2018 (7) TMI 1623 - HC - Income Tax

Recovery proceedings - power conferred on the Tax Recovery Officer - attachment orders - Held that - In the instant case, the respondent has issued the impugned notice and the petitioner has straightaway approached this Court and filed this writ petition. In my considered view, this writ petition is not the proper remedy, which the petitioner should have availed. In this regard, it is relevant to point out that the 2nd Schedule to the Income Tax Act contains the procedure for recovery of tax. The procedure for such investigation and the manner in which the proceedings to be conducted are enumerated under Rule 11 of the said Rules. Therefore, if the petitioner s claim is that the property is not liable for such attachment, then the petitioner has to make a claim before the Tax Recovery Officer and for such reason, the petitioner could not have approached this Court invoking the jurisdiction under Article 226 of the Constitution of India. Therefore, the Court holds that the writ petition is not maintainable. However, considering the fact that the Income Tax Act and Rules framed thereunder, especially Rule 11 under the 2nd Schedule, provides for a remedy to the assessee, the petitioner is at liberty to avail such a remedy. Writ petition is dismissed as not maintainable with a direction to the petitioner to file a claim before the respondent in terms of Rule 11(1) of the 2nd Schedule to the Income Tax act within a period of four weeks from the date of receipt of a copy of this order.

Issues Involved:
Challenge to attachment of property under Income Tax Act - Validity of transfer of property - Proper remedy for challenging attachment.

Analysis:

Issue 1: Challenge to attachment of property under Income Tax Act
The petitioner challenged the attachment of property by the respondent, Tax Recovery Officer-I, claiming that the transfer of property to the petitioner was declared null and void under Section 281(1) and Rule-16 of the 2nd Schedule to the Income Tax Act, 1961. The petitioner contended that the attachment was against the principles of the Act as there were no encumbrances on the property at the time of purchase. The respondent attached the property for the arrears of the vendor long after the petitioner had acquired it, raising questions about the validity of the attachment.

Issue 2: Validity of transfer of property
Section 281 of the Income Tax Act deals with transfers deemed void if made during or after a proceeding under the Act, without notice to the tax dues. The onus is on the assessee to prove the validity of such transactions. In this case, the petitioner claimed to be a bona fide purchaser for value without knowledge of any encumbrances. The Court analyzed the provisions of Section 281(1) along with the proviso, emphasizing the need for adequate consideration and lack of notice of tax dues for a transfer to be valid.

Issue 3: Proper remedy for challenging attachment
The Court highlighted that the petitioner should have availed the remedy provided under Rule 11 of the 2nd Schedule to the Income Tax Act for investigating claims or objections to property attachment. The procedure under Rule 11 mandates the Tax Recovery Officer to investigate such claims and objections, providing a comprehensive framework for resolving disputes related to property attachment. The Court deemed the writ petition as not maintainable and directed the petitioner to file a claim before the respondent within a specified period, emphasizing the availability of remedies under the Act for addressing such disputes.

In conclusion, the Court dismissed the writ petition as not maintainable, directing the petitioner to follow the prescribed procedure under Rule 11 of the 2nd Schedule to the Income Tax Act for challenging the attachment of the property. The judgment underscores the importance of adhering to the statutory provisions and utilizing the remedies provided under the law for resolving disputes related to tax recovery and property attachments.

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