1997 (1) TMI 15 - HC - Income Tax

Issues Involved:
1. Validity of the gift deed executed by Smt. Tara Rani.
2. Jurisdiction of the Income-tax Department to proceed against the petitioner's share in the property.
3. Validity of the order passed under section 281 of the Income-tax Act.
4. Priority of attachment and sale of properties for tax recovery.
5. Period of limitation for the sale of attached property under rule 68B.
6. Allegations of mala fides against the Income-tax Department officials.

Detailed Analysis:

1. Validity of the gift deed executed by Smt. Tara Rani:
The petitioner argued that the gift deed executed by Smt. Tara Rani in favor of her grandchildren was valid as it had been assessed to gift-tax and the tax was duly paid. However, the court noted that the gift deed was declared void under section 281 of the Income-tax Act because it was executed to defraud the Revenue and avoid tax liability. This decision was upheld by the High Court in a previous writ petition (Civil Writ Petition No. 361 of 1979), and the petitioner's rights were deemed unaffected by the earlier court order since the petitioner was a minor at the time and not given a hearing.

2. Jurisdiction of the Income-tax Department to proceed against the petitioner's share in the property:
The petitioner contended that the Income-tax Department had no jurisdiction to proceed against her share in the property. However, the court found that the petitioner's father and legal guardian, Baldev Raj, was aware of the High Court's decision and did not seek a review or request to include the minor as a party in the writ petition. Therefore, the petitioner could not challenge the order on these grounds.

3. Validity of the order passed under section 281 of the Income-tax Act:
The court reiterated that the order under section 281 of the Act had been previously examined and upheld by the High Court. The conditions required under section 281 were fulfilled: there was an outstanding tax liability, and the gift deed was executed during the pendency of assessment proceedings. The court found no substance in the petitioner's pleas against the order passed by the Income-tax Officer under section 281.

4. Priority of attachment and sale of properties for tax recovery:
The petitioner suggested that the tax recovery should proceed against another property owned by Smt. Tara Rani in Gurgaon, which was also attached. The court held that there was no legal provision that prevented the Department from proceeding against the property that was attached earlier. The house in Chandigarh was attached in 1978, and the Department had the discretion to proceed with its auction for tax recovery.

5. Period of limitation for the sale of attached property under rule 68B:
The petitioner argued that the sale of the attached property was barred by the limitation period prescribed in rule 68B of the Second Schedule to the Act. The court clarified that rule 68B, inserted by the Finance Act, 1992, deemed the date of the final order giving rise to a tax demand as June 1, 1992, for properties attached before that date. Additionally, the period of limitation was further extended due to the stay order granted by the court. Therefore, the plea regarding the expiry of the limitation period was rejected.

6. Allegations of mala fides against the Income-tax Department officials:
The petitioner alleged that the attachment and sale proceedings were initiated due to mala fides on the part of the Income-tax Department officials. The court dismissed this plea outright, noting that no such plea was raised in the writ petition, and there was no material evidence to support the charge of mala fides. The court emphasized that allegations of mala fides must be substantiated with sufficient material.

Conclusion:
The writ petition was found to be devoid of any force and merit and was dismissed with costs quantified at Rs. 5,000.

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