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TMI Blog2011 (2) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... t of section 281, the judgment of the Hon'ble Supreme Court is not bar to the revenue invoking section 281 in the circumstances mentioned therein and proceeding under section 222 by way of attachment and sale of assessee's property ignoring transfer in violation of section 281 subject of course to the statutory remedies of the affected party to raise objections or to file suit - Decided against the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that the power of the Tax Recovery Officer (TRO) under Rule 11 of the Second Schedule to the Act was only to attach the property in possession of the assessee. If the property is transferred to third party with the intention to defraud the revenue, remedy of the department is to file a suit under Rule 11(6). 6. Learned counsel for the respondents submits that the judgment relied upon is distinguishable and after taking into account the said judgment, the Calcutta High Court in Jaymac Lasetron (P.) Ltd. v. CIT [2000] 245 ITR 734/[2001] 116 Taxman 231 held that section 281 of the Act statutorily declared a transaction with an intention to defraud the revenue to be void and it was not necessary for the revenue to file a suit to get such transaction annulled. Moreover, in the judgment of the Hon'ble Supreme Court, unamended provision of section 281 was interpreted since dispute involved was for period prior to amendment. In 1975, by amendment, the words "with the intention to defraud the revenue" have been deleted. In view of the said amendment, no suit was necessary and statutory declaration in section 281 could be invoked. 7. Thus, the question for consideration is whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise: Provided that 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. (2) This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds five thousand rupees and the assets charged or transferred exceed ten thousand rupees in value. Explanation.--In this section, "assets" means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee." 9. The Rules laid down in the Second Schedule to the Act contain procedure for recovery of tax by way of attachment and sale of the property. On transfer of property for recovery of dues, title to the property gets vested i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim. (6) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive." 10. A perusal of the above provisions show that the Tax Recovery Officer is entitled to issue a certificate and recover the amount by way of attachment and sale of assessee's property. If such property is transferred during the pendency of proceedings, the same does not affect the recovery from the said property. The questions relating to validity of attachment and sale can be decided by the Tax Recovery Officer. Of course, such decision is final only subject to result of suit, if any, preferred by the objector. 11. Section 222 clearly provides that where assessee is in default, the Tax Recovery Officer (TRO) can issue the requisite certificate and proceed to recover t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the TRO that the transfer was void is ignored, the statutory declaration of the transaction being void cannot be ignored. No doubt, it may be open to the revenue to file a suit to seek such a declaration but the revenue can also rely upon statutory declaration under section 281 though the TRO cannot grant such a declaration. We may also notice the statutory change in section 281 on account of amendment vide Taxation Laws (Amendment) Act, 1975 with effect from 1-10-1975. In the amended provision, the words "with the intention to defraud the revenue" have been deleted. The judgment of the Hon'ble Supreme Court was rendered on unamended provision. Bona fide transferee is protected from the effect of voidness of the transaction. The question for revenue to file suit would have arisen if it was required to be established that the transfer was to defraud the revenue which is no longer the requirement. Moreover, voidness of the transaction qua the claim of the revenue is statutorily declared which is different from the transaction itself being declared void. Thus, in our view, after the amendment of section 281, the judgment of the Hon'ble Supreme Court is not bar to the revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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