2022 (10) TMI 1229 - HC - Income Tax

Recovery proceedings - attachment made of 50% of the share of R3 in the property in question - claim of ownership of the property - void sale agreement - claim of the petitioner that the property in question has been sold to him is in direct contravention to the statutory provisions as well as the Rules, seeing as there was an attachment of the property that was validly made, subsisting at the time of the avowed transfer of the property - HELD THAT - This Court is unaware as to whether there was any encumbrance registered upon the property. In any event, the fact that the property was under attachment is not in dispute. A copy of the ITCP has been placed on record by the revenue counsel. R3 has filed a counter where she brings to light disputes between the petitioner and R3 in regard to the transfer of the property itself. Thus, the petitioner and R3 would proceed on the basis of their rival claims to the property. In such circumstances, the appropriate remedy is under Rule 11 of the second schedule which sets out the procedure for recovery of tax - Hence, it is for the TRO to look into the claim of ownership of the property and, in fact, the impugned communication, a mere notice, is precisely to such effect. Learned counsel for the petitioner would express apprehension that the TRO has pre-determined the issue, since at paragraph 2 he proceeds on the basis that the transfer had taken place for inadequate consideration, and when there were tax arrears. The apprehension expressed by petitioner may be allayed by directing R2 to approach the matter with an open mind, hear the petitioner and R3 by issuance of prior notice, take their submissions into account and passing an order thereafter, in accordance with law and bearing in mind all relevant rules in this regard. WP dismissed.

Summary

Issues:
1. Ownership claim over property in question.
2. Validity of attachment of property due to tax arrears.
3. Disputes between petitioner and third respondent regarding property transfer.
4. Application of Rule 11 of the second schedule for recovery of tax.

Analysis:
1. The petitioner claims ownership of a property in Coimbatore District and alleges to have purchased it from the third respondent. The affidavit filed by the petitioner outlines the basis of their title over the property.
2. The tax authorities had attached 50% of the third respondent's share in the property due to outstanding tax arrears. The revenue asserts that the petitioner's claim of ownership is in contravention of statutory provisions and rules since the property was under valid attachment at the time of the alleged transfer.
3. The third respondent disputes the transfer of the property to the petitioner, highlighting ongoing disagreements between them regarding the property transfer itself.
4. The Court notes the provision of Rule 11 of the second schedule, which outlines the procedure for investigating claims or objections to the attachment or sale of property in execution of a tax recovery certificate. The Tax Recovery Officer is directed to investigate the ownership claim impartially, considering submissions from both parties before making a decision.

The Court dismisses the Writ Petition but directs the Tax Recovery Officer to approach the matter with an open mind, hear both parties, and make a decision in accordance with the law and relevant rules. The judgment emphasizes the importance of a fair investigation into the ownership claim and the need to address disputes between the parties involved.