If the assessee’s claim is that the property is not liable for any attachment, then it has to make a claim before the Tax Recovery Officer as per Rule 11 and could not have approached the Court invoking jurisdiction under Article 226 of the Constitution of India.

CHAMPA DEVI VS THE TAX RECOVERY OFFICER-(High Court)

Held As per s. 281, transfers, 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, if an assessee creates a charge on a property, such charge or transfer shall be void 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. The language of s. 281(1) r/w the proviso would make it clear that the onus is on the assessee, who claims the transaction to be valid and not void. In the instant case, the Revenue has issued the impugned notice and the assessee has straightaway approached this Court and filed this writ petition. In my considered view, this writ petition is not the proper remedy, which the assessee should have availed. In this regard, it is relevant to point out that the 2nd Schedule to the Income Tax Act contains the procedure for recovery of tax. Under the said Schedule, there is a power conferred on the Tax Recovery Officer for investigation under Rule 11 . (Paras 8, 9 & 10) As per Rule 11, if any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. The procedure for such investigation and the manner in which the proceedings to be conducted are enumerated under Rule 11 of the said Rules. Therefore, if the assessee’s claim is that the property is not liable for such attachment, then the assessee has to make a claim before the Tax Recovery Officer and for such reason, the assessee could not have approached this Court invoking the jurisdiction under Article 226 of the Constitution of India. Therefore, the Court holds that the writ petition is not maintainable. However, considering the fact that the Income Tax Act and Rules framed there under, especially Rule 11 under the 2nd Schedule, provides for a remedy to the assessee, the assessee is at liberty to avail such a remedy. (Para 11)

1. Heard Mr.R.Sivaraman, learned counsel for the petitioner and Mr.A.P.Srinivas, learned Senior Standing Counsel for the respondent.

2.The petitioner has filed this writ petition challenging an intimation given by the respondent, Tax Recovery Officer-I, stating that the recovery of tax arrears in the case relating to M/s.NEPC India Ltd., the immovable property situated in Trichy Road, belonging to M/s.NEPC India Ltd., and later transferred to the petitioner vide Sale Deed dated 05.09.2011 registered as Doc. No.3016 has been attached vide order dated 29.02.2012. Further, the notice states that the said property has been attached, as the transfer in the name of the petitioner is null and void in view of Section 281(1) and Rule-16 of the 2nd Schedule to the Income Tax Act, 1961. The petitioner was prohibited from dealing with the property in any manner.

3.The petitioner would contend that the respondent, by the impugned notice, declared the transfer of property in the name of the petitioner as null and void and the same is totally against the principles of Rule-16 of the 2nd Schedule to the Income Tax Act, 1961.

5.Further, it is submitted that the respondent attached the petitioner's property for the arrears of the vendor only on 29.02.2012, that is, long after the petitioner had purchased the property and therefore, the notice of attachment will not bind the petitioner.

6.Section 281 of the Income Tax Act deals with certain transfers, which are held to be void. Sub-Section (1) of Section 281 states 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 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.

7.Proviso states that such charge or transfer shall not be void if it is made 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 with the previous permission of the [Assessing] Officer.

8.On a reading of the said provision, it is seen that transfers, 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, if an assessee creates a charge on a property, such charge or transfer shall be void 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.

9.The language of Section 281(1) read with the proviso would make it clear that the onus is on the assessee, who claims the transaction to be valid and not void.

“Investigation by Tax Recovery Officer.

Rule 11. (1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection: Provided that no such investigation shall be made where the Tax Recovery Officer considers that the claim or objection was designedly or unnecessarily delayed.

Rule 11(2) : Where the property to which the claim or objection applies has been advertised for sale, the Tax Recovery Officer ordering the sale may postpone it pending the investigation of the claim or objection, upon such terms as to security or otherwise as the Tax Recovery Officer shall deem fit.

Rule 11(3) : 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 11(4) : Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale.

Rule 11(5) : Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim.

Rule 11(6) : Where a claim or an objection is preferred, 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.”

11.In terms of the above Rule, if any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. The procedure for such investigation and the manner in which the proceedings to be conducted are enumerated under Rule 11 of the said Rules. Therefore, if the petitioner's claim is that the property is not liable for such attachment, then the petitioner has to make a claim before the Tax Recovery Officer and for such reason, the petitioner could not have approached this Court invoking the jurisdiction under Article 226 of the Constitution of India. Therefore, the Court holds that the writ petition is not maintainable. However, considering the fact that the Income Tax Act and Rules framed thereunder, especially Rule 11 under the 2nd Schedule, provides for a remedy to the assessee, the petitioner is at liberty to avail such a remedy.

12.In the result, the writ petition is dismissed 'as not maintainable' with a direction to the petitioner to file a claim before the respondent in terms of Rule 11(1) of the 2nd Schedule to the Income Tax act within a period of four weeks from the date of receipt of a copy of this order. On such claim being filed, the respondent is directed to investigate the same in accordance with law. No costs. Consequently, M.P.No.1 of 2012 is closed.

Sd/-

Assistant Registrar(CS IX) Sub Assistant Registrar To

The Tax Recovery Officer-I,Income Tax Department, Office of the Tax Recovery Officer-I, 63, Race Course, Coimbatore-641 018.

+1cc to Mr.A.P.Srinivas, Advocate Sr.No.45901 +1cc to Mr.R.Sivaraman, Advocate SR.No.46437 SV(CO)

sm:26.7.2018 W.P.No.8148 of 2012

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Section - 281, Certain transfers to be void (IT Act, 1961)

Rule-11, Determination of income from transactions with non-residents (IT Rules…

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If the assessee’s claim is that the property is not liable for any attachment, then it has to make a claim before the Tax Recovery Officer as per Rule 11 and could not have approached the Court invoking jurisdiction under Article 226 of the Constitution of India.

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Held

As per s. 281, transfers, 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, if an assessee creates a charge on a property, such charge or transfer shall be void 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. The language of s. 281(1) r/w the proviso would make it clear that the onus is on the assessee, who claims the transaction to be valid and not void. In the instant case, the Revenue has issued the impugned notice and the assessee has straightaway approached this Court and filed this writ petition. In my considered view, this writ petition is not the proper remedy, which the assessee should have availed. In this regard, it is relevant to point out that the 2nd Schedule to the Income Tax Act contains the procedure for recovery of tax. Under the said Schedule, there is a power conferred on the Tax Recovery Officer for investigation under Rule 11 .

(Paras 8, 9 & 10)

As per Rule 11, if any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the ground that such property is not liable to
such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. The procedure for such investigation and the manner in which the proceedings to be conducted are enumerated under Rule 11 of the said Rules. Therefore, if the assessee’s claim is that the property is not liable for such attachment, then the assessee has to make a claim before the Tax Recovery Officer and for such reason, the assessee could not have
approached this Court invoking the jurisdiction under Article 226 of the Constitution of India. Therefore, the Court holds that the writ petition is not maintainable. However, considering the fact that the Income Tax Act and Rules framed there under, especially Rule 11 under the 2nd Schedule, provides for a remedy to the assessee, the assessee is at liberty to avail such a remedy.

(Para 11)

1. Heard Mr.R.Sivaraman, learned counsel for the petitioner
and Mr.A.P.Srinivas, learned Senior Standing Counsel for the
respondent. 
2.The petitioner has filed this writ petition challenging
an intimation given by the respondent, Tax Recovery Officer-I,
stating that the recovery of tax arrears in the case relating to
M/s.NEPC India Ltd., the immovable property situated in Trichy
Road, belonging to M/s.NEPC India Ltd., and later transferred to
the petitioner vide Sale Deed dated 05.09.2011 registered as
Doc. No.3016 has been attached vide order dated 29.02.2012.
Further, the notice states that the said property has been
attached, as the transfer in the name of the petitioner is null
and void in view of Section 281(1) and Rule-16 of the 2nd
Schedule to the Income Tax Act, 1961. The petitioner was
prohibited from dealing with the property in any manner.

3.The petitioner would contend that the respondent, by the
impugned notice, declared the transfer of property in the name
of the petitioner as null and void and the same is totally
against the principles of Rule-16 of the 2nd Schedule to the
Income Tax Act, 1961.

4.It is submitted that the petitioner is a bona fide
purchaser of the said property for a valuable consideration and
as on the date of purchase, there are no encumbrances / charge
on the property. Further, it is submitted that there are no
income tax dues payable by the petitioner's vendor and to that
effect, a certificate was issued by the Assistant Commissioner
of Income Tax, Company Circle IV(4), Chennai, dated 13.01.2006. 
5.Further, it is submitted that the respondent attached the
petitioner's property for the arrears of the vendor only on
29.02.2012, that is, long after the petitioner had purchased the
property and therefore, the notice of attachment will not bind
the petitioner.

6.Section 281 of the Income Tax Act deals with certain
transfers, which are held to be void. Sub-Section (1) of
Section 281 states 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 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.

7.Proviso states that such charge or transfer shall not be
void if it is made 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 with the previous permission of the [Assessing] Officer.

8.On a reading of the said provision, it is seen that
transfers, 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, if an assessee
creates a charge on a property, such charge or transfer shall be
void 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.

9.The language of Section 281(1) read with the proviso
would make it clear that the onus is on the assessee, who claims
the transaction to be valid and not void.

10.In the instant case, the respondent has issued the
impugned notice and the petitioner has straightaway approached
this Court and filed this writ petition. In my considered view,
this writ petition is not the proper remedy, which the
petitioner should have availed. In this regard, it is relevant
to point out that the 2nd Schedule to the Income Tax Act contains
the procedure for recovery of tax. Under the said Schedule,
there is a power conferred on the Tax Recovery Officer /
respondent for investigation under Rule 11, which reads as
under:- 
“Investigation by Tax Recovery Officer.
Rule 11. (1) Where any claim is preferred to, or
any objection is made to the attachment or sale of,
any property in execution of a certificate, on the
ground that such property is not liable to such
attachment or sale, the Tax Recovery Officer shall
proceed to investigate the claim or objection:
Provided that no such investigation shall be made
where the Tax Recovery Officer considers that the
claim or objection was designedly or unnecessarily
delayed. 
Rule 11(2) : Where the property to which the claim
or objection applies has been advertised for sale,
the Tax Recovery Officer ordering the sale may
postpone it pending the investigation of the claim
or objection, upon such terms as to security or
otherwise as the Tax Recovery Officer shall deem
fit. 
Rule 11(3) : 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 11(4) : Where, upon the said investigation,
the Tax Recovery Officer is satisfied that, for the
reason stated in the claim or objection, such
property was not, at the said date, in the
possession of the defaulter or of some person in
trust for him or in the occupancy of a tenant or
other person paying rent to him, or that, being in
the possession of the defaulter at the said date,
it was so in his possession, not on his own account
or as his own property, but on account of or in
trust for some other person, or partly on his own
account and partly on account of some other person,
the Tax Recovery Officer shall make an order
releasing the property, wholly or to such extent as
he thinks fit, from attachment or sale. 
Rule 11(5) : Where the Tax Recovery Officer is
satisfied that the property was, at the said date,
in the possession of the defaulter as his own
property and not on account of any other person, or
was in the possession of some other person in trust
for him, or in the occupancy of a tenant or other
person paying rent to him, the Tax Recovery Officer
shall disallow the claim. 
Rule 11(6) : Where a claim or an objection is
preferred, 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.” 
11.In terms of the above Rule, if any claim is preferred
to, or any objection is made to the attachment or sale of, any
property in execution of a certificate, on the ground that such
property is not liable to such attachment or sale, the Tax
Recovery Officer shall proceed to investigate the claim or
objection. The procedure for such investigation and the manner
in which the proceedings to be conducted are enumerated under
Rule 11 of the said Rules. Therefore, if the petitioner's claim
is that the property is not liable for such attachment, then the
petitioner has to make a claim before the Tax Recovery Officer
and for such reason, the petitioner could not have approached
this Court invoking the jurisdiction under Article 226 of the
Constitution of India. Therefore, the Court holds that the writ
petition is not maintainable. However, considering the fact
that the Income Tax Act and Rules framed thereunder, especially
Rule 11 under the 2nd Schedule, provides for a remedy to the
assessee, the petitioner is at liberty to avail such a remedy.

12.In the result, the writ petition is dismissed 'as not
maintainable' with a direction to the petitioner to file a claim
before the respondent in terms of Rule 11(1) of the 2nd Schedule
to the Income Tax act within a period of four weeks from the
date of receipt of a copy of this order. On such claim being
filed, the respondent is directed to investigate the same in
accordance with law. No costs. Consequently, M.P.No.1 of 2012
is closed. 
Sd/-

Assistant Registrar(CS IX)

Sub Assistant Registrar

To
The Tax Recovery Officer-I,Income Tax Department,
Office of the Tax Recovery Officer-I,
63, Race Course, Coimbatore-641 018.
+1cc to Mr.A.P.Srinivas, Advocate Sr.No.45901
+1cc to Mr.R.Sivaraman, Advocate SR.No.46437
SV(CO)
sm:26.7.2018

W.P.No.8148 of 2012

3.The petitioner would contend that the respondent, by the
impugned notice, declared the transfer of property in the name
of the petitioner as null and void and the same is totally
against the principles of Rule-16 of the 2nd Schedule to the
Income Tax Act, 1961.

6.Section 281 of the Income Tax Act deals with certain
transfers, which are held to be void. Sub-Section (1) of
Section 281 states 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 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.

7.Proviso states that such charge or transfer shall not be
void if it is made 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 with the previous permission of the [Assessing] Officer.

8.On a reading of the said provision, it is seen that
transfers, 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, if an assessee
creates a charge on a property, such charge or transfer shall be
void 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.

9.The language of Section 281(1) read with the proviso
would make it clear that the onus is on the assessee, who claims
the transaction to be valid and not void.

12.In the result, the writ petition is dismissed 'as not
maintainable' with a direction to the petitioner to file a claim
before the respondent in terms of Rule 11(1) of the 2nd Schedule
to the Income Tax act within a period of four weeks from the
date of receipt of a copy of this order. On such claim being
filed, the respondent is directed to investigate the same in
accordance with law. No costs. Consequently, M.P.No.1 of 2012
is closed. 
Sd/-

Assistant Registrar(CS IX)

Sub Assistant Registrar

W.P.No.8148 of 2012

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Section - 281, Certain transfers to be void (IT Act, 1961)

Rule-11, Determination of income from transactions with non-residents (IT Rules…

If the assessee’s claim is that the property is not liable for any attachment, then it has to make a claim before the Tax Recovery Officer as per Rule 11 and could not have approached the Court invoking jurisdiction under Article 226 of the Constitution of India.