Addanki Narayanappa And Another v. Learned Standing Counsel Points Out To Section 281 And282 Of The Income Tax Act, Wherein Certain Transfers Are Declared Asvoid. This Transfer Was Effected Durin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE MONDAY, THE 3RD DAY OF AUGUST 2015/12TH SRAVANA, 1937 WP(C).No. 11057 of 2013 (F) ---------------------------- PETITIONER(S): -------------------------- B. VINOD, MANAGING PARTNER, PONNAMKULAM BROTHERS, REGISTERED OFFICE AT T.J.R.S. 184, NANDANAM, PIPPINMOODU, SASTHAMANGALAM, THIRUVANANTHAPURAM. BY ADVS.SRI.T.K.ANANDA KRISHNAN, SRI.SANOJ R. NAIR, SRI.B.S.SHAJI, SRI.G.BIJU (VELLANAD), SRI.U.JAYACHANDRAN. RESPONDENT(S): ---------------------------- 1. THE SECRETARY, DEPARTMENT OF FINANCE, GOVERNMENT OF INDIA. 2. THE COMMISSIONER OF INCOME TAX, DEPARTMENT OF INCOME TAX, AYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM. KOWDIAR, THIRUVANANTHAPURAM. 3. THE TAX RECOVERY OFFICER, DEPARTMENT OF INCOME TAX, AYAKAR BHAVAN, KAWDIAR, THIRUVANANTHAPURAM. 4. REGISTRAR OF FIRMS, OFFICE OF THE REGISTRAR OF FIRMS, THIRUVANANTHAPURAM. R1 TO R3 BY SRI.P.K.R.MENON, SSENIOR COUNSEL. ADV. SRI.JOSE JOSEPH, SC. R4 BY GOVT. PLEADER SRI.R. RANJITH. rs. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03-08-2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ON 03-08-2015, THE COURT ON THE SAME DAY DELIVERED WP(C).No. 11057 of 2013 (F) APPENDIX PETITIONER'S EXHIBITS:- EXHIBIT P1: TRUE COPY OF THE PARTNERSHIP DEED. EXHIBIT P2: TRUE COPY OF THE NEWS ITEM PUBLISHED IN KERALA KAWMUDI DAILY.KAWMUDI DAILY. EXHIBIT P3: TRUE COPY OF THE LETTER ISSUED BY 4TH RESPONDENT DATED 19.10.2012.DATED 19.10.2012. EXHIBIT P4: TRUE COPY OF THE REGISTER OF FIRM IN FORM A ISSUED BY THE 4TH RESPONDENT.THE 4TH RESPONDENT. EXHIBIT P5: TRUE COPY OF THE INCOME TAX RETURN OF THE FIRM FOR THE YEAR 2010-11.THE YEAR 2010-11. EXHIBIT P6: TRUE COPY OF THE INCOME TAX RETURN OF THE FIRM FOR THE YEAR 2011-12.THE YEAR 2011-12. EXHIBIT P7: TRUE COPY OF THE INCOME TAX RETURN OF THE FIRM FOR THE YEAR 2012-13.THE YEAR 2012-13. EXHIBIT P8: TRUE COPY OF THE ORDER ISSUED BY THE 3RD RESPONDENT ATTACHING THE PROPERTY OF THE PARTNERSHIP FIRM.ATTACHING THE PROPERTY OF THE PARTNERSHIP FIRM. EXHIBIT P9: TRUE COPY OF THE ENCUMBRANCE CERTIFICATE ISSUED FROM THE SUB REGISTRAR OFFICE, THIRUVANANTHAPURAM.THE SUB REGISTRAR OFFICE, THIRUVANANTHAPURAM. EXHIBIT P10: TRUE COPY OF THE LEASE DEED. EXHIBIT P11: TRUE COPY OF THE OBJECTION FILED BY THE PETITIONER TO THE EXT.P8.THE EXT.P8. EXHIBIT P12: TRUE COPY OF THE ORDER ISSUED BY THE 3RD RESPONDENT DATED 15.01.2013.DATED 15.01.2013. RESPONDENT'S ANNEXURE: ANNEXURE R4A COPY OF THE APPLICATION IN FORM V FILED BY THE PETITIONER. //TRUE COPY// rs. P.A. TO JUDGE A.MUHAMED MUSTAQUE, J. ***************************************************************************** W.P.(C) No.11057 of 2013*************************************************************** **************Dated this the 3[rd] day of August, 2015 JUDGMENT The petitioner is the Managing Partner of the PartnershipFirm by name 'Ponnamkulam Brothers'. The petitioner hasapproached this Court challenging recovery proceedings initiatedto recover the income tax dues from Sri.B.Vijayan, a former partnerof the above partnership firm. 2.The partnership firm was formed in the year 2009 andregistered on 22.12.2009. Originally, there were nine partners.One of the partners, namely, Sri.B.Vijayan retired on 22.1.2010.The Income Tax Authorities have now proceeded to recover theamount due from Sri.B.Vijayan from the assets belong to thepartnership firm. 3.The partnership firm was formed with object to carry onbusiness in trading as well as in purchase and acquiringcommercial lands, buildings etc. 4.By virtue of the partnership firm, Sri.B.Vijayan alsoacquired in the share of the assets of the partnership firm alongwith others. 2.The partnership firm was formed in the year 2009 andregistered on 22.12.2009. Originally, there were nine partners.One of the partners, namely, Sri.B.Vijayan retired on 22.1.2010.The Income Tax Authorities have now proceeded to recover theamount due from Sri.B.Vijayan from the assets belong to thepartnership firm. 3.The partnership firm was formed with object to carry onbusiness in trading as well as in purchase and acquiringcommercial lands, buildings etc. 4.By virtue of the partnership firm, Sri.B.Vijayan alsoacquired in the share of the assets of the partnership firm alongwith others. 5.As seen from the impugned order, it is a blockassessment based on a search conducted in the year 2008 and theassessment was crystalized on 31.12.2010. 6. The learned counsel for the petitioner would urge that since Sri.B.Vijayan had retired from the firm much before the assessment,the liability cannot be fastened on the share of Sri.B.Vijayan whichwas released to the other partners before the assessment. It is alsosubmitted that the recovery of any amount due from Sri.B.Vijayan,the entire property of the firm cannot be attached. The learnedcounsel also relies on the judgment of the Hon’ble Supreme Court in Addanki Narayanappa and another v. Bhaskara Krishtappa and13 others[1966 AIR 1300], wherein it was held that the retiringpartner is only entitled to receive the money value of his share in thenet partnership assets as on the date of dissolution or retirementafter the deduction of liabilities and prior charges. 7.Learned Standing Counsel points out to Section 281 and282 of the Income Tax Act, wherein certain transfers are declared asvoid. This transfer was effected during the pendency of proceedings initiated under the Act. Therefore, it is argued thatsince this was commenced in the year 2008, any transfer as far asthe Department is void. It is also submitted that the Departmentonly proceeded against the share of Sri.B.Vijayan, the defaulter andnot against the entire property as such. 8.The judgment relied by the petitioner in AddankiNarayanappa's case (supra) has no relevance in this matter. Thedictum in the above judgment would clearly indicate that the right ofthe partner in the partnership firm, in respect of the immovableproperty is to receive monetary value and not as a share of theimmovable property. This was taking into account of the fact thatthe partnership firm owns immovable property and any retirement of the partners cannot result in disruption of the right over theimmovable property by other partners. 9.Therefore, the question is whether Section 281(2) of theIncome Tax Act would come into operation or not. There is no doubtthat the proceedings were initiated in the year, 2008 and theproceedings were pending while release of the share was obtained.The attachment in fact is effected to obtain the money value of the W.P.(C) No.11057 of 2013 4 share. Going by the judgment relied by the petitioner, theDepartment would be entitled for the money value of the share heldby the partner. Therefore, this Court is of the view that the petitionerwould be entitled for release of the attachment on payment of themoney value of the share held by the defaulter at the time ofretirement. Therefore, following directions are issued: i.The petitioner shall make available all the recordsrelating to the release including intimation givenbefore the Authority at the time of release of theshare of Sri.B.Vijayan from the partnership firm. relating to the release including intimation givenbefore the Authority at the time of release of theshare of Sri.B.Vijayan from the partnership firm. share. Going by the judgment relied by the petitioner, theDepartment would be entitled for the money value of the share heldby the partner. Therefore, this Court is of the view that the petitionerwould be entitled for release of the attachment on payment of themoney value of the share held by the defaulter at the time ofretirement. Therefore, following directions are issued: i.The petitioner shall make available all the recordsrelating to the release including intimation givenbefore the Authority at the time of release of theshare of Sri.B.Vijayan from the partnership firm. relating to the release including intimation givenbefore the Authority at the time of release of theshare of Sri.B.Vijayan from the partnership firm. ii.Thereafter, after determining the share of thedefaulter and assessing the value of the share heldby Sri.B.Vijayan at the time of release with theassistance of approved valuer, shall intimate thesame to the petitioner.defaulter and assessing the value of the share heldby Sri.B.Vijayan at the time of release with theassistance of approved valuer, shall intimate thesame to the petitioner. iii.On remitting the amount as demanded by therespondents, necessary steps shall be taken by therespondents to release the attachment.respondents, necessary steps shall be taken by therespondents to release the attachment. W.P.(C) No.11057 of 2013 5 iv. The petitioner has to make a request with all thedetails furnishing the share of the defaulter at thetime of release within one month. details furnishing the share of the defaulter at thetime of release within one month. v. Thereupon, the entire exercise shall be completed for determination of the value within two months andthe petitioner shall be given a further period of twomonths to deposit the value of the defaulter. the petitioner shall be given a further period of twomonths to deposit the value of the defaulter. vi. On payment of the above, the attachment shall bereleased. released. vii. However, if the petitioner fails to comply with any ofthe above directions, the respondents are free toproceed for recovery of the amount by sale of theshare of the defaulter in accordance with law.the above directions, the respondents are free toproceed for recovery of the amount by sale of theshare of the defaulter in accordance with law. The writ petition is disposed of as above. Sd/- A.MUHAMED MUSTAQUE, JUDGE