1987 (8) TMI 11 - HC - Income Tax

1985 (4) TMI 64 - SC

Issues Involved:

1. Whether the sale of the suit property on January 22, 1969, is fraud on the Revenue and not bona fide.
2. Whether the sale deed dated January 22, 1969, is not for valuable consideration and without notice.
3. Whether on the date of sale, income-tax proceedings and assessments for 1964-65 to 1968-69 in the case of K. R. Radhakrishnan were at various stages of finalisation and were completed within a few months after the completion of the sale.
4. Whether the sale deed dated January 22, 1969, is a sham and nominal document not intended to be acted upon.
5. Whether the sale of attached property by three separate sale deeds each for Rs. 25,000 was executed to avoid getting an income-tax clearance certificate under section 230A of the Income-tax Act.
6. Whether the sale is void under section 281 of the Income-tax Act.
7. Whether the plaintiffs were the erstwhile partners along with the seller, K. R. Radhakrishnan in K. R. & Sons from January 1, 1964, to December 31, 1968, and as such cannot plead ignorance of the assessment proceedings against K. R. Radhakrishnan.
8. Whether, under section 281 of the Income-tax Act, an opportunity was given to the plaintiffs to make a representation on January 19, 1974.
9. To what relief, if any, is the plaintiff entitled?

Issue-wise Detailed Analysis:

1. Whether the sale of the suit property on January 22, 1969, is fraud on the Revenue and not bona fide:
The court found that the sale of the suit property was indeed a fraud on the Revenue. The transferor, K. R. Radhakrishnan, executed the sale deeds immediately after receiving notices from the Income-tax Officer regarding pending assessments. The proximity of the sale to the initiation of tax proceedings indicated an intent to defraud the Revenue.

2. Whether the sale deed dated January 22, 1969, is not for valuable consideration and without notice:
The court determined that the sale deeds were for valuable consideration. The total consideration of Rs. 75,000 was paid, and improvements were made to the property. However, the plaintiffs had knowledge of the pending tax proceedings against K. R. Radhakrishnan, as they were his partners and aware of his tax liabilities.

3. Whether on the date of sale, income-tax proceedings and assessments for 1964-65 to 1968-69 in the case of K. R. Radhakrishnan were at various stages of finalisation and were completed within a few months after the completion of the sale:
The court confirmed that the assessments for the years 1964-65 to 1968-69 were in various stages of finalisation at the time of the sale. Notices had been issued to K. R. Radhakrishnan, and the anticipated tax liability was substantial.

4. Whether the sale deed dated January 22, 1969, is a sham and nominal document not intended to be acted upon:
The court did not find the sale deeds to be sham or nominal. The transactions were genuine in terms of consideration passing to the vendor. However, the intention behind the sale was to defraud the Revenue, making the transactions void under section 281 of the Income-tax Act.

5. Whether the sale of attached property by three separate sale deeds each for Rs. 25,000 was executed to avoid getting an income-tax clearance certificate under section 230A of the Income-tax Act:
The court found that executing three separate sale deeds for Rs. 25,000 each was a deliberate attempt to avoid obtaining an income-tax clearance certificate under section 230A, which is required for transactions exceeding Rs. 50,000. This indicated a fraudulent motive.

6. Whether the sale is void under section 281 of the Income-tax Act:
The court held that the sales were void under section 281 of the Income-tax Act. The sales were executed during the pendency of tax proceedings with the intent to defraud the Revenue. The plaintiffs failed to prove that they had no notice of the pending proceedings.

7. Whether the plaintiffs were the erstwhile partners along with the seller, K. R. Radhakrishnan in K. R. & Sons from January 1, 1964, to December 31, 1968, and as such cannot plead ignorance of the assessment proceedings against K. R. Radhakrishnan:
The court concluded that the plaintiffs, being erstwhile partners of K. R. Radhakrishnan, were aware of his tax liabilities and the pending assessment proceedings. Their plea of ignorance was not accepted.

8. Whether, under section 281 of the Income-tax Act, an opportunity was given to the plaintiffs to make a representation on January 19, 1974:
The court noted that the plaintiffs were given an opportunity to make a representation under section 281, but they did not respond. This further weakened their case.

9. To what relief, if any, is the plaintiff entitled:
The court dismissed all three suits, holding that the sales were void under section 281 of the Income-tax Act. The plaintiffs were not entitled to any relief.

Conclusion:
The court dismissed all three appeals and upheld the decision of the lower court, finding that the sales were void under section 281 of the Income-tax Act. The plaintiffs were aware of the pending tax proceedings and acted in collusion with K. R. Radhakrishnan to defraud the Revenue. The appeals were dismissed with costs.

← Previous Next →