9911796707
TMI Blog2000 (5) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... oor of premises No. 50, Chowringhee Road, Calcutta, covering an area of 5,386 sq. ft. (the said premises) for a period of 34 years up to February 28, 2015, against payment of Rs. 9,49,680 as premium. The agreement provided that the lessor shall execute and register the lease deed in favour of the company, as aforesaid. As per the clause of the agreement, the second party could transfer, sublet or assign its rights in the said premises. On November 21, 1983, a notice was issued by the appropriate income-tax authority under section 143(2) of the Income-tax Act, 1961, in respect of the assessment year 1982-83. On September 20, 1984, the second party, as aforesaid, entered into an agreement with petitioner No. 1-company, i.e., Jaymac Lasetron (P.) Ltd., assigning its interest under the said agreement dated January 31, 1983, and the right to obtain lease deed in the consideration of a sum of Rs. 9,49,680 paid by the petitioner-company to the second party as above. The second party delivered the possession of the said premises to petitioner No. 1-company. Immediately thereafter the petitioner-company licensed out the said premises and the license fee was assessed as its income. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any filed an appeal against the said prohibitory orders before the Commissioner of Income-tax but on September 7, 1999, the Commissioner dismissed the appeal. On November 4, 1999, the petitioner-company received a letter dated November 1, 1999, from the Assessing Officer, informing it that the Tax Recovery Officer had issued a prohibitory order dated August 3, 1999, restraining the petitioner-company from receiving any refund from its Assessing Officer as such the refund of the assessment year 1998-99 could not be granted. The petitioner-company has not received any copy of the said prohibitory order dated August 3, 1999. From the factual background of the aforesaid case, this court has come to a conclusion that the petitioner, in fact, on interpretation of section 281 of the Income-tax Act could not get appropriate relief in this respect. Therefore, it is necessary to understand the scope and ambit of section 281 of the Income-tax Act which is as follows : "(1) Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding available to the authority concerned because petitioner No. 1-company is not the defaulter to the authority. Learned counsel cited various decisions in this respect. Firstly, he cited a single Bench judgment of this court reported in Srimati Preeti Rungta v. ITO [1995] 214 ITR 594 to establish the ratio of the judgment to the extent that the income-tax authority could not declare the transfer void until the transfer was declared void in properly constituted proceedings. From the observations in such judgment it appears that the entire process for recovery under the Second Schedule to the Income-tax Act commences with service of notice under rule 2 and all the rules in the Second Schedule relate to the protection of the Revenue's right subsequent to the issue of notice under rule 2. Section 281, in turn, relates to the right of the Revenue prior to the issuance of notice under rule 2. The procedure under the Second Schedule is for enforcement of the rights of the Revenue vis-a-vis the assessee when would not be available for enforcement of a right under section 281 of the Act. The Second Schedule to the Act does not apply at a stage when section 281 operates. At the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty by way of lease is a sham transaction since the directors or parties are closely related in respect of the two companies which can be understood from a nomenclature of the defaulting company and the petitioner-company. According to Mr. Shome, the rules prescribed under the Second Schedule are more or less identical with the rules as prescribed under Order 21 of the Code of Civil Procedure, i.e., in respect of execution. He has given more emphasis in respect of the scope and ambit of rule 2, i.e., issue of notice, rule 4, i.e., mode of recovery, rule 6, i.e., purchasers' title, rule 11, i.e., investigation, rule 16(2), i.e., in respect of private alienation to be "void" in certain circumstances and rule 26(1)(i), i.e., in respect of order of attachment. I have compared these rules with the scope and ambit of Order 21 of the Civil Procedure Code and I found that the statement as made by Mr. Shome to the extent of execution is correct. Mr. Shome, apart from giving details of distinguishing features of the judgments, made a very solid statement that the word "void" created a confusion in the mind of the people but if the court goes deep into it, it will be available that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1961, or after the completion thereof but before the service of notice under rule 2 of the Second Schedule, tax can be recovered by proceeding against the property notwithstanding the said charge or transfer. There is no question of adjudication of validity of charge or transfer prior to the stage of actual transfer. According to me, in the instant case, it is more so because the lease has to be registered otherwise there is no existence of the lease. The Commissioner of Income-tax, ultimately, held that the transfer is not only void as per section 281, but it is also a colourable device with the obvious intention to evade tax. The Commissioner of Income-tax followed the ratio of the judgment reported in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), in coming to a conclusion by inferring that it is permissible for an assessee to avoid tax by proper planning but it is not permissible to evade tax by resorting to colourable transaction. In the case of the present assessee, the whole transaction is fraudulent with a view to evade tax and such, device is not permissible in the light of the Supreme Court case stated above. Of course, such findings are fact orien ..... X X X X Extracts X X X X X X X X Extracts X X X X
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