2005 (8) TMI 53 - HC - Income Tax

Attachment - Whether, by the impugned order the Assistant Commissioner of Income-tax, was justified in holding that the transfer of office premises by respondent No. 3 in favour of the petitioner is void under section 281 - impugned order dated December 24, 1991 passed under section 281 of the Income-tax Act is quashed and set aside. However, it is made clear that quashing of the said order dated December 24, 1991 will not affect the attachment if any levied by the Department in respect of the said premises and the right of the Department to have the transfer declared as void by taking appropriate proceedings in accordance with law

Summary

Issues involved:
1. Validity of the transfer of office premises under section 281 of the Income-tax Act, 1961.

Analysis:
The High Court of BOMBAY examined the legality of the transfer of office premises under section 281 of the Income-tax Act, 1961. The petitioner, a Canadian banking corporation, was granted possession of the office premises by respondent No. 3 based on agreements dated June 14, 1983, and September 9, 1983. The petitioner claimed to have purchased the premises and obtained a no objection certificate for the transfer. However, the Assistant Commissioner of Income-tax issued a notice under section 281(1) questioning the validity of the transfer due to ongoing assessment proceedings. The initial order declaring the transfer void was set aside by the court, directing a fresh order after hearing the petitioner.

Subsequently, the Assistant Commissioner once again held the transfer void under section 281, leading to the current petition. The petitioner argued that the Assistant Commissioner lacked the authority to declare the transfer void under section 281 and contended that the transaction predated the assessment proceedings, thus not warranting such action. Additionally, the petitioner claimed to be a bona fide purchaser, seeking protection under section 281 of the Income-tax Act.

Despite the absence of a response from the respondents, the Revenue's counsel acknowledged the lack of support for the order under section 281. Citing a previous apex court decision, the counsel highlighted the potential impact on departmental rights regarding any attachment or void declaration of the transfer. Ultimately, the court quashed the order dated December 24, 1991, under section 281 of the Income-tax Act. However, the court clarified that the quashing of the order would not affect any existing attachments or the department's right to pursue appropriate proceedings to declare the transfer void in accordance with the law.

In conclusion, the court ruled in favor of the petitioner, setting aside the impugned order under section 281 of the Income-tax Act while preserving the department's rights regarding attachments and void declarations, without imposing any costs on the parties involved.