2019 (6) TMI 758 - HC - Income Tax

Attachment of the property the TRO - bonafide purchaser - prohibited and restrained the defaulter assessee from transferring or charging the property in any way - claimed that petitioner has no idea that the property was already attached by the department - HELD THAT - We inquired with Mr. Mirza, the learned counsel appearing for the writ applicant whether his client has responded to such communication or not. Mr. Mirza, the learned counsel pointed out that his client has not so far responded in any manner to the said communication. We are of the view that if the writ applicant is seeking to rely upon the proviso (i) to Section 281 of the Act, 1961, he needs to point out to the authority concerned that the purchase of the attached property was for adequate consideration and without notice of the pendency of any proceedings against the defaulter assessee under the Act and that too the transfer was before the service of notice under Rule 2 of the second schedule. The writ applicant shall appear before the Tax Recovery Officer, Valsad at the earliest and adduce necessary evidence and also make good his case for discharging the notice/communication dated 27.03.2019 Annexure-D to this petition. The authority concerned shall hear the writ applicant and pass appropriate order in accordance with law. It is expected by the authority concerned not to take any coercive steps against the writ applicant till the completion of this exercise as directed by this Court.

Summary

Issues:
Challenge to communication dated 27.03.2019 by Tax Recovery Officer regarding attachment of property under Income Tax Act, 1961.

Analysis:
1. The writ applicant sought relief under Article 226 of the Constitution of India to challenge the communication dated 27.03.2019 issued by the Tax Recovery Officer, Valsad. The communication informed the writ applicant about the attachment of immovable property purchased from a defaulter assessee. The applicant requested the court to quash the communication, restrain the respondents from implementing it, and grant any other suitable relief in the interest of justice.

2. The communication dated 27.03.2019 detailed the attachment of the property under Rule 48 of the Income Tax Act, 1961, prohibiting any transfer or charge on the property. Despite the attachment notice issued in 2012, the property was transferred to the writ applicant in 2015. The applicant claimed to be a bona fide purchaser without knowledge of the attachment. The applicant relied on Section 281 of the Income Tax Act, 1961, which deems certain transfers void if made during pending proceedings without adequate consideration or notice.

3. The court noted that the writ applicant had not responded to the communication directing possession handover. The applicant's counsel indicated the lack of response. The court emphasized the need for the applicant to establish that the property purchase was for adequate consideration and without notice of pending proceedings against the defaulter assessee. The court directed the applicant to appear before the Tax Recovery Officer, present evidence, and justify the property transfer.

4. The court disposed of the writ application, permitting direct service and instructing the applicant to appear before the Tax Recovery Officer to substantiate the property purchase under Section 281 of the Income Tax Act, 1961. The Tax Recovery Officer was directed not to take coercive steps against the applicant until the completion of the proceedings as directed by the court.