1992 (7) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the attachment order dated June 7, 1977.
2. Validity of the rejection order dated June 22/27, 1977.
3. Validity of the notice of attachment dated February 15/17, 1977, and the letter dated November 9, 1977.
4. Jurisdiction of the Tax Recovery Officer to determine the title of the shares.
5. Jurisdiction of the Calcutta High Court to entertain the writ application.

Issue-wise Detailed Analysis:

1. Validity of the Attachment Order Dated June 7, 1977:
The petitioners, trustees of Birla Seva Trust, challenged the attachment order issued by the Tax Recovery Officer (TRO) under Rule 26(1)(ii) of the Second Schedule to the Income-tax Act, 1961. The attachment was in respect of tax dues of Raja Baldeodas Birla Santatikosh Trust (private trust). The court held that the attachment was based on the Jaipur Bench Tribunal's decision, which was overturned by the Calcutta Bench and the Division Bench of the Calcutta High Court. The court concluded that the shares were not the property of the private trust and thus could not be attached for its tax dues.

2. Validity of the Rejection Order Dated June 22/27, 1977:
The TRO's order rejecting the petitioners' claim that the shares were not liable to attachment was also challenged. The court found that this order was based solely on the Jaipur Bench Tribunal's decision, which was no longer sustainable after the Calcutta Bench and Division Bench decisions. Therefore, the rejection order was invalid.

3. Validity of the Notice of Attachment Dated February 15/17, 1977, and the Letter Dated November 9, 1977:
The notice of attachment and the subsequent letter were similarly challenged. The court reiterated that the Division Bench's decision, which held that the shares were not the property of the private trust and could not be attached, was binding on the income-tax authorities. Consequently, these documents were also set aside.

4. Jurisdiction of the Tax Recovery Officer to Determine the Title of the Shares:
The court addressed whether the TRO had the jurisdiction to determine the title of the shares. It was held that the TRO's powers were limited to determining possession and custody of the shares, not their title. The court cited analogous provisions under Order 21, Rule 58 of the Code of Civil Procedure, emphasizing that only a civil court could determine title. The shares were registered in the names of the trustees of the petitioner trust, and the TRO had no jurisdiction to question this title.

5. Jurisdiction of the Calcutta High Court to Entertain the Writ Application:
The respondents contended that the Calcutta High Court lacked jurisdiction to entertain the writ application. The court rejected this argument, stating that it could entertain an application under Article 226 of the Constitution if any part of the cause of action arose within its jurisdiction. The attached shares were in Calcutta, and the impugned orders were served there, thus giving the court jurisdiction.

Conclusion:
The writ application was allowed. The notice of attachment dated February 15/17, 1977, the order of attachment dated June 7, 1977, the rejection order dated June 22/27, 1977, and the letter dated November 9, 1977, were set aside and quashed. The court held that the shares were not the property of the private trust and could not be attached for its tax dues. Additionally, the court affirmed its jurisdiction to entertain the writ application. No order as to costs was made, and the judgment also governed C.R. No. 6550 (W)/77.