2021 (4) TMI 1218 - HC - Income Tax

Property attached in respect of arrears of tax due to the Income Tax Department - HELD THAT - In this case, the petitioner has been fighting for her rights over the property in terms of a sale agreement dated 30.06.1994. The Hon ble Supreme Court ultimately accepted the contention of the petitioner that the third and fourth respondent s mother late Mrs.J.Padmini ought to have executed a sale deed in favour of the petitioner in terms of the aforesaid sale agreement dated 30.06.1994. The third and the fourth respondents who were minors at the time of execution of the sale agreement on 30.06.1994 ought to have executed the sale deed in favour of the petitioner. Therefore, the subsequent tax liability of the fourth respondent and her husband for the Assessment Years 2012-13 and 2013 -14 cannot be to the disadvantage of the petitioner, since the petitioner has been diligently litigating since 2004. Therefore, fruits of the decree in a contested suit cannot be denied merely because the seller or one of the persons had incurred subsequent tax liability. The fruits of a decree will date back to the date of the suit. Section 281 of the Income Tax Act, 1961 applies only to a situation where an assessee during the pendency of any proceeding under the Act, or after completion thereof, but before the service of a notice under Rule 2 of the Second Schedule, creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his/her assets in favour of any other person. Only such charge or transfer is void as against any claim in respect of any tax or any other sum payable by the assessee as a result of completion of the said proceedings or otherwise. In this case admittedly the transfer was on account the final culmination of the litigation by the order of Hon ble Supreme Court.There was only a delay in the execution of sale deed due to the pendency of the proceedings as the third and fourth respondent s mother declined to execute sale deed under the sale agreement dated 30.6.1994. Therefore the impugned communication dated 06.07.2018 asking the petitioner to obtain clearance from the second respondent cannot be countenanced. Further as per proviso to section 281 of Income Tax Act, 1961 such charge or transfer shall not be void if it is made- (i) for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee ; or (ii) with the previous permission of the Assessing Officer. The tax liability of the aforesaid firms of which the fourth respondent and her husband were the partners are subsequent to the commitment in the sale agreement dated 30.6.1994. Therefore, there is no justification in not releasing the registered sale deed in favour of the petitioner as the petitioner is a bonafide purchaser who has purchased the property after a long drawn litigation . This Court is inclined to allow this writ petition as prayed for. Thus, this writ petition deserves to be allowed. The second respondent is directed to release the sale deed dated 29.06.2018 registered vide Document No. 89 of 2018 in favour of the petitioner within a period of two weeks from date of receipt of this order.

Summary

Issues:
1. Challenge of impugned communication regarding property attachment due to tax arrears.
2. Amendment of prayer from writ of certiorari to writ of certiorarified mandamus.
3. Dispute over property ownership and sale agreement.
4. Litigation history involving sale deed execution and subsequent legal proceedings.
5. Opposition from first respondent based on tax default by partnership firms.
6. Application of Section 281 of Income Tax Act, 1961 to property attachment.
7. Justification for releasing the registered sale deed to the petitioner.

Analysis:
1. The petitioner, a senior citizen, challenged a communication stating property attachment for tax arrears. The original prayer for a writ of certiorari was amended to a writ of certiorarified mandamus to obtain the sale deed.
2. The sale agreement from 1994 involved the petitioner, late Mrs. J.Padmini, and minors, the third and fourth respondents. Legal battles ensued over sale deed execution and subsequent ownership.
3. Court proceedings, including a suit and appeals, determined the petitioner's rights. The Supreme Court's judgment favored the petitioner, leading to the execution of the sale deed in 2018.
4. The first respondent opposed, citing tax default by partnership firms related to the fourth respondent. The property attachment was linked to tax arrears from 2012-2014.
5. Section 281 of the Income Tax Act, 1961 was invoked concerning property attachment and tax liabilities. The timing of attachment vis-a-vis the Supreme Court's judgment was a key contention.
6. The judgment clarified that the property transfer was post-litigation conclusion, not covered by Section 281. The petitioner's status as a bona fide purchaser was emphasized.
7. The court ruled in favor of the petitioner, directing the release of the sale deed and cancellation of encumbrances related to the tax arrears. The judgment favored the petitioner's long-standing legal pursuit.