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Issues Involved:
1. Whether the Tax Recovery Officer has the power under rule 11 of the Second Schedule to declare a transfer of property void under section 281 of the Income-tax Act, 1961. 2. Whether the petitioners are precluded from contending against the Tax Recovery Officer's power due to a prior judgment. 3. Whether the impugned order is a speaking order and thus valid. Detailed Analysis: Issue 1: Power of the Tax Recovery Officer under Rule 11 and Section 281 The primary issue concerns whether the Tax Recovery Officer is empowered under rule 11 of the Second Schedule to the Income-tax Act to declare a transfer of property void under section 281. Section 281 states that any transfer of property by an assessee during the pendency of proceedings with the intention to defraud the Revenue shall be void against any tax claim. Rule 11 outlines the procedure for investigating claims or objections to the attachment or sale of property in execution of a tax recovery certificate. The court noted that the provisions of rule 11 are analogous to Order 21, rules 58 to 61 and 63 of the Code of Civil Procedure, which primarily focus on possession rather than title. It is settled law that complicated questions of title should not be addressed under the summary procedure of Order 21, rule 58. The court held that the Tax Recovery Officer, in proceedings under rule 11, must direct his investigation to possession and cannot entertain claims that a transfer is void due to fraud against the Revenue. The court referenced the Supreme Court judgment in C. Abdul Shukoor Saheb v. Arji Papa Rao, AIR 1963 SC 1150, which clarified that a defense claiming a transfer is void due to fraud is not permissible in summary proceedings under Order 21, rule 58. The court concluded that the Tax Recovery Officer does not have the power under rule 11 to declare a transfer void under section 281. Issue 2: Preclusion by Prior Judgment The second issue was whether the petitioners are precluded from contesting the Tax Recovery Officer's power due to a prior judgment. The earlier petition challenged an order by the Income-tax Officer declaring certain transfers void under section 281. The court in the earlier petition observed that section 281 is a substantive declaration of law and does not confer adjudicatory power on the tax authorities. It was held that the expression of intention by the tax authorities under section 281 does not preclude the adjudicatory process under rule 11. The court in the current petition noted that the earlier judgment did not address the ambit of the Tax Recovery Officer's power under rule 11. Therefore, the petitioners are not precluded from contending that the Tax Recovery Officer lacks the power to declare a transfer void under section 281. Issue 3: Validity of the Impugned Order The third issue was whether the impugned order is a speaking order and thus valid. The court found that the order lacked a discussion of the merits or demerits of the evidence and contentions, and contained no statement of reasoning. The order merely quoted the views of the Income-tax Officer and concluded that the transfers were void without any analysis. The court held that the order must be set aside on the ground that it is not a speaking order. Conclusion The court restrained the Tax Recovery Officer from proceeding with the recovery of tax arrears by the sale of the attached property and quashed the order of attachment. The court denied leave to appeal to the Supreme Court, noting that the decision was based on a Supreme Court judgment. The order quashing the attachment was set to become operative on February 1, 1983.
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