2005 (5) TMI 50 - HC - Income Tax

Orders of attachment - Section 281B ownership of property - it was held by the Commissioner in the impugned order that since the ownership of the said property in question has not been transferred by executing a registered deed of conveyance respondent No. 9 cannot be said to have ceased to be the owner and the petitioner has not acquired any title in the property. It was further observed by the Commissioner that the petitioner had not taken possession of the same applicant submit that impugned orders are bad in law - We hold the order of attachment relating to the portion of the property claimed and held by the petitioner is not sustainable under the law and the same is set aside. The writ petition is thus allowed.

Issues Involved:
1. Validity of the provisional and final orders of attachment under section 281B of the Income-tax Act, 1961.
2. Ownership and possession of the property in question.
3. Jurisdiction and application of section 281 of the Income-tax Act.
4. Principles of natural justice and procedural fairness.
5. Maintainability of the writ petition in the context of disputed facts and alternative remedies.

Detailed Analysis:

1. Validity of the Provisional and Final Orders of Attachment:
The petitioners challenged the provisional order of attachment dated May 30, 1997, and the final order dated November 2, 1999, issued under section 281B of the Income-tax Act, 1961. They argued that the orders were legally flawed due to erroneous application of law. The court noted that the provisional order of attachment was extended multiple times without proper communication, and the final order was based on the Commissioner's finding that the petitioner was not the owner of the property due to the absence of a registered deed of conveyance.

2. Ownership and Possession of the Property:
The core issue was whether the petitioner had acquired ownership and possession of the property. The petitioner contended that under section 27(iiia) of the Income-tax Act, they were deemed the owner after entering into an agreement, paying the full consideration, and taking possession. The Commissioner's decision, based on the Supreme Court's ruling in Nawab Sir Mir Osman Ali Khan v. CWT, was that without a registered conveyance deed, the petitioner was not the owner. The court disagreed, emphasizing that possession and payment of consideration under a contract of the nature referred to in section 53A of the Transfer of Property Act could constitute ownership under the Income-tax Act.

3. Jurisdiction and Application of Section 281:
The petitioner argued that the Commissioner had no jurisdiction to declare the transfer void under section 281 of the Income-tax Act and that such a declaration should be sought through a civil suit. The court found that the Commissioner's decision contradicted itself by simultaneously treating the transaction as a transfer and not a transfer. The court held that the Commissioner's findings were without jurisdiction and not sustainable.

4. Principles of Natural Justice and Procedural Fairness:
The petitioner claimed that the Commissioner's decision was made in violation of natural justice principles, as they were not given an opportunity to rebut the evidence used against them. The court agreed, noting that the Revenue's inspection reports were prepared without the petitioner's knowledge or opportunity to respond. The court emphasized that possession could be established through various means and that the Commissioner failed to consider all relevant documents and evidence.

5. Maintainability of the Writ Petition:
The Revenue argued that the writ petition was not maintainable due to disputed facts and the availability of alternative remedies. The court, however, held that the writ petition was maintainable as it involved questions of law and breaches of natural justice. The court also noted that the previous order by Justice Ghose, which suggested the need for a civil suit, had been modified, removing the relevant observations.

Conclusion:
The court concluded that the petitioner had acquired ownership and possession of the property under the Income-tax Act, and the attachment orders were not sustainable. The court set aside the attachment orders and allowed the writ petition, emphasizing the need for adherence to principles of natural justice and proper legal procedures. No order as to costs was made.

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