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TMI Blog2007 (11) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner is a benami transaction or not ? 2. The facts necessary for decision of the case are that on February 14, 1992, the house of the petitioner was searched by the income-tax authorities and cash amounting to Rs. 1,56,875 was seized. The petitioner thereafter filed a return showing the income of Rs. 30,600 for the relevant year. An amount of Rs. 1,56,875 being the amount seized was added to the income of the petitioner on protective basis. According to the Revenue, Shyam Sunder Aggarwal, the husband of the petitioner had alleged in his statement that this amount belongs to his wife. However, later, it was found that the petitioner is only a housewife, having no independent source of income and this amount of Rs. 1,56,8 75 was deleted from the income of the petitioner and added to the income of her husband Shyam Sunder Aggarwal. On the basis of such assessment made, according to the Revenue, an amount of Rs. 43,89,705 was recoverable from Shyam Sunder Aggarwal the husband of the petitioner. Interest was also payable on this amount in terms of section 220(2) of the Act. At the time of the filing of the reply to the writ petition, this amount had swelled to Rs. 84,86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 222(1) of the Act are not attracted to the facts of the case. He directed the petitioner to be present on January 18, 2000. Again, on January 10, 2000, the Tax Recovery Officer sent another letter to the petitioner asking her to produce documents including year-wise source of income for the last ten years to establish her claim. It appears that the petitioner led no evidence before the Tax Recovery Officer and the Tax Recovery Officer on the basis of the material placed before him, came to the conclusion that the petitioner has no independent source of income as she was simply a house wife. The Tax Recovery Officer came to the conclusion that the properties were purchased by her husband out of his funds but in the name of his wife. The Tax Recovery Officer further held that the provisions of the Explanation to sub-section (1) of section 222 of the Act were duly attracted as the properties were enjoyed by Shyam Sunder Aggarwal and his family for residential purposes. Thereafter, the proclamation of sale was drawn up on February 9, 2000, and these are under challenge in this writ petition. 6. The main ground of challenge is that the Tax Recovery Officer has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property so transferred to his minor child or his son's minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son's child, as the case may be, continue to be included in the assessee's movable or immovable property for recovering any arrears due from the asses- see in respect of any period prior or to such date. (2) The Tax Recovery Officer may take action under sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken." 10 . A perusal of the section itself shows that when an assessee is in default, the Tax Recovery Officer shall proceed to recover from the assessee the amount specified in the certificate by attachment and sale of the assessee's property or by arresting him or detaining him in prison. The Explanation to this section further provides that for the purpose of this sub-section, the assessee's movable or immovable property shall include any property which has been transferred directly or indirectly on or after the 1st day of June, 1973, by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred, 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." 12. Reliance on behalf of the respondents has been placed on sub-rule (3), where the onus is on the objector to adduce evidence that he has some interest or was possessed of the property in question. Reliance has also been placed on sub-rule (5) wherein if the Tax Recovery Officer is specified that the property was in the possession of the defaulter as his own property or was in possession of some other person in trust or in the possession of the defaulter, the Tax Recovery Officer. shall disallow the claim. Sub-rule (6) provides that an aggrieved party can file a suit to establish his/her claim despite the order of the Tax Recovery Officer. 13. Reference may also be made to section 281 of the Act which provides that where during the pendency of any proceeding under the Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee encumbers or transfer his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird party as void. If the Department finds that a property of the assessee is transferred by him to a third party with the intention to defraud the Revenue, it will have to file a suit under rule 11(6) to have the transfer declared void under section 281. 13. In the present case, the Tax Recovery Officer could not have examined whether the transfer was void under section 281 of the Income-tax Act. His adjudication of the transfer as void under section 281 is without, jurisdiction. The Tax Recovery Officer has relied upon the earlier order of the Income-tax Officer dated May 9, 1974, declaring that the transaction is void under section 281 of the Income-tax Act. In the earlier proceedings, however, although the High Court has not set aside this order of the Income-tax Officer, the High Court has expressly held that the order amounted only to an intention or declaration on the part of the Department to treat the transaction as void under section 281. Such a declaration cannot affect the legal rights of the parties affected under rule 11. The High Court expressly held that the rights of the parties under rule 11 were not affected in any way by this declaration. The Department, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that under the provisions of rule 42 of the Second Schedule to the Act quoted above, the Tax Recovery Officer is also authorized to attach the property of the defaulter. The defaulter in this case was Shyam Sunder Aggarwal and not the petitioner. The Kerala High Court in P. K. Kunjamma v. TRO [1997] 227 ITR 852 also dealt with a case where the property of the wife was attached to realize the tax dues of her husband. The court struck down the attachment of the property. 21 . In view of the law laid down by the apex court in Gangadhar ViswanathRanade's case [1998] 234 ITR 188, the judgment of the Madras High Court in Iqbal Begum's case [1974] 97 ITR 310 (Mad) can no longer be treated as good law. In fact, the case of the petitioner stands on a better footing than the case of the appellant before the apex court. In the case before the apex court, the transaction was apparently void in terms of section 281 of the Act. The transfer had been made after the assessment had been finalized by the assessee in favour of his wife and daughter. Any transaction made in violation of the terms of section 281 was void. Despite this, the apex court held that the Tax Recovery Officer had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no funds to purchase the property and the property must have been purchased by her husband, the Department can take appropriate action. The petitioner has alleged that the property belongs to her. In case the Department wants the petitioner to prove the source of funds for purchase of these properties, it can take recourse to the provisions of the Act. If the Department insists that the petitioner is holding the property benami for her husband, the Department must establish this by filing a civil suit. 25. In view of the above discussion, we are of the considered view that the order of attachment and the order of proclamation of sale issued by the Tax Recovery Officer is wholly without jurisdiction. Since the order is wholly without jurisdiction, there is no question of dismissing the petition on the plea that an alternative remedy is available. The writ petition is accordingly allowed and the orders annexure-PK and annexure-PL are quashed being wholly without jurisdiction. However, the right of the Department to get a declaration that the petition is holding property for her husband cannot be taken away. The Department shall have the right to file a civil suit in this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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