section 281(1) of the Act is only the assessee and not the purchaser. The Division Bench of Punjab and Haryana High Court in the decision reported in (2011)245 CTR (P H) 437 [Karnail Singh vs. Union of India] observed as follows:- 12.We, may, however, notice the contention raised on behalf of the petitioner that in TRO vs. Gangadhar Vishwanath Ranade (Dead) (supra), the Hon'ble Supreme Court held that the TRO cannot declare any transfer by the assessee in favour of a third party to be void. The TRO can only examine who is in possession and in what capacity. He can attach property in possession of the assesee in his own right or in possession of a tenant or third party on behalf of or for the benefit of the assessee. The contention is no doubt borne out from the judgment but it is explained on behalf of the Revenue that even if declaration by the TRO that the transfer was void is ignored, the statutory declaration of the transaction being void cannot be ignored. No doubt, it may be open to the Revenue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. Rule 51 reads as follows:- Where any immovable property is attached under this Schedule, the attachment shall relate back to, and take effect from, the date on which the notice to pay the arrears, issued under this Schedule, was served upon the defaulter . 10.There cannot be any doubt that a sale is a contractual transaction. For a contract to be valid, it must be made by the free consent of parties competent to contract. Section 11 of the Contract Act, 1872 reads as under:- 11.Who are competent to contract- Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. 11.Thus, there are three ingredients in section 11 of the Contract Act 1872. This Court is concerned with the third ingredient. The person executing the contract must not be disqualified from contracting by any law to which he is subject. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to deal with the property. In Rule 16(1), it is expressly stated that the defaulter assessee shall not be competent to deal with the property. If the vendor was not competent to deal with the property, he could not have passed any valid or legal title to the purchaser. Thus, the issue has to be approached through the prism of Section 11 of the Contract Act, 1872. 13.The learned counsel for the petitioners laid considerable emphasis on the fact that on the date when attachment was made, the assessee ceased to have any interest in the subject matter and that the writ petitioners herein were absolute owners of the properties in question. He would therefore call upon this Court to be guided by the ratio set out in the Ranade case (cited supra). Though on the face of it the submission of the learned counsel appearing for the petitioners is formidable, on a closer scrutiny, the legal position is totally otherwise. As per Rule 11(3) of the second schedule, the objector or claimant must adduce evidence to show that in the case of immovable property on the date of the service of the notice issued under this schedule to pay arrears, he had some interest in or was possessed of the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue. 17.The learned counsel for the petitioners would submit that Rule 11(3)(a) of the second schedule cannot have an over-riding effect over the proviso to Section 281 of the Income Tax Act. But as held by the learned single Judge of this Court in 1998-2-L.W.288 (cited supra), the Section 281 and Rule 11 of the second schedule operate distinctly and independent of each other. 18.The learned counsel appearing for the petitioners would further contend that Rule 16(2) of second schedule clearly states that where the attachment was made under the schedule, any alienation that takes place thereafter alone shall be void. But then Rule 16(2) cannot be read in isolation. It is not a standalone provision. It must be read together and in conjuction with Rule 51. Hence, the submission of the learned counsel appearing for the petitioners cannot be accepted. 19.The learned counsel appearing for the petitioners also emphasised that this Court should defer to the decision rendered by the Division Bench of the Gujarat High Court. But this Court is unable to agree with the said submission. It is true that the Division Bench of this Court in the decision reported in [1986]159 ITR 64 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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