2019 (5) TMI 858 - HC - Income Tax

Right in property purchased of purchaser landlord - property under development by developer - attachment orders u/s 281B passed by Income tax department against developer by orders dated 07.10.2011 - Tax Recovery proceedings - ownership of property - HELD THAT - Insofar as the challenge to the orders dated 07.10.2011 passed under Rule-48 is concerned, the main contention of the petitioners is that neither on the date of the provisional order of the attachment nor on the date of order of attachment passed under Rule 48, was the sixth respondent the owner of the property and that therefore the orders of attachment and the consequent directions issued under Section 22-A of the Registration Act, 1908 were null and void. Under Rule 68-B (1) of the Second Schedule to the Act, 1961, no sale of immovable property can be made after the expiry of three years from the end of the financial year in which the order giving rise to a payment of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached. The period of three years from the date of the order of attachment had already passed. The properties attached were not brought to sale within three years. Therefore, the orders of attachment dated 07.10.2011, have lost their potency. In addition, the counter proceeds on the footing that what was ordered to be attached was the property that was the subject matter of development agreement. In other words, whatever was the subsisting interest that the sixth respondent had on the date of the order of the attachment alone could be the subject matter of attachment. The petitioners in the first writ petition appear to have purchased the individual plots, even before the provisional order of attachment was passed. On both grounds viz., (a) that under Rule 68-B (1), no further steps were taken within three years and (b) that on the date of order of attachment, the petitioners in the first writ petition had already purchased the properties, the petitioners are entitled to succeed. W.P. allowed.

Summary

Issues:
Challenge to orders of attachment under the Second Schedule to the Income Tax Act, 1961.

Analysis:
The judgment involves three writ petitions challenging the orders of attachment by the Tax Recovery Officer under the Second Schedule to the Income Tax Act, 1961. The first writ petition is filed by purchasers of individual plots, while the other two are filed by landlords on whose properties residential plots were developed by the defaulter. The defaulter, a company, failed to pay tax dues, leading to attachment orders. The petitioners argued that they were bona fide purchasers and that the attachment was improper. Assessment proceedings were initiated against the defaulter, resulting in a tax demand. The Tax Recovery Officer issued orders prohibiting property transfer, prompting the petitioners to seek relief in the writ petitions.

The department countered with assessment details and subsequent orders prohibiting property transactions. The petitioners then sought to amend their prayers in the writ petitions to challenge the attachment orders. The main contention was that the defaulter was not the property owner at the time of attachment, rendering the orders void. Rule 68-B (1) stipulates a three-year limit for property sale post-attachment, which had lapsed without property sale. Additionally, the petitioners had purchased the properties before the attachment order, strengthening their case for relief.

The judgment favored the petitioners on both grounds, highlighting the failure to take further steps within the three-year limit and the petitioners' ownership predating the attachment. Consequently, all writ petitions were allowed, dismissing any pending miscellaneous petitions without costs.