TMI Blog2024 (2) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... erty in possession of the assessee in his own right, or in possession of the tenant or 3rd party on behalf of/for the benefit of the assessee. The Court however concluded that Tax Recovery Officer cannot declare sale made by the assessee in favour of a 3rd party as void, if he finds that the property of the assessee was transferred by the assessee to a 3rd party with an intention to defraud the revenue . As mentioned above, the expression intention has been deleted in the amended Section. The Court further held that, the Income Tax Department will have to file a suit in terms of Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, though under Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, the party against whom an order of attachment is made, has to institute a suit in a civil court to establish the right which he claims over the property in dispute and subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive. Therefore, the ratio laid down by the Hon'ble Supreme Court in Tax Recovery officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade [ 1998 (9) TMI 1 - SUPREME COURT] cannot be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter arguments of the objector exhibiting lack of satisfaction and reasonableness, the failure on part of the income-tax returns of the objector to explain the source of investment made and the financial capacity of the objector are symmetric and therefore based on the circumstantial evidence and corroborative evidence (cancellation of sale agreement and immediate execution of sale deed), and essential supporting evidences in the form of disarranged entries in thumb impression register of SRO for the relevant dates, the actual date of execution of the document identified as forged getting executed on 24.02.2012 much ahead of the dated of cancellation of sale agreement systematically illustrate the nonadherence to this principle, and the financial incapacity of the objector as reflected in the ROI filed for A.Y.2012-13, it is hereby ascertained that the execution of deed of sale dated 24.02.2012 in the records of SRO, Annur, Coimbatore District is not genuine and necessarily termed as a ''FORGED DOCUMENT''. On the final aspect that the criminal complaint filed by the Assessee in default, Smt. Sameer Bhuvaneshwari making a case of land-grabbing was quashed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities issued a Demand Notice on 30.05.2011 under Rule 2 of the Second Schedule to the Income Tax Act, 1961. Again on 30.08.2012, another Demand Notice was issued demanding the fourth respondent to pay arrears of tax along with interest. As the fourth respondent failed to pay the arrears of tax, the property of the fourth respondent were attached vide order dated 25.05.2012 in Form ITCP No.16 issued by the Income Tax Department. 6. It appears that petitioner and the fourth respondent had earlier entered into a Sale Agreement dated 19.02.2009 for the sale of one of the property viz., a theater together with land measuring an extent of 4950 Sq.ft. in Survey No.339/6 in Annur Village, Avinasi Revenue Jurisdiction, Coimbatore District. The fourth respondent had executed a Power of Attorney dated 18.08.2009 in favour of the wife of the petitioner also named Buvaneshwari. The said Power of Attorney was later cancelled on 16.08.2011 vide Doc.No.971/2011. 7. The Income Tax Department had attached the said property on 25.05.2012. Meanwhile, the sale deed dated 24.02.2012 was registered/executed by the fourth respondent in favour of the petitioner which was registered as Document No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent had an option to file a Civil suit. However, till date, the fourth respondent has not filed a suit against the petitioner. Thus, it is submitted that sale in favour of the petitioner vide registered Document No.1981 dated 24.02.2021 is binding. The learned Senior Counsel appearing for the petitioner further submits that though the second respondent has no jurisdiction to declare that the sale deed dated 24.02.2012 registered as Document No.1981 was void under the provision of the Income Tax Act, 1961. 13. In this connection, the learned Senior Counsel has drawn attention to decision of Bench of this Court in Sri Sivalaya Advances and Ors. Vs. Tax Recovery Officer-2, Income Tax Offices, Madurai reported in [2018] 408 ITR 611(Mad). A specific reference was made to Para 21 from the said decision, wherein it was observed as under:- Yet the orders impugned in these writ petitions cannot sustained as such. The Hon'ble Supreme Court in MANU/SC/0600/1998: (1998) 6 SCC 658 has held that it is the function of the civil court to declare a transaction to be null and void and that the Tax Recovery Officer cannot exercise the said function. Therefore, the respondent clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.1980/2012. Therefore, there is no merit in the present Writ Petition. That apart, it is submitted that in terms of Rule 11(6) of the second schedule of the Income Tax Act, 1961, only remedy that is available to the petitioner is to file a civil suit. 18. It is submitted that the fourth respondent is Party-in-Person with whom the petitioner had transactions had registered a sale agreement dated 19.02.2009. It is submitted that the fourth respondent's signature was forged by the petitioner in connivance with the Sub Registrar while registering Sale Deed dated 24.02.2012 registered as Document No.1981 of 2012. 19. It is submitted that the sale agreement dated 19.02.2009 was cancelled vide registered Document No.1980 of 2012 on 27.02.2012 and therefore the sale deed dated 24.02.2012 registered as Document No.1981 of 2012 was void. It is submitted that if the document dated 24.02.2012 had preceeded the cancellation of Sale Agreement on 27.02.2012, it should have been numbered prior to 1980 and not after 1980, but it has been registered 1981. 20. Learned counsel for the second respondent has drawn attention to Para 17 of the counter which reads as under:- 17. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, with the intention to defraud the Revenue , 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 proceeding : Provided that such charge or transfer shall not be void if made for valuable consideration and without notice of the pendency of the proceeding under this Act . 281. (1) Where, during the pendency of any proceeding 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 proceeding or otherwise : Provided that such charge or transfer shall not be void if it is made (i) for adequate consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and conveyed the said property to his wife and his daughter, original respondent. Objections were also filed by the Bank of Mahrashtra. The assessee as well as his wife and his daughter, therefore, contended that on the date when notice was issued under Rule 2 of the second Schedule to the Income Tax Act and also on the date when the said property was attached by the Tax Recovery Officer, the ownership of the property was his wife and his daughter. Hence, it was contended the property could not be attached for the dues of the assessee. 29. It was in the said context in para Nos. 8,9 and 12, the Court held as under:- 8. Section 281 declares as void any transfer made by the assessee during the pendency of proceedings under the Act, with the intention to defraud the Revenue. The powers of the Tax Recovery Officer, however, under Rule 11 of the Second Schedule to the Income Tax Act are somewhat different. Under Rule 11(1), where any claim is preferred to or any objection is made to the attachment or sale of any property in execution of a certificate on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the Income Tax Act. 30. Rule 11 (4) to (6) of the 2nd Schedule to the Income Tax Act, 1961 reads as under:- 11(4) Where, upon 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 possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person 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 Recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very Officer can attach property in possession of the assessee in his own right, or in possession of the tenant or 3rd party on behalf of/for the benefit of the assessee. 34. The Court however concluded that Tax Recovery Officer cannot declare sale made by the assessee in favour of a 3rd party as void, if he finds that the property of the assessee was transferred by the assessee to a 3rd party with an intention to defraud the revenue . As mentioned above, the expression intention has been deleted in the amended Section. The Court further held that, the Income Tax Department will have to file a suit in terms of Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, though under Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, the party against whom an order of attachment is made, has to institute a suit in a civil court to establish the right which he claims over the property in dispute and subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive. 35. Therefore, the ratio laid down by the Hon'ble Supreme Court in Tax Recovery officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade (1998) 6 Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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