Case: Connectwell Industries Private Limited Vs. Union of India &amp; Others

property by the Income Tax Department.16. The said schedule provides for procedure for recovery of tax. Rule 2 thereof reads as under:"Issue of notice. 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 realize the amount under this Schedule."This Rule provides for a notice to the defaulter after a certificate is drawn up by the Tax Recovery Officer for the recovery of arrears. Rule 16 thereof reads thus;"Private alienation to be void in certain cases.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 property 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 the 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."17. It is clear, therefore, that after notice under Rule 2 is served on the defaulter the defaulter or his representative in interest cannot deal with the property belonging to him except with the permission of the Tax Recovery Officer and under Sub-rule (2) of Rule 16, if any attachment has been made under this schedule any private transfer or delivery of the property or of any interest therein contrary to such attachment is void against all claims enforceable under the attachment.18. In this case notice under Rule 2 was issued to BPIL on 11/2/2003. The said immovable property was attached under Rule 48 of the said schedule on 17/6/03 vide ITCP-16. Form No.ITCP 16 annexed to the affidavit of the Tax Recovery Officer states that the defaulter BPIL had failed to pay a sum of Rs.20,46,813/- payable under certificate dated 11/2/2003 and hence the said property is attached. The sale in favour of the petitioners has taken place on 9/12/2004 and the sale certificate is issued on 14/1/05. Therefore, as per Rule 2 read with Rule 16 of the said Schedule the said sale is void.19. We are not impressed by Mr. Tulzapurkars contention that because the sale was at the instance of the 2nd respondent under the orders of the DRT, it will not be covered by Rule 16. The defaulter could not have sold the property after receipt of notice under Rule 2 and after attachment of the property by the Income Tax Department. Therefore, in the circumstances of the case even respondent 2 could not have ordered the sale of the said property. It is not possible for us to set aside the attachment in this manner. Attachment levied by the Income-Tax Department cannot cease to operate because of subsequent sale. Dues of the Department must be paid. Attachment will continue to operate so long as the dues are not paid and the fact that property has changed hands will, in our opinion, make no difference.20. In our opinion, the reliance placed by Mr. Tulzapurkar on the judgment of this court in P. Kumars case (supra) is misplaced. In that case the petitioners therein had entered into an agreement of sale dated 18/8/1984 with one company. Possession was handed over to the petitioners. The petitioners and the company jointly filed Form No.37EE before the Competent Authority under Section 269 AB(2) of the Income Tax Act. In March 1987, the Income Tax Department attempted to attach the said property. Petitioners wrote a letter to the Income Tax Department stating that they had purchased the premises without notice of any proceedings against the said company in respect of assessment year 1983-84. The company had filed return for the assessment year 1983-84 on 27/2/84, though the date of completion of the assessment was not indicated.21. On facts before it a learned Single Judge of this court held that the petitioner and the said company had jointly filed Form No.37EE in the office of the Competent Authority. The assessment of the said company was not completed until March, 1986 and hence no demand could, thus be pending against the said company at the relevant time. This court observed that the petitioners therein had filed the requisite forms and, therefore, it was for the department to raise objection against the purchase of the premises from the said company. This court observed that affidavit in reply was also not filed by the department. In the circumstances, this court quashed the notice of attachment.22. In this case, the Income Tax Department has filed affidavit. The petitioner has not chosen to make BPIL party. It is not even averred in the petition that no demand was pending against BPIL. Mrs. Majas, the Tax Recovery Officer of the Income Tax Department has stated in her affidavit that the Income Tax Department had initiated recovery proceeding against BPIL for realization of dues of more than Rs.20 lacs. She has annexed to her affidavit a table giving all particulars about the assessment years, demand to be recovered, date of service of notice and dates of payment. We are not in a position to record a finding that in the facts of this case, there was no pending demand, particularly when there is no specific challenge raised in the petition. In our opinion, the judgment of this court in P. Kumars case will have to be confined to its own facts.23. In the circumstances, we are of the opinion that there is no merit in this writ petition.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]17. It is clear, therefore, that after notice under Rule 2 is served on the defaulter the defaulter or his representative in interest cannot deal with the property belonging to him except with the permission of the Tax Recovery Officer and under(2) of Rule 16, if any attachment has been made under this schedule any private transfer or delivery of the property or of any interest therein contrary to such attachment is void against all claims enforceable under the attachment.18. In this case notice under Rule 2 was issued to BPIL on 11/2/2003. The said immovable property was attached under Rule 48 of the said schedule on 17/6/03 videForm No.ITCP 16 annexed to the affidavit of the Tax Recovery Officer states that the defaulter BPIL had failed to pay a sum of Rs.20,46,813/payable under certificate dated 11/2/2003 and hence the said property is attached. The sale in favour of the petitioners has taken place on 9/12/2004 and the sale certificate is issued on 14/1/05. Therefore, as per Rule 2 read with Rule 16 of the said Schedule the said sale is void.19. We are not impressed by Mr. Tulzapurkars contention that because the sale was at the instance of the 2nd respondent under the orders of the DRT, it will not be covered by Rule 16. The defaulter could not have sold the property after receipt of notice under Rule 2 and after attachment of the property by the Income Tax Department. Therefore, in the circumstances of the case even respondent 2 could not have ordered the sale of the said property. It is not possible for us to set aside the attachment in this manner. Attachment levied by theDepartment cannot cease to operate because of subsequent sale. Dues of the Department must be paid. Attachment will continue to operate so long as the dues are not paid and the fact that property has changed hands will, in our opinion, make no difference.20. In our opinion, the reliance placed by Mr. Tulzapurkar on the judgment of this court in P. Kumars case (supra) is misplaced. In that case the petitioners therein had entered into an agreement of sale dated 18/8/1984 with one company. Possession was handed over to the petitioners. The petitioners and the company jointly filed Form No.37EE before the Competent Authority under Section 269 AB(2) of the Income Tax Act. In March 1987, the Income Tax Department attempted to attach the said property. Petitioners wrote a letter to the Income Tax Department stating that they had purchased the premises without notice of any proceedings against the said company in respect of assessment yearThe company had filed return for the assessment yearon 27/2/84, though the date of completion of the assessment was not indicated.21. On facts before it a learned Single Judge of this court held that the petitioner and the said company had jointly filed Form No.37EE in the office of the Competent Authority. The assessment of the said company was not completed until March, 1986 and hence no demand could, thus be pending against the said company at the relevant time. This court observed that the petitioners therein had filed the requisite forms and, therefore, it was for the department to raise objection against the purchase of the premises from the said company. This court observed that affidavit in reply was also not filed by the department. In the circumstances, this court quashed the notice of attachment.22. In this case, the Income Tax Department has filed affidavit. The petitioner has not chosen to make BPIL party. It is not even averred in the petition that no demand was pending against BPIL. Mrs. Majas, the Tax Recovery Officer of the Income Tax Department has stated in her affidavit that the Income Tax Department had initiated recovery proceeding against BPIL for realization of dues of more than Rs.20 lacs. She has annexed to her affidavit a table giving all particulars about the assessment years, demand to be recovered, date of service of notice and dates of payment. We are not in a position to record a finding that in the facts of this case, there was no pending demand, particularly when there is no specific challenge raised in the petition. In our opinion, the judgment of this court in P. Kumars case will have to be confined to its own facts.23. In the circumstances, we are of the opinion that there is no merit in this writ petition.