2017 (9) TMI 1592 - HC - Income Tax

Recovery of tax - Certain transfers to be void - Petitioner s application for permission u/s 281 - guard against fraudulent transfers designed to defeat recovery by the revenue - Held that - The section is asset-specific and transfer-or charge-specific. The section demands, above all, precision. An application is for prior permission to create a charge or effect a transfer in respect of a defined asset. Such an application cannot be disposed of by resorting to generalities ( likelihood , huge demands , might be revoked , etc). There is no room in considering an application under Section 281 for a response that is speculative, predicated on imponderables and unknowns such as litigation outcomes, or on suppositions that all stay orders obtained by an assessee are bound to be vacated and an assessee s appeals lost. Nothing in our experience suggests this to be remotely true. We have considered Mr. Pardiwala s submission in regard to the tenability of the impugned order. We agree with him that it cannot be sustained for the precise reasons we have outlined, and which we find unacceptable. There is no discussion on the merits of any particular application, proposed transfer or individual asset. Hence, keeping the contentions of both sides open, and without rendering a decision on the merits of the application by the Petitioner, we will set aside the impugned order and direct the 1st Respondent to consider the Petitioner s application afresh, uninfluenced by the previous order and subject to certain conditions that we will set out hereafter. The 1st Respondent will consider the Petitioner s application (including subsequent correspondence) under Section 281 de novo by 17th November 2017 (we have extended time because of the intervening Diwali holidays). The 1st Respondent will indicate whether he requires any clarifications or further documents or materials from the Petitioner

Summary

Issues:
1. Rejection of application under Section 281 of the Income Tax Act, 1961 by the Assistant Commissioner of Income Tax, Circle 1(1), Panaji.

Analysis:
The High Court examined the impugned order in the context of Section 281 of the Income Tax Act, which aims to protect the interest of the Revenue against fraudulent transfers. The section specifies that any charge or transfer of assets by an assessee during or after proceedings under the Act shall be void without the Assessing Officer's permission, unless made for adequate consideration or with prior permission. The Court emphasized the precision required in considering applications under this section, emphasizing that responses should not be speculative or based on unknown outcomes like litigation results. The judgment highlighted the need for a specific assessment of each application, transfer, or asset rather than generalities.

The Court found the impugned order unsustainable due to lack of discussion on the merits of the application or individual assets. Consequently, the Court set aside the order and directed the 1st Respondent to reconsider the Petitioner's application afresh, free from previous influence. The Court provided detailed timelines for the reconsideration process, ensuring adequate time for both parties to respond and for the 1st Respondent to make a decision by a specified date.

Additionally, the judgment emphasized the importance of adhering to Circular No.4/2011 dated 19th July 2011, which outlines guidelines for granting prior permission under Section 281. The Court noted the Petitioner's substantial assets and encumbrances but clarified that the decision should be based on specific asset details and proposed transactions rather than general assumptions about potential demands or litigation outcomes. The judgment concluded by making the rule partly absolute without any order as to costs.

In summary, the High Court's judgment addressed the rejection of the Petitioner's application under Section 281 of the Income Tax Act, emphasizing the need for precise assessment, specific consideration of assets, and adherence to guidelines for granting permission to ensure the Revenue's interests are protected effectively.