1981 (1) TMI 1 - HC - Income Tax

Issues Involved:
1. Jurisdiction of the Income-tax Officer under Section 281 of the Income-tax Act.
2. Authority and procedural clarity under Section 281.
3. Validity and operation of Section 281 in light of Article 14 of the Constitution.
4. Limitation period for declaring transfers void under Section 281.
5. Natural justice and the right to be heard.
6. Nature and effect of the order passed under Section 281.

Detailed Analysis:

1. Jurisdiction of the Income-tax Officer under Section 281:
Shri Natu contended that the Income-tax Officer had no jurisdiction or authority to pass an order under Section 281. He argued that the section does not confer any such power or jurisdiction upon the Income-tax Officer. The court, however, found that Section 281 merely declares what the law is and does not confer exclusive adjudicatory power on the Income-tax Officer. The expression of an intention to proceed under Section 281 is not an adjudication but a preliminary step for recovery proceedings.

2. Authority and Procedural Clarity under Section 281:
Shri Natu argued that the Act does not specify which officer in the hierarchy can take action under Section 281, leading to potential usurpation of civil court jurisdiction. The court noted that Section 281 is akin to Section 53 of the Transfer of Property Act, which does not bar the jurisdiction of civil courts. The court held that the Income-tax Officer's action under Section 281 is not conclusive and does not preclude the jurisdiction of civil courts.

3. Validity and Operation of Section 281 in Light of Article 14:
Shri Natu submitted that Section 281 could lead to discrimination, violating Article 14 of the Constitution, as it allows the Income-tax Officer discretion to choose between remedies. The court held that Section 281, by merely declaring the law, does not create an exclusive remedy and does not violate Article 14. The court emphasized that the expression of an intention under Section 281 is not an adjudication and does not affect the rights of the parties, thus not attracting Article 14.

4. Limitation Period for Declaring Transfers Void under Section 281:
An argument based on the Limitation Act was presented, stating that the transfers made between 1967 and 1969 could not be declared void in 1974 as the limitation period had expired. The court did not find this argument persuasive, noting that the liability to the State is independent of any consideration of time, and the expression of an intention under Section 281 does not constitute a time-barred adjudication.

5. Natural Justice and the Right to Be Heard:
Shri Natu contended that the order passed without notice to the beneficiaries violated principles of natural justice. The court agreed that the right to be heard is fundamental and directed that the Income-tax Officer must decide objections from the claimants in accordance with law, ensuring natural justice is upheld.

6. Nature and Effect of the Order Passed under Section 281:
The court clarified that an order under Section 281 is not an adjudication but an expression of intention to proceed against the property for recovery of tax. This expression does not affect the rights of the parties and does not preclude them from seeking remedies through civil courts. The court emphasized that the procedure for recovery of tax under the Second Schedule of the Income-tax Act remains intact, and claimants can file objections which the Tax Recovery Officer must decide.

Conclusion:
The petition challenging the order under Section 281 was dismissed. The court directed the Income-tax Officer to expedite the proceedings and decide any objections from the claimants within three months. The court held that Section 281 merely declares the law and does not confer exclusive adjudicatory power on the Income-tax Officer, thus not violating Article 14 of the Constitution. The expression of intention under Section 281 is a preliminary step for recovery and does not preclude the jurisdiction of civil courts.

← Previous Next →