2017 (7) TMI 176 - HC - Income Tax

Attachment orders - whether the third respondent is not the owner of the said property as the entire sale consideration has been paid by the writ petitioner/ first respondent and therefore the first respondent firm is the owner of the property and therefore the order of the appellant department is not binding and should be lifted? - maintainability of petition - Held that - As far as the instant case is concerned, the sale of property as defined under the Transfer of Property Act, 1882, was not completed at the time of order of Attachment was issued by the appellant department. At that time, only a sale agreement was entered into between the parties. The contention of the writ petitioner/ first respondent that the entire sale consideration was paid to the third respondent and the relevant documents have been handed over to the writ petitioner/ first respondent by the third respondent, would itself be sufficient to show that the writ petitioner/ first respondent is deemed to be the owner of the subject property. If there is any sale of the immovable property, the Transfer of Property Act, would apply. As per the provisions of the Act, unless the property is transferred in the name of the purchaser, the writ petitioner herein cannot claim that he is the owner of the property. Hence, the writ petitioner has no locus standi to question the order of attachment in the present appeal, as the writ petitioner is not the owner of the property and the vendor who is the assessee cannot question the order of attachment. The transfer of immovable property can only be, by way of a sale deed. In the absence of a deed of conveyance, duly stamped and registered, no right, title or interest in an immovable property can be transferred. However, the contention of the writ petitioner/ first respondent that he is deemed to be the owner of the property cannot be accepted in the light of the Transfer of Property Act

Issues Involved:
1. Validity of the writ petition.
2. Completion of the sale transaction.
3. Attachment of the property by the Income Tax Department.
4. Ownership and possession of the property.
5. Applicability of Section 281 of the Income Tax Act, 1961.
6. Legal precedents and their applicability.

Issue-wise Detailed Analysis:

1. Validity of the writ petition:
The appellant department contended that the writ petition was not maintainable as the writ petitioner/first respondent did not challenge the order of attachment dated 05.08.2010. The court noted that the writ petition was filed after the writ petitioner/first respondent became aware of the notice of attachment issued by the appellant department on 08.04.2011. The court held that the writ petition was not maintainable for not challenging the initial order of attachment.

2. Completion of the sale transaction:
The court examined whether the sale transaction was completed as per Section 2(47) of the Income Tax Act, 1961. The writ petitioner/first respondent argued that the sale transaction was completed on 18.02.2010, and they became the absolute owner of the property. However, the court found that the sale of property as defined under the Transfer of Property Act, 1882, was not completed at the time of the order of attachment. The court emphasized that a transfer of immovable property by way of sale can only be by a sale deed, duly stamped and registered.

3. Attachment of the property by the Income Tax Department:
The appellant department attached the property on 08.04.2011, due to tax arrears owed by the third respondent. The court noted that as per Section 281 of the Income Tax Act, any transfer of assets during the pendency of proceedings or after completion but before service of notice is void against any claim for tax dues. The court held that the attachment was valid as the sale transaction was not completed before the attachment order.

4. Ownership and possession of the property:
The writ petitioner/first respondent claimed ownership based on the sale agreement and payment of the entire sale consideration. However, the court held that mere possession and payment do not confer ownership unless a registered sale deed is executed. The court cited the Supreme Court's decision in Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana, which stated that ownership of immovable property is transferred only through a registered sale deed.

5. Applicability of Section 281 of the Income Tax Act, 1961:
The court analyzed Section 281, which voids any transfer of assets during the pendency of tax proceedings unless made for adequate consideration and without notice of such proceedings. The court found that the third respondent, who was the assessee, had not disclosed the tax proceedings to the writ petitioner/first respondent. Therefore, the transfer was void against the tax claim.

6. Legal precedents and their applicability:
The court reviewed various legal precedents cited by both parties. It distinguished the cases cited by the writ petitioner/first respondent, noting that they were not applicable to the facts of the present case. The court relied on the Supreme Court's decision in Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana, which held that a sale of immovable property requires a registered sale deed to transfer ownership.

Conclusion:
The court concluded that the writ petitioner/first respondent was not the owner of the property as the sale transaction was not completed through a registered sale deed. The attachment by the Income Tax Department was valid under Section 281 of the Income Tax Act. The court set aside the order of the writ court and allowed the writ appeal filed by the Revenue.

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