2018 (3) TMI 586 - HC - Income Tax

Recovery of dues of the erstwhile owners of the property - attachment orders - Benefit of amnesty scheme framed by the Government rejected - Held that - Firstly, when the petitioner purchased the properties, no charge of the department was reflected in the revenue records. There is nothing on record to suggest that to defeat the interest of the revenue, erstwhile owners had transferred the properties to the petitioner who happen to be close relatives or that the transfer was without full consideration. The element of transfer being fraudulent is therefore, not established. Secondly, even in terms of section 47, the case of the department is that such transfer was void. The transfer took place in the year 2007. No action was taken by the department for nearly 10 years. It was only when the petitioner asked for benefit of amnesty scheme the said view was taken. Even on ground of delay, laches and inaction, the department cannot be allowed to open such old issues. In the present case, the petitioner did apply before the last date, nevertheless, his offer was conditional. The petitioner did not make payment of tax dues. He only indicated that he has a buyer and who also would pay the tax dues on a condition that department will thereafter lift the attachment on the properties. This was not an unconditional application for benefit of amnesty scheme. The amnesty scheme would be in the nature of an invitation by the Government and applying dealer would be making an offer. Such offer had to be unconditional. The petitioner therefore, did not make the application in proper requirement of the scheme. He did not deposit the amount. In any case, his offer that is, buyer would pay the amount provided the Government would agree to lift the attachment was not a valid offer. Whether the attachment would be lifted or not depend on various circumstances and not mere offer to pay the principal tax. The petitioner s request for being granted belated benefit of the amnesty therefore, must fail, despite our conclusion to the first issue regarding the legality of the Government s stand of insisting that either the erstwhile owners or the petitioner must clear the dues of such owners from whom the petitioner had purchased the properties in question. - Decided against the revenue.

Summary

Issues:
1. Rejection of petitioner's application for benefit of an amnesty scheme.
2. Liability of petitioner for dues of erstwhile owners.
3. Department's stand on clearing dues of erstwhile owners before lifting charge.
4. Petitioner's application for benefit of amnesty scheme under specific conditions.

Analysis:
1. The petitioner challenged the rejection of their application for an amnesty scheme by the Government. The petitioner, a public limited company, purchased properties in 2007, but the previous owners had outstanding VAT dues. The petitioner's business suffered, and they found a buyer willing to pay off the dues. The Government introduced an amnesty scheme, and the petitioner applied before the deadline but with a conditional offer. The application was rejected based on the outstanding dues of the previous owners, deeming the transfer fraudulent.

2. The petitioner argued that they should not be liable for the previous owners' dues as they were bona fide purchasers without notice of the charges. They contended that the department cannot declare the sale void unilaterally after a significant period without taking legal action. The court found the department's stance incorrect, emphasizing that the transfer was not fraudulent, and the department should have pursued legal avenues earlier if the transfer was void.

3. Regarding the department's insistence on clearing the previous owners' dues before lifting the charge, the court held that the department's approach was flawed. The court highlighted that there was no evidence of fraudulent transfer and that the department's delay in taking action for ten years weakened their position. The court cited precedents indicating that the department must resort to legal procedures to declare a transfer void.

4. In terms of the petitioner's application for the amnesty scheme, the court found that the petitioner's offer was conditional and did not meet the scheme's requirements. The court noted that the scheme necessitated an unconditional application with full payment of tax dues. The court ruled that the petitioner's offer, dependent on the department lifting the attachment, was not a valid offer under the scheme. Consequently, the court denied the petitioner's request for belated benefit under the amnesty scheme, despite ruling in their favor on the issue of liability for previous owners' dues.

In conclusion, the court set aside the impugned order, disposing of the petition while providing detailed reasoning for each issue raised in the case.