Rajasthan High Court - Jaipur
Premier Texto Trade Pvt Ltd vs Tax Recovery Officer And Anr on 12 April, 2018
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Civil Writs No. 8308/2010
Premier Texto Trade Pvt Ltd, Registered Office-B-3/9, 2 nd
Floor, Model Town 1, New Delhi, through its Director Mr.
Ashwani Dewan aged about 48 years.
----Petitioner
Versus
1. Tax Recovery Officer, Range -2, 22-Moti Doongri, Alwar.
2. Rajasthan State Industrial Development & Investment
Corporation Limited, Udyog Bhawan, Tilak Marg, Jaipur.
----Respondents
Connected With
S.B. Civil Writs No. 4369/2010
1. Premier Texto Trade Pvt Ltd, Registered Office-B-3/9,
2nd Floor, Model Town 1, New Delhi, through its Director
Mr. Ashwani Dewan aged about 48 years.
2. Ashwani Dewan S/o Late Ved Prakash Dewan, R/o P-
(Basement), Green Park Extension, New Delhi-100016.
----Petitioners
Versus
1. Tax Recover Officer, Range 2, 22-Motir Doongri, Alwar.
2. Tax Recovery Officer 1(2), Room No.535, 5 th Floor,
Aaykar Bhawan, M.K.Road, Mumbai.
3. Rajasthan State Industrial Development & Investment
Corporation Limited, Udhyog Bhawan, Tilak Marg, Jaipur.
----Respondents
For Petitioner(s) : Mr. O.P.Modi Advocate with
Mr. Varun Sharma.
For Respondent(s) : Mr. Abhay Jain.
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
Order
Judgment Reserved on :: 02/04/2018
Judgment Pronounced on :: 12th/04/2018
(1) Both the Counsel agree that the petitions can be
disposed of at this stage.
(2) Admit.
(2 of 20) [CW-8308/2010]
(3) The petitioner is a Company registered under the
Companies Act 1956 having its registered Office at B-3/9,
2nd Floor, Model Town 1, New Delhi. Aggrieved of the
demand notice dated 29.09.2009 issued by the Income Tax
authorities (respondent No.1) holding the petitioner
Company as assessee in default, the petition has been filed
before this Court. In order to understand the facts it would
be appropriate to quote the order of demand dated
29.09.2009 in verbatim : -
"OFFICE OF THE TAX RECOVERY OFFICER-2,
22, MOTI DUNGRI, ALWAR
No.2550 Date:-29.09.2009
Sh. Ashok Mathur,
Dy General Manger (Documentation)
Rajsthan State Industrial Development and
Investment Corporation Limited,
Udyog Bhawan, Tilak Marg,
Jaipur.
Sir,
Subject:- Arrear demand in the case of M/s Panasia
Industries Ltd Plot No.F-62-63, RIICO Industrial Area,
Behror, Distt. Alwar-regarding.
Please refer to your letter No.U(20)3(-62)/164/94
dated 02.07.2009 and this office letter No.TRO-
2/ALW/2009-10/04 dated 23.06.2009 on the above subject.
In this connection you have been reminded many
times by this office that a huge demand of Rs.1, 25, 45,
598 is outstanding against the above named assessee and
for this purpose attachment of factory building including
plant and machinery of M/s Pan Asia Industries Ltd. were
made by way of issue of ITCP-16 on 26.03. 2004 by this
office. You have been asked many times to cooperate in the
(3 of 20) [CW-8308/2010]
matter so that recovery of tax dues may be made from the
assessee. But instead of cooperating with the department
you are trying to transfer the property of the above named
assessee to M/s Premier Texto Trade Pvt. Ltd. You have
been asked vide letter No.TRO-2 ALW/2007-08/45 dated
24.03.2008 that before giving permission to the assessee
from your office for transfer of property in this case, No
objection certificate should be obtained by this department.
But I find that there is no cooperation from your side at all.
Legal opinion from Standing Counsel of the department
regarding limitation u/s 68B of second schedule was also
sought, according to which it is clear that the aspect of
limitation u/s 68B of second scheduled cannot be ground for
releasing and relinquishing the arrears because the open
words of 68B goes to show that it is a procedural section
and not having overriding effect to the provisions contained
in the Act.
Apart from the above it is worthwhile to mention that
the attachment of the aforesaid property was made on
26.03.2004 and attached property has been sold by you.
(Copy of your office letter No.327 dated 22.04.2008 is
enclosed) by way of getting payment through one time
settlement scheme against your outstanding dues. At that
time also you were well aware about the outstanding dues
of I.Tax Department against the above assessee but
ignoring all these facts you are trying to cooperate the
assessee and getting the property of the assessee
transferred in the name of M/s Premier Texto Trade Pvt. Ltd.
In view of the above facts you are required to explain
as to why the Govt. dues of Rs.1,25,45,598/- alongwith
interest u/s220(2) of the I.T. Act 1961 should not be
recovered from you by invoking the coercive measures of
recovery i.e. attachment of you bank Account etc. For this
purpose you are required to attend this office on
12.10.2009 at 11.00 AM.
Your Faithfully,
(H.L. Gupta)
Tax Recovery Officer
Range-2, Alwar
Copy to:-
1. Premier Texto Trade Pvt. Ltd., B-3/9 second floor Model
Town-1 Delhi-110009 for information.
(4 of 20) [CW-8308/2010]
2. Tax Recovery Officer 1(2), Room No.535, 5 th Floor,
Aaykar Bhawan, M.K. Road, Mumbai-400020 for
inofrmation.
Tax Recovery Officer
Ranger-2, Alwar"
(4) The submission which the petitioner seeks to
advance is on the basis of the provisions of the Income Tax
Act, 1961 (hereinafter to be referred as the 'Act of 1961').
(5) In the other writ petition No.8308/2016 the
impugned demand notice dated 09.06.2010 is also quoted
in verbatim: -
"OFFICE OF THE
TAX RECOVERY OFFICER-2,
22, MOTI DUNGRI, ALWAR
No. ITO/TRO-2/2010-11/2070 Date:09.06.2010
M/S Premier Texo Trade Pvt. Ltd.
F-62-63, Ricco Industrial area,
Behror.
Sir,
Subject: Recovery of outstanding demand of
Rs.7485523/- for Asstt. Year 91-92 to 94-95 in the case of
M/S Pan Asia Industries Pvt. Ltd., Behror- regarding.
Above demand is outstanding against the above
company since long. To recover the above demand the
immovable property situated at plot No.62-63, Ricco
Industrial area, Behror has been attached by this office on
26.03.2004. Now it has been informed that your Company
has taken possession over the immovable properties
including the above said plot and possession over the
immovable properties including the above said plot and
running therein business activities. Since the above said
immovable properties already stand attached by this Office
you are an assessee in default in respect of above
(5 of 20) [CW-8308/2010]
outstanding demand of Rs.7485523/- plus interest.
Accordingly you are requested to deposit the above demand
within 3 days of the receipt of this letter failing which the
above said immovable property shall be taken in possession
by the Department and coercive measures of recovery
including attachment of your Bank account etc. shall also be
taken. For this purpose you may attend before the
undersigned on 15.06.2010 at 12.30 AM in my office at
Shakti vihar colony, Behror
(R.A. AGARWAL)
Tax Recovery Officer, Range-2
Alwar
At present at Behror"
(6) Due to the aforesaid notice given to the RIICO
authorities and to the petitioner, the lease rights were not
transferred in favour of the petitioner-Company.
(7) Facts which need to be noted are that the
Company purchased lease rights of Industrial plot Nos.F-
62-64 and G-93-95 plots situated at RIICO Industrial Area,
Behror, Distt. Alwar (Rajasthan) from M/s. Pan Asia
Industries Limited on 17.11.2006 through a registered sale
deed. As there was a tax recovery demand, as against Pan
Asia the Tax Recovery Officer issued an Order under Section
220(2) of the Act of 1961 as against Pan Asia Industries
relating to assessment year 1993-1994 on 16.02.1998 and
an order was passed on 23.03.2004 under Section 271 (1)
(i) imposing penalty on 27.06.2007 in four cases for a sum
of Rs.5,025/-, 74,29,696/-, 50,877/- & 50,60,000/-
totaling to Rs. 1,25,45,598/- plus interest. The properties
of Pan Asia were thus attached as on 31.03.2004. Thus on
17.11.2006 when the sale deed was executed the
(6 of 20) [CW-8308/2010]
properties of Pan Asia were under attachment with Income
Tax Authorities. In view thereof, the Income Tax Authorities
issued aforesaid orders for recovering the amount from the
petitioner.
(8) ` Learned Counsel for the petitioner submits that
the provisions of the Act of 1961 provided procedure for
recovery of tax as laid down in Schedule Second after the
Certificate is issued in terms of Section 222 of the Income
Tax Act. As per the said Schedule, the Tax Recovery Officer
is supposed to serve upon the defaulters the notice
requiring a defaulter to pay the amount. As per Rule 16
where a notice has been served on defaulter under Rule 2
and where an attachment has already been made under
this Schedule, any private transfer or delivery of the
property attached or of any interest therein and any
payment to the defaulter of any debt, dividend or other
moneys contrary to such attachment, shall be void as
against all claims enforceable under the attachment.
(9) However, it is his submission that as per Rule
68B to Schedule Second the sale of immovable property
shall be made only within three years from the end of
financial year and as per Rule 68B (4) where the sale of
immovable property is not made in accordance with the
provisions of sub-rule (1), the attachment order in relation
to the said property shall be deemed to have been vacated
(7 of 20) [CW-8308/2010]
on the expiry of the time of the limitation specified under
this rule.
Thus, it is his submission that as the immovable
property which was purchased by the petitioner-Company
from Pan Asia (the defaulting Company) was made on
17.11.2006 and the sale of the immovable property by the
respondent i.e. the Tax Recovery Officer was not made as
prescribed under 68B within three years from the end of the
financial year in which the order giving rise to the demand
of tax for the recovery of which the immovable property has
been attached; the attachment order would be deemed to
have been vacated on the expiry of three years in other
words after the expiry of three years i.e. from 31.03.2004
upto 31.3.2007, the attachment stood vacated on
31.03.2007 and the sale deed executed in favour of
petitioner would remain intact and cannot be termed as
void after 31.03.2007.
(10) Learned Counsel also points out that the Pan
Asia and the Tax Recovery Officer entered into a one time
settlement. He submits that so far as RIICO is concerned,
they were not justified in withholding the transfer of lease
rights pertaining to plot Nos.F-62-64 and G-93-95 plots
situated at RIICO Industrial Area, Behror, Distt. Alwar
(Rajasthan) in favour of the petitioner-Compnay on account
of the attachment notice having become barred by
limitation by virtue of the aforenoted submission and has
(8 of 20) [CW-8308/2010]
therefore prayed that the RIICO be directed to transfer
lease rights pertaining to the said plots.
Further, it is submitted that the loan account of
Pan Asia with the RIICO stood already satisfied and the
RIICO therefore had no authority to withhold the transfer of
lease rights of the said plots in the name of the petitioner-
Company. Learned Counsel for the petitioner has relied
upon documents relating to Pan Asia filed by way of an
application. The petitioner has also placed on record the
sale deed which was executed between the petitioner and
the Director, Pan Asia industries (defaulting Company).
(11) Learned Counsel relies on the judgment passed
by the Supreme Court in the case of Commissioner of
Income Tax Vs. S.V. Gopala Rao & Ors. (2017) 396
ITR 694 (SC) to assert that the provisions contained under
Rule 68B of the Second Schedule have statutory force as
held by the Apex Court. He further relies on three Judges
Bench of Supreme Court in case of M.Marathachalam
Pillai Vs. Padmavathi Ammal & Ors. 1971 (3)
Supreme Court Cases 878 and (1985) 2 SCC 167-
Balkrishan Gupta & Ors. Vs. Swadeshi Polytex Ltd. &
Anr. in support of his contention. He also refer to
judgments passed by various High Courts following the
judgment passed by the Supreme Court as noted above as
reported in AIR 1977 Allahabad 77- Official Receiver,
Muzaffarnagar, Vs. Chandra Shekhar & Ors. &
(9 of 20) [CW-8308/2010]
2008(1) AWC 276- Smt. Viyawati Vs. Lala Ram (D) by
L.Rs. & Anr. and 251 ITR 357 (Madras)- Noorudin
Vs.Tax Recover Officer.
(12) Per contra, learned Counsel appearing for the
respondents submits that Rule 68B does not apply to the
subsequent purchaser who with ulterior motives purchased
the property in question during the subsistence of
attachment. It is further submitted in the reply that a
Court receiver had already been appointed by the Bombay
High Court relating to the properties of the defaulting
Company and in this regard information was sent to RIICO
on 13.03.2008 and the RIICO had informed to the Income
Tax Authorities that the Corporation had already released its
charge over the fixed assets of the Company after the one
time settlement arrived at between the defaulting Company
and the RIICO. The Income Tax Officer was also informed
by the RIICO about the one time settlement between the
defaulting Company of the Corporation. The RIICO had also
been been asked not to grant and recognize any sale of the
property or transfer of title unless No Objection is received
from the Office.
Learned Counsel submits that in terms of Section
281 of the Act of 1961 any transfer of property where there
is any pendency of any proceedings under this act, would
be void as against any claim in respect of any tax or any
other sum applied by the assesee.
(10 of 20) [CW-8308/2010]
Further it is submitted that as per Rule 68(B)(i)
the limitation of three years would be only from the date
the demand of any tax has become conclusive under the
provisions of Section 245(I) or as the case may be final in
terms of provisions of Chapter 40 and, therefore, the same
would not apply. Learned Counsel further submits that in
terms of Section 64 of the CPC a private transfer by
judgment debtor of the property contrary to the claims of
the decree holder is void and submits that the judgment
cited by the Counsel for the petitioner are actually in favour
of the revenue and have been wrongfully interpreted.
(13) Having heard learned Counsel at length, before
dealing with the facts of the case, it would be appropriate to
quote certain provisions of the Act of 1961 and also
relevant judgments cited at bar : -
Provisions of the Income Tax, 1961 : -
"281. (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 possession (by way of
sale, mortgage, gift, exchange or any other mode of
transfer whatsoever) of, any of his assets in favour
of any other person, such charge or transfer shall be
void as against any claim in respect of any tax or
any other sum payable by the assessee as a result
of the completion of the said proceeding or
otherwise :
Provided that such charge or transfer shall not be
void if it is made--
(i) for adequate consideration and without notice of
the pendency of such proceeding or, as the case
may be, without notice of such tax or other sum
payable by the assessee ; or
(ii) with the previous permission of the
63[Assessing] Officer.
(11 of 20) [CW-8308/2010]
(2) This section applies to cases where the amount
of tax or other sum payable or likely to be payable
exceeds five thousand rupees and the assets
charged or transferred exceed ten thousand rupees
in value.
Explanation.--In this section, "assets" means land,
building, machinery, plant, shares, securities and
fixed deposits in banks, to the extent to which any
of the assets aforesaid does not form part of the
stock-in-trade of the business of the assessee.]"
"222. [(1) When an assessee is in default or is
deemed to be in default in making a payment of tax,
the Tax Recovery Officer may draw up under his
signature a statement in the prescribed form
specifying the amount of arrears due from the
assessee (such statement being hereafter in this
Chapter and in the Second Schedule referred to as
"certificate") and shall proceed to recover from such
assessee the amount specified in the certificate by
one or more of the modes mentioned below, in
accordance with the rules laid down in the Second
Schedule--]
(a) attachment and sale of the assessee's movable
property ;
(b) attachment and sale of the assessee's
immovable property ;
(c) arrest of the assessee and his detention in
prison;
(d) appointing a receiver for the management of the
assessee's movable and immovable properties.
[Explanation.--For the purposes 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 to his spouse or minor child
or son's wife or son's minor child, otherwise than for
adequate consideration, and which 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
minor 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
assessee in respect of any period prior to such
date.]
[(2) The Tax Recovery Officer may take action under
sub-section (1), notwithstanding that proceedings
(12 of 20) [CW-8308/2010]
for recovery of the arrears by any other mode have
been taken.]
"Schedule Second Rule 2
2. "[When a certificate has been drawn up by
the Tax Recovery Officer] 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 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 property90 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.
(2) Where an attachment has been made
under this Schedule, any private transfer or
delivery of the property attached or of any
interest therein and any payment to the
defaulter of any debt, dividend or other
moneys contrary to such attachment, shall be
void as against all claims enforceable under
the attachment."
"Rule 48. Attachment of the immovable
property of the defaulter shall be made by an
order prohibiting the defaulter from
transferring or charging the property in any
way and prohibiting all persons from taking
any benefit under such transfer or charge."
"68B. (1) No sale of immovable property shall
be made under this Part after the expiry of
three years18 from the end of the financial
year in which the order giving rise to a
demand of any tax, interest, fine, penalty or
any other sum, for the recovery of which the
immovable property has been attached, has
become conclusive under the provisions of
section 245-I or, as the case may be, final in
terms of the provisions of Chapter XX:
Provided that where the immovable property is
required to be re-sold due to the amount of
(13 of 20) [CW-8308/2010]
highest bid being less than the reserve price or
under the circumstances mentioned in rule 57
or rule 58 or where the sale is set aside under
rule 61, the aforesaid period of limitation for
the sale of the immovable property shall stand
extended by one year.
(2) In computing the period of limitation under
sub-rule (1), the period--
(i) during which the levy of the aforesaid tax,
interest, fine, penalty or any other sum is
stayed by an order or injunction of any court;
or
(ii) during which the proceedings of
attachment or sale of the immovable property
are stayed by an order or injunction of any
court; or
(iii) commencing from the date of the
presentation of any appeal against the order
passed by the Tax Recovery Officer under this
Schedule and ending on the day the appeal is
decided, shall be excluded :
Provided that where immediately after the
exclusion of the aforesaid period, the period of
limitation for the sale of the immovable
property is less than 180 days, such remaining
period shall be extended to 180 days and the
aforesaid period of limitation shall be deemed
to be extended accordingly.
(3) ---------------
(4) Where the sale of immovable property is
not made in accordance with the provisions of
sub-rule (1), the attachment order in relation
to the said property shall be deemed to have
been vacated.
"70. Where immovable property is attached, the Tax
Recovery Officer may, instead of directing a sale of
the property, appoint a person as receiver to
manage such property. Powers of receiver."
"71. (1) Where any business or other property is
attached and taken under management under the
foregoing rules, the receiver shall, subject to the
control of the Tax Recovery Officer, have such
powers as may be necessary for the proper
management of the property and the realisation of
the profits, or rents and profits, thereof.
(2) The profits, or rents and profits, of such
business or other property, shall, after defraying the
expenses of management, be adjusted towards
discharge of the arrears, and the balance, if any,
shall be paid to the defaulter."
(14 of 20) [CW-8308/2010]
Somewhat similar facts were existing in the case of
M.Marathachalam Pillai cited (supra) by the Hon'ble Apex
Court. Therein, a money decree against a suit and
attachment was obtained by the appellant Pillai as against
one Sait who was a owner of the house at Ootacamand. The
house pertaining to Sait was attached in execution of the
decree on October 9, 1956. The house was put up for sale
and purchased by him with the leave o the Court on
7.02.1958. However, possession was obstructed by the
respondent Padmavathi claiming to have purchased it from
Sait on 9.10.1956. In appeal the High Court of Madras held
that the attachment was not made according to law and
reversed the decree passed in faovur of Pillai. Section 64 of
the CPC was examined by the Apex Court and it was held as
under : -
"5. The High Court was impressed by the testimony of
R.F. Stoney who is a retired Engineer and his driver L.
Joseph. It is true that there is on the record the report
of the Amin which purports to bear the signatures of as
many as 12 persons in acknowledgment of attachment
being effected by the proclamation by beat of drum.
But none of those witnesses has been examined. We
have been taken through the evidence of R.F. Stoney
and L. Joseph and of the Amin and Vishwanathan, son
of Pillai. On a consideration of the evidence, we do not
see any reason to disagree with the High Court that no
attachment was levied as required by law. Relying upon
Section 64, Code of Civil Procedure the private transfer
of property in favour of Padmavathi cannot be deemed
to be void as against the claims enforceable under the
attachment of the property by Pillai.
6. But Mr Chagla appearing on behalf of Pillai raised an
alternative contention. He said that at the time of sale
there was another outstanding attachment and the sale
in favour of Padmavathi being contrary to such
attachment was, in any event, void. It appears that on
(15 of 20) [CW-8308/2010]
January 17, 1956, Pillai had in execution of a decree
obtained in Suit No. 55 of 1953, attached the property,
but that attachment was removed on March 23, 1957,
on satisfaction of the decree. By Section 64, Code of
Civil Procedure, the attachment is only void as against
all claims enforceable under the attachment, and it is
not void generally. Since the attachment effected on
January 17, 1956 was removed, any private alienation
contrary to such attachment cannot be regarded as void
for there are no claims enforceable under the
attachment, dated January 17, 1956."
(11) In case of Balkrishan Gupta cited (supra) the
Apex Court held as under : -
"30.---------------What is forbidden under section 64 of the
Code of Civil Procedure is a private transfer by the
judgment-debtor of the property attached contrary to the
attachment, that is, contrary to the claims of the decree
holder under the decree for realisation of which the
attachment is effected. A private transfer under section 64
of the Code of Civil Procedure is not absolutely void, that is,
void as against all the world but void only as against the
claims enforceable under the attachment. Until the property
is actually sold, the judgment-debtor retains title in the
property attached. Under Rule 76 of Order 21 of the Code of
Civil Procedure, 1908, the shares in a Corporation which
reattached may sold through a broker. In the alternative
such shares may be sold in public auction under Rule 77
thereof. On such sale' either under Rule 76 or under Rule
77, the purchaser acquires title. Until such sale is effected,
all other rights of the judgment-debtor remain unaffected
even if the shares may have been seized by the officer of
the court under Rule 43 of Order 21 of the Code of Civil
Procedure, 1908 for the purpose of effecting the
attachment, or through a Receiver or though an order in
terms of Rule 46 of Order 21 of the Code of Civil Procedure
may have been served on the judgment-debtor or on the
company concerned."
(14) Learned Counsel for the respondent has also
cited one judgment reported in (2008)15 Supreme Court
Cases 481; Macson Marbles Private Limited Vs. Union
of India the question arose relating to whether the auction
purchaser whose bid has been accepted would also take on
the liability of the Company who owned the suit plot against
whom there is a demand of Central Excise. The Apex Court
held as under :
(16 of 20) [CW-8308/2010]
"9. The argument advanced by the appellant that sale
having taken place under the State Act free of
encumbrances and the transferor's rights or liabilities
cannot be that of transferee does not hold
good. Section 29(2) of the State Act makes it clear
that the property pledged, mortgaged, hypothecated
or assigned to the Financial Corporation can be
brought to sale and such a sale if resulted in transfer
of property shall vest in the successor all rights in the
property transferred as if the transfer has been made
by the owner of the property. When sale made by the
corporation is deemed to be a sale made by the owner
of the property, necessarily Rule 230(2) of the Central
Excise Rules would be attracted.
10 . We are not impressed with the argument that
the State Act is a special enactment and the same
would prevail over the Central Excise Act. Each of
them is a special enactment and unless in the
operation of the same any conflict arises this aspect
need not be examined. In this case no such conflict
arises between the corporation and the Excise
Department. Hence it is unnecessary to examine this
aspect of the matter."
(15) A look at the aforenoted provisions show that
under Section 68B if the sale is not executed within a period
of three years after the attachment, the same shall be
deemed to have been vacated. However, Rule 48 mentions
attachment of immovable property of a defaulter prohibiting
the defaulter from transferring or charging the property in
any way and prohibiting all persons from taking all benefits
under such transfer or charge fees. Thus, if the facts of the
present case are taken into consideration, it is apparent
that Section 281 of the Act of 1961 would not come into
operation to declare the sale and transfer as void since the
provision is only with reference to the pendency of the
proceedings before the service of notice under Rule 2 of
Second Schedule.
(17 of 20) [CW-8308/2010]
(16) Learned Counsel for the petitioner relying upon
Rule 16(2) has submitted that since it was a private
transfer or delivery of a property attached, the same could
be void as against of claimant enforceable under the
attachment. However, as the attachment itself cannot be
said to be enforceable after a lapse of three years as
provided under 68(B)(4), the notices issued to the
petitioner by the respondents were unjustified.
(17) I do not agree with the said submission as there
is a basic fault in it to the extent that the Rule 16(2) shall
be examined on the day when the sale was executed i.e. on
17.11.2006. The attachment was enforceable on that day
when the sale was executed between the Company i.e.
petitioner and the defaulting company and would be void.
The clams of the department being enforceable against the
defaulting company the petitioner's attempt to take
umbrage of Rule 16(2) is wholly unfounded.
On a conjoint reading of Rule 16(1) and 16(2), it
is apparent that while Rule 16(1) puts an embargo on the
defaulter or his representative in interest to mortgage,
charge, lease or otherwise deal with any property belonging
to him except with the permission of the Tax Recovery
Officer. Rule 16(2) disallows any private transfer or delivery
of property attached or of creating any interest therein for
any payments to the defaulter of any debt, dividend and
(18 of 20) [CW-8308/2010]
other monies contrary to such attachment when all such
dealings have been treated as void.
Petitioner-Company could not have even entered
in settlement with the Tax Recovery Officer and such one
time settlement as alleged by the petitioner would be
treated as void. The judgment passed by the Apex Court in
M.Marathachalam Pillai (supra) was essentially relating
to a civil suit where there was an attachment of the house
in execution of the decree. In Balkrishan Gupta (supra),
the Apex Court again dealt with Section 64 of CPC to hold
that the private transfer is not absolutely void as against all
the word but void only as against a claim enforceable under
the attachment. Although the same words have been used
in Rule 16(2), the facts show that on the day when the sale
was executed the same was void against all claims
enforceable under the attachment.
Submission of learned Counsel for the petitioner
that after the expiry of three years, the sale deed would remain alive and intact is wholly misconceived. The word 'void' means not valid or legally binding once a sale deed is void, it is rendered useless. In English language it means a complete empty space once sale deed is void on the day when it was executed i.e.17.11.2006. Merely on account of the period of attachment has lapsed and the attachment having been vacated, it cannot be revived and such claims (19 of 20) [CW-8308/2010] of the department persist the petitioner attempted to take benefit of Rule 68(3)(4) is not made out. (18) There is other aspect which also needs to be noted. Rule 68(B)(iv) comes into operation where the sale of immovable property is not made in terms of Section 68(b)(1). However, it is seen that in all cases the Tax Recovery Officers may not have proceeded under 168(b) and has an option to appoint a person as Receiver instead of directing of sale of property in terms of Rule 70 and 71. Admittedly the Receiver has already been appointed on the properties of the defaulting Company which includes the property situated at Alwar thus, there was no occasion for the Tax Recovery Officer to proceed with the sale in terms of 68(b) and the argument of the petitioner relating to the same not being void on account of vacation of the attachment is not made out and in such circumstances, the sale executed in favour of the petitioner has to be treated as void.
(19) Even as per Section 222 there is an option for either to proceed with the charge sheet and sale by the Tax Recovery Officer or to appoint a Receiver on the property. However, in view of the fact that Receiver had already been appointed by the Bombay High Court, it is to be presumed that the attachment and sale could not be proceeded further and receiver as appointed by the High Court, would (20 of 20) [CW-8308/2010] be deemed to do the work in terms of Rule 70 and 71 of the Income Tax, 1961.
(20) In view of the law as laid down by Apex Court in Macson Marbles Private Limited cited (supra), the sale executed in favour of the petitioner results in the petitioner liable to pay the dues as against the defaulting company and, therefore, the demand raised by the department is wholly justified. Income Tax Act provides a complete code in itself and protect the revenue from misadventures which may be taken up by a defaulting person like the Company in the present case.
(21) In view of the aforesaid discussions, the writ petitions are dismissed with cost of Rs.50,000/-.
(SANJEEV PRAKASH SHARMA),J N.Gandhi/77-78