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1997 (1) TMI 15

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..... us of a partner of the said firm. A sum of Rs. 12,661 was payable by her as arrears of income-tax relating to the assessment yen- 1967-68 in her individual capacity. Certain arrears of tax were also recoverable from the partnership firm, Baldev Raj Tilak Raj, in which Smt. Tara Rani was a partner with her two sons. Smt. Tara Rani owned a house (No. 230, sector 21-A) at Chandigarh and also a house It Gurgaon. A gift deed was executed by Smt. Tara Rani in favour of her two grand-children on April 17, 1971. The petitioner, Smt. Ramana wife of Sunil Kohli and daughter of Baldev Raj, received half portion of-the Chandigarh house by way of the above-mentioned gift from her grandmother, Smt. Tara Rani, and the remaining half portion of the house was given by the donor, Smt. Tara Rani, to Mr. Duke alias Rahul Arora, son of Tilak Raj. Since certain tax was found to be payable by Smt. Tara Rani in her individual capacity as also in the capacity of a partner of the partnership firm, the gift deed executed by the assessee, Smt. Tara Rani, on April 17, 1971, was declared to be void, vide order dated December 15, 1978, passed under section 281 of the Act. Thereafter, the house, in question, wa .....

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..... portunity of hearing was given to her through her father and legal guardian, Baldev Raj. It may be mentioned here that the order passed under section 281 of the Act had been challenged by Smt. Tara Rani in a writ petition but she did not succeed. The High Court, vide order dated April 3, 1980 (in Civil Writ Petition No. 361 of 1979-Tara Rani v. CIT [1982] 137 ITR 266 (P H)), upheld the order passed by the Income-tax Officer declaring the gift to be void. Shri Mittal has also argued that the order of the High Court would also not affect the petitioner's right in the property because she was not impleaded as a party in that writ petition and, moreover, the gift was declared to be void only to the extent of the tax liability and the petitioner's rights remained unaffected. Shri R. P. Sawhney, learned senior counsel for the respondents (Commissioner of Income-tax and Tax Recovery Officer), has defended the order passed under section 281 of the Act with the plea that sufficient opportunity of hearing was given by the Income-tax Officer to Smt. Tara Rani, donor of the property in question. The Income-tax Officer had noticed that the gift deed had been executed by Smt. Tara Rani with .....

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..... of the petitioner), informing him that the High Court had decided the matter in favour of the Department. On receiving this letter, Baldev Raj, vide his letter dated May 25, 1980, asked his father as to how much money he will have to pay as his share to clear the tax liability. Hans Raj, vide letter dated June 3, 1980, informed his son, Baldev Raj, who was at that time staying in a foreign country, that the tax authorities had to recover the tax money from Smt. Tara Rani after declaring the gift deed as void. The interest amount on the arrears of tax was also mentioned in that letter. Shri Sawhney has contended that, from this correspondence (copies of which have been placed on record as annexures R-5, R-6 and-R-7), it is evident that the petitioner's father, Baldev Raj, was well aware of the order of the High Court and, therefore, no objection can now be raised to the effect that the petitioner's rights do not stand affected by the High Court's order. As regards the validity of the order passed by the Income-tax Officer under section 281 of the Act, it has already been examined by this court in Civil Writ Petition No. 361 of 1979 (see [1982] 137 ITR 266), and the order of the I .....

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..... house at Gurgaon for Rs.5,30,080. It would be, therefore, more appropriate if the Department proceeded against the house at Gurgaon and recovered the tax liability from that house. Since the house at Chandigarh was situated in a prime locality and was a property of very high value, the Department should, in all fairness, recover the arrears of tax out of the sale proceeds of the house at Gurgaon. The argument of Shri Mittal, that the house at Gurgaon belonging to Smt. Tara Rani should be first sold for recovering the arrears of tax, has no legal force because there is no provision in law which would debar the Department from proceeding against the house which was attached much earlier. It is for the Department to see as to how to proceed for the recovery of tax. The house at Chandigarh was attached in the year 1978. Once the gift deed has been declared to be void, there is no legal bar against proceeding to auction the house at Chandigarh. The next plea raised in the writ petition relates to the period of limitation prescribed in rule 68B of the Second Schedule to the Act for the sale of the attached property. It has been stated that, under rule 68B, no sale of any immovable pro .....

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