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TMI Blog2018 (4) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions to which the petitioners are parties as null and void. Petition allowed in part. - W. P. (MD)Nos.1320 to 1324 of 2018 W.M.P.(MD)Nos.1390 to 1399 of 2018 W.P.(MD)No.1320 of 2018 - - - Dated:- 28-2-2018 - G. R. Swaminathan, J. For the Petitioner : Mr.R.Srinivasan For the Respondent : Mrs.S.Srimathi, Standing Counsel ORDER As the issue involved in all these cases are similar in nature, they are disposed of by way of this common order. 2. One S.Rajendran proprietor of Inland Real Estate, Madurai 14 was served with notices of demand under Section 156 of the Income Tax Act, 1961 on 30.05.2012 and 12.06.2012 in respect of assessment years 2005-06 to 2011- 12. It was finally quantified that he was liable to pay a sum of ₹ 4,04,56,280/- and notice of demand was served on him on 05.01.2013 under Rule 2 of II Schedule to the Income Tax Act, 1961 in the relevant form. The petitioners herein purchased the properties that are the subject matter of these writ petitions from the said defaulter-assessee thereafter. Subsequent to the said purchases, orders of attachment were made on 21.12.2015. The petitioners lodged their objections with the Tax Recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute the petitioners' claim that the properties purchased by the petitioners were for adequate consideration and that the petitioners had no notice of the arrears of Income Tax. The properties stood in the name and possession of the petitioners even before the attachment was effected by the respondent. 5. The learned counsel for the petitioners further contended that the judgment of the Nagpur Bench of the Bombay High Court reported in 1979 Mah. L.J.514, 122 ITR 227 (Bom) (Inayat Hussain Fakhruddin v. UOI) which is relied upon by the Revenue is a judgment of a Single Judge and that therefore, this Court must prefer the Division Bench decision of the Gujarat High Court which is more on the point. It is his further contention that it is a golden rule of fiscal jurisprudence that if there are two conflicting decisions, the decision which is in favour of the assessee should be preferred ((1973) CIT v. Vegetable Products Ltd [88 ITR 192 (SC)]). These principles have been followed by the High Courts of Madras, Bombay and Delhi. (1. (CIT v. G.V.Venugopal Para 20 (2005) 145 Taxman 784 (Mad). 2. DI (Int. Taxation v. Krupp Udme GMBH Para 5 (2013) 354 ITR 173 (Bom). 3. CIT v. Kamal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of the assessee. 9. While the Revenue would place emphasis on the main provision, the learned counsel appearing for the petitioners would rely on the proviso. Going by the plain language of the said section, it is clear that the main provision is concerned only with those transactions executed by the assessee during the pendency of any proceedings under the Income Tax Act or after the completion thereof, but before the service of notice under Rule 2 of the second schedule. In this case, it is evident from the face of the record and it is again not in dispute that notice under Rule 2 of second schedule was served on the defaulter on 05.01.2013 and that the sale transactions executed by the said defaulter-assessee took place thereafter. Therefore, this Court is of the view that it would not be open to the purchasers to claim the benefit of the proviso to Section 281(1) of the Act. It may not be out of place to mention here that in the decision reported in 1998-2-L.W.288 (Abdul Jamil and 5 others vs. The Secretary, Income Tax Department and 2 others) it was held that the person referred to in the proviso to Section 281(1) of the Act is only the assessee and not the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer] for the recovery of arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule. Rule 11(3) reads as follows:- The claimant or objector must adduce evidence to show that- (a) (in the case of immovable property) at the date of the service of the notice issued under this Schedule to pay the arrears, or (b) (in the case of movable property) at the date of the attachment, he had some interest in, or was possessed of, the property in question. Rule 16(1) reads as follows:- 16(1)Where a notice has been served on a defaulter under rule 2, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. Rule 51 reads as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with any court of justice shall buy or traffic in, stipulate for or agree to receive any share of, or interest in any actionable claim. (The Transfer of Property Act, 1882, s.136) Officers and employees of the patent office are incapable, during the period in which they hold their appointments, to acquire or take any right or interest in any patent issued by that office. (The Patents Act, 1970, s.75 (except by inheritance or bequest). No forest officer shall, as principal or agent, trade in timber or forest produce, or be or become interested in, any lease of any forest or in any contract for working in any forest, except with the permission of the state Government in writing. (The Indian Forest Act, 1927, s.75.) 13. In this case, the property belonged to the defaulter-assessee. He had been served with notice under Rule 2. The moment such a notice was served on the defaulter-assessee, by virtue of Rule 16(1) of the second schedule, he became incompetent to deal with the property. In Rule 16(1), it is expressly stated that the defaulter assessee shall not be competent to deal with the property. If the vendor was not competent to deal with the property, he could not have pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire process of reasoning. 16. More than anything else, as rightly pointed out by the learned standing counsel for the respondent Department, any attachment of an immovable property made under the second schedule would relate back to and take effect from the date on which the notice to pay the arrears issued under II schedule was served on the defaulter. This legal effect of Rule 51 of second schedule cannot be overcome. In this case, this Court, therefore, comes to the conclusion that the attachment made subsequent to the purchase by the writ petitioners would relate back to and take effect from 05.01.2013 onwards. 17. It is true that as strongly contended by the learned counsel for the petitioners, if two interpretations are possible, the one that is beneficial to the assessee must be preferred. But, in this case, this Court has absolutely no doubt that on a plain reading of the relevant provisions, only one interpretation is possible and that one is in favour of the Revenue. 18. The learned counsel for the petitioners would submit that Rule 11(3)(a) of the second schedule cannot have an over-riding effect over the proviso to Section 281 of the Income Tax Act. But, as he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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