1995 (3) TMI 21 - HC - Income Tax

Summary

Issues:
1. Maintainability of the writ petition due to the petitioner's transfer of interest in the property.
2. Interpretation of Section 281 of the Income-tax Act regarding the voidability of transfers during pending proceedings.
3. Determination of the extent of voidability of the transfer in relation to tax liability.

Analysis:

The judgment delivered by the High Court of PUNJAB AND HARYANA involved a case where the petitioner, an income-tax assessee, transferred certain shares and possession of a flat to his wife, leading to an order by the Deputy Commissioner of Income-tax declaring the transfer void under Section 281 of the Income-tax Act. The primary issue addressed was the maintainability of the writ petition by the petitioner, challenged by the Revenue on the grounds of lack of locus standi due to the transfer. The court held that since the property would still be treated as belonging to the assessee for tax purposes, the petitioner had the right to challenge the order, establishing his locus standi in the matter.

Regarding the interpretation of Section 281 of the Income-tax Act, the court analyzed the provision which declares transfers made by an assessee during pending proceedings or after completion thereof void against any tax liability. The court clarified that the section does not render the transfer void ab initio but only against claims of the Revenue in respect of tax liabilities determined during the relevant proceedings. It was emphasized that the ownership does not revert to the assessee indefinitely, but the transfer is void only to the extent of the tax liability determined by the authorities post the transfer.

The court further deliberated on the extent of voidability of the transfer concerning tax liability. It was concluded that the transfer made by the petitioner to his wife was void only against claims of the Revenue related to tax liability or any sum payable by the assessee resulting from pending or completed proceedings at the time of transfer. The court directed the removal of the statement asserting continued ownership by the assessee in the Deputy Commissioner's order, emphasizing the limited voidability of the transfer in relation to tax obligations.

In summary, the judgment clarified the rights of the petitioner to challenge the order despite the transfer, interpreted Section 281 to limit the voidability of transfers based on tax liabilities, and determined the specific extent of voidability in the case at hand, providing clarity on the legal implications of such transfers under the Income-tax Act.