1990 (7) TMI 26 - HC - Income Tax

Summary

Issues:
1. Legality and validity of a notice issued by the Tax Recovery Officer regarding attachment of premises due to purported dues.
2. Interpretation of section 281(1) of the Income-tax Act, 1961 regarding attachment of property.
3. Compliance with the conditions of section 281 for property purchase.
4. Obligations of the Income-tax Department in cases of property transactions.

Detailed Analysis:
1. The petitioners, a registered partnership firm, challenged the legality and validity of a notice issued by the Tax Recovery Officer for attaching premises due to purported dues from another party. The petitioners had purchased the premises in question for adequate consideration and without notice of any pending proceedings against the previous owner. The petitioners contended that the attachment was illegal as they were not informed of any dues against the previous owner at the time of purchase.

2. The court examined section 281(1) of the Income-tax Act, 1961, which allows for attachment of property for recovery of dues. The Department argued that the petitioners should have sought information from the Income-tax Officer regarding any pending proceedings against the previous owner before finalizing the purchase. However, the court found that the petitioners had fulfilled their obligation by filing the necessary Form No. 37EE with the required information, and the Department did not raise any objections within a reasonable time frame.

3. The court emphasized that the petitioners had complied with the conditions of section 281 by providing the necessary information at the time of purchase. It was noted that the Department did not take any steps or raise any objections against the purchase despite being informed through the required form. The court held that the petitioners had purchased the premises in good faith and without knowledge of any pending dues against the previous owner.

4. The judgment highlighted the obligations of the Income-tax Department in property transactions involving potential attachment for recovery of dues. The court noted that the Department failed to take any action or file a reply to the petition, indicating a lack of grounds for attaching the premises. The court ultimately quashed the impugned notice dated June 19, 1987, and ruled in favor of the petitioners, stating that the Department had no valid case for attaching the premises purchased by the petitioners in 1984.