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2015 (10) TMI 2061 - HC - Income TaxAttachment of immovable property - Recovery proceedings against the buyer of the property from the defaulter assessee - whether the action of the respondent in initiating the recovery proceedings by issue of notice under Section 226(3) and initiation of provisional attachment proceeding is without jurisdiction and void ab-initio since the required preconditions for initiating the proceedings under section 281B are not satisfied? - Held that - It is relevant to refer to the decision of the Honourable Supreme Court rendered in the case of Mysore Minerals Ltd. v. CIT (1999 (9) TMI 1 - SUPREME Court) , wherein it has been held that a person who had taken possession and made payment of the consideration was the owner though he had not obtained the deed of conveyance. In the case on hand, the Petitioner, having purchased the property in question, by paying the entire sale consideration, became the absolute owner of the property in question. In the case on hand, the Petitioner has become the owner of the property in question, to put it differently the 3rd Respondent ceased to be the owner on and from 08.02.2010, when everything for transfer of the property excepting the execution and registration of conveyance was completed. Admittedly, alleged dues are recoverable from the 3rd Respondent. Under the Income-tax Act, the dues of the Revenue do not form charge on the property and this can only be recovered under the method and mode as provided under the Income-tax Act and the Rules framed thereunder. Since the 3rd Respondent failed to pay the dues to the department on time, the property in question has been attached. In the proceedings between the Department and the 3rd Respondent, the tax liability was reduced by CIT(Appeals) and the same was also paid by the 3rd Respondent. By virtue of the completion of the entire sale transaction and registration of the same, the Petitioner became the absolute owner of the property in question. While so and when the 3rd Respondent was not the owner of the property and when on the date of passing the order of attachment, the property in question did not belong to the assessee, namely, the 3rd Respondent, the attachment of the property in question, which has been in absolute possession and enjoyment of the Petitioner by virtue of the completion of the entire sale transaction, made by the 1st Respondent for the dues payable by the 3rd Respondent, is not binding on the Petitioner and hence, unsustainable and accordingly, the impugned attachment has to be lifted and consequently, the sale deed has to be released, after numbering the same. If at all the 1st Respondent can proceed on the other property of the 3rd Respondent for the tax liabilities if any payable by the 3rd Respondent. Thus the impugned attachment of the property in question is directed to be lifted forthwith and the concerned Registering Authority is directed to number the impugned sale deed executed in respect of the property in question and release the sale deed, if it is otherwise in order. However, it is open to the 1st Respondent Department to proceed against the other property of the 3rd Respondent for the tax dues if any payable by the 3rd Respondent, in accordance with law, by keeping the attachment of the other property, pending disposal of the appeal preferred by the 3rd Respondent as well as the 1st Respondent.
Issues Involved:
1. Legality of the attachment of the immovable property by the Income Tax Department. 2. The status of ownership and completion of the sale transaction. 3. The impact of the tax liability of the third respondent on the property sold to the petitioner. 4. The validity of the actions taken by the Income Tax Department under the Income Tax Act. Detailed Analysis: 1. Legality of the Attachment of the Immovable Property by the Income Tax Department: The petitioner firm filed a writ of Mandamus to direct the first respondent to remove the charge and lift the attachment on the immovable property. The property in question was attached by the Income Tax Department on 08.04.2011 due to the tax arrears of the third respondent. The petitioner argued that the attachment was illegal and violative of settled principles of law as the entire sale transaction was completed on 18.02.2010, well before the attachment date. The first respondent contended that the attachment was proper under the provisions of the Income Tax Act, as the third respondent had tax arrears certified for recovery on 30.07.2010. 2. The Status of Ownership and Completion of the Sale Transaction: The petitioner entered into an agreement of sale on 20.01.2010 and paid the entire sale consideration by 10.02.2010. A supplementary agreement of sale dated 18.02.2010 evidenced the completion of the sale transaction. The property was handed over to the petitioner, and a sale deed was executed on 21.12.2011. The court noted that the petitioner, having paid the entire sale consideration and taken possession, became the absolute owner of the property as of 18.02.2010. The court referenced the Supreme Court decision in Mysore Minerals Ltd. v. CIT, which held that a person who had taken possession and made payment of the consideration was the owner, even without a deed of conveyance. 3. The Impact of the Tax Liability of the Third Respondent on the Property Sold to the Petitioner: The third respondent had a tax liability for the assessment year 2006-07, which led to the attachment of the property by the Income Tax Department. However, the tax demand notice was issued on 31.07.2010, after the sale transaction was completed. The court highlighted that the dues of the Revenue do not form a charge on the property under the Income Tax Act and can only be recovered through the methods provided under the Act. The court referenced the Calcutta High Court decision in Electro Zavod (India) Pvt. Ltd. vs Commissioner Of Income-Tax, which held that an order of attachment was not sustainable if the property did not belong to the assessee at the time of attachment. 4. The Validity of the Actions Taken by the Income Tax Department Under the Income Tax Act: The court found that the attachment of the property by the first respondent was not binding on the petitioner, as the property did not belong to the third respondent at the time of attachment. The third respondent had ceased to be the owner on 18.02.2010, when the sale transaction was completed. The court directed the first respondent to lift the attachment and the Registering Authority to number and release the sale deed. The court allowed the first respondent to proceed against other properties of the third respondent for any remaining tax liabilities. Conclusion: The court concluded that the attachment of the property in question was unsustainable and directed the removal of the attachment. The sale deed was to be numbered and released by the Registering Authority. The first respondent was permitted to proceed against other properties of the third respondent for any tax dues, pending the disposal of appeals. The writ petition was disposed of with these directions, and no costs were awarded.
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