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TMI Blog1998 (3) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ndency of the proceedings before the Income Tax Authorities against his vendor Krishnasamy Maniagarar. One year subsequent to the purchase, the plaintiff also raised a loan from the Land Mortgage Bank and further he incurred expenses to improve the land. The vendor represented to the plaintiffs that he wants to alienate the property, since he could not visit the village in order to manage the same and further he need cash for his lorry business. If the first plaintiff had known about the pendency of the income-tax proceeding, he would not have purchased the property. Equally if the bank authorities had any notice about the pendency of the income-tax proceedings against the vendor, they would not have granted the loan. There was no publication in accordance with section 287 of the Income Tax Act (hereinafter referred to as `the Act) about the proceedings against the vendor. The first plaintiff, being a bona fide purchaser for valuable consideration, without any notice about the pendency of the income-tax proceeding against his vendor and as such the plaintiffs title cannot be questioned. The sale in favour of the first plaintiff cannot be considered as void in view of section 281 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-1-1972. The plaintiff has no right to question the order of attachment. The sale in favour of the first plaintiff is hit by section 281 of the Act. Even in accordance with rule 16(2) of the Schedule II of the Income Tax Act, any private transfer by the defaulter after the attachment has been made is void. Hence the suit is liable to be dismissed. 4. On the above pleadings, the parties have led in documentary evidence. The second plaintiff alone had been examined as PW 1. After elaborately considering the evidence available on record, the trial court had dismissed the suit by judgment and decree dated 1-4-1980, finding that Krishnasamy Maniagarar, the vendor of the first plaintiff had sold the property to the first plaintiff after the issue of certificate under the Income Tax Act for recovery of the tax arrears from him. Hence the transaction is hit by the provisions of section 281 as well as rule 16(1), of the Income Tax Act. Aggrieved by the same, the plaintiffs filed an appeal in AS 358/80 on the file of the District Court, Madurai. The learned Principal District Judge, also concurred with the trial court and dismissed the appeal. Aggrieved by the same, the present second ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Transfer of Property Act and hence the rights of the transferee, who is a bona fide purchaser for valuable consideration, is safeguarded. In view of the said principle, the properties of the first plaintiff cannot be proceeded with; especially when the defendants have not established any collusion between the first plaintiff and the defaulter Krishnasamy Maniagarar. He further contended that rule 16(2) makes the sale void if such alienation is made subsequent to the order of attachment. In this case, the attachment order is subsequent to the sale and as such rule 16(2) cannot be applied. Rule 16(1) and section 281 of the Act should be read conjointly and if it is established that the transferee had purchased the property without the knowledge about the tax recovery proceedings and for valuable consideration, such transfers cannot be challenged by the Income Tax Officer. 7. On the contrary, Mrs. Kala Ramesh, the learned counsel for the respondent, contended that section 281 of the Act cannot be considered in pari materia with section 53 of the Transfer of Property Act. The provisions of different enactments has to be considered independently and there cannot be a conjoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property under Ex. A1 on 27-6-1968 when the recovery proceedings are pending against the vendor since 17-2-1965. 9. Now the question for consideration is whether section 281 of the Act should be read in conjunction with section 53 of the Transfer of Property Act to construe that it protects the interest of the bona fide purchasers for valuable consideration without notice about the recovery proceedings against the defaulter. 10. 1 do not think it is necessary to deal with the same elaborately in view of the earlier judgments reported in TRO v. Radhakrishna Erad: (1979) 117 ITR 868 (Ker) and Inayat Hussain v. Union of India (1980) 122 ITR 227 (Bom). 11. Before referring to those judgments, it may be worth to refer to section 281 of the Act as it stood prior to the amendment introduced by the Taxation Laws (Amendment) Act, 1975, which is as follows: 281. Transfers to defraud revenue void. Where during the pendency of any proceeding under this Act, any assessee creates a charge on or parts with the possession by way of sale, mortgage, exchange or any other mode of transfer, whatsoever, of any of his assets in favour of any other person with the intention to defraud t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer was effected. The effect of the section is that, if such transfer with intent to defraud the revenue has been made and any claim for tax arises after completion of the proceedings during the pendency of which the transfer took place, such tax or other sum can be recovered by proceeding against the property notwithstanding the said transfer. 13. In the case of hand, there is no dispute that after the completion of proceedings, the recovery certificate has been issued as early as 17-2-1965 and 20-1-1966 under Exs. B1, B2 and B3. The first plaintiff had purchased the property while, in fact, the recovery proceedings are pending. 14. The learned counsel further placed reliance on the proviso to section 281 of the said Act and contended that, if the transfer is for valuable consideration and without notice of the pendency of the proceedings, then such transaction will be valid. The first plaintiff being a purchaser of the property without notice of the pendency of the proceeding and for valuable consideration, he is a bona fide purchaser and as such the sale in his favour would fall within the proviso which is almost in pari materia with section 53 of the Transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied, into rule 16 of the Second Schedule as well. There is neither reason nor logic in doing so and we are unable to accept this process of reasoning of the learned judge. 16. This decision was followed by the Bombay High Court in Inayat Hussain v. Union of India (supra) where it was also held that a transfer subsequent to the attachment as provided in rule 51 would be of no avail and would be void as against the department and no question of bona fides of the transfer for value or any other question or an intention to defraud the Revenue would arise at all in considering rule 16. Therefore, I am of the view that since in this case the transfer in favour of the first plaintiff was subsequent to the pendency of recovery proceeding against the defaulter- assessee, the question of bona fides or otherwise does not arise. 17. In a recent judgment in Palani Gounder v. Revenue Department (1998) 229 ITR 59 (Mad), this court had an occasion to deal with an identical case. In this case also the learned judge has held that the notice about the recovery proceedings or the knowledge about the pendency of the proceedings would refer only to defaulter and not the purchaser. Further, it h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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