J.manoharakumari v. The Tax Recovery Officer – 1, Income Tax Department, Income Tax Department

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE C.SARAVANAN W.P.No.33221 of 2018 J.Manoharakumari ..Petitioner Vs. 1. The Tax Recovery Officer – 1, Income Tax Department, Income Tax Department, Office of the Tax Recovery Officer-1, 67-A, Race Course Road, Coimbatore – 18. 67-A, Race Course Road, Coimbatore – 18. 2. The Sub Registrar, The Office of the Sub-Registrar, Gandhi Puram, Coimbatore. The Office of the Sub-Registrar, Gandhi Puram, Coimbatore. 3. Anitha 4. Suvetha ..Respondents Prayer: Writ petition filed under Article 226 of theConstitution of India praying for issuance of a writ ofCertiorarified Mandamus calling for the relating to the impugnedorder in A.O.No.P86/2018 dated 6.7.2018 on the file of the 2[nd]respondent. Quash the same and further direct the 2[nd] respondentto release the registered sale deed dated 29.6.2018 in DocumentNo.86 of 2018 on the file of the Sub Registrar's Office,Gandhipuram, Coimbatore ) in favour of the petitioner pertainingto the site No.45, Sri Ram Co-operative Colony, in Town SurveyNo.12/156 and in S.F.No.391/1, Sanganoor Village, CoimbatoreTaluk and District (Prayer Amended as per Order dated 3/10/2019in WMP.No.28195/2019 in W.P.No.33221/2018) For Petitioner: Mr.V.Ravi For First Respondent: Mr.A.P.Srinivas Senior Standing Counsel For Second to FourthRespondents : No appearance O R D E R This writ petition has been filed by a senior citizen who isnow aged about 70 years. She has been in litigation since 1994to have the property registered in her name. 2. The petitioner has challenged the impugned communicationdated 06.07.2018 issued by the second respondent in this writpetition. By the impugned communication, the petitioner has beeninformed that the said property has been attached in respect ofarrears of tax due to the Income Tax Department and thereforethe petitioner should obtain a certificate to the effect thatthere are no tax due in respect of the aforesaid property fromthe first respondent Income Tax Department. 3. Though the writ petition was originally filed for a writof certiorari to quash the impugned communication dated27.03.2017 of the first respondent, later the prayer was amendedfor a Writ of Certiorarified Mandamus to call for the records ofthe second respondent in the impugned communication dated06.07.2018 and for a consequential direction to the secondrespondent to release the registered sale deed dated 29.6.2018vide registered document No.86/2018 to the petitioner. 4. The facts are not in dispute. The petitioner had enteredinto a sale agreement with the mother of the third and fourthrespondents late Mrs.J.Padmini wife of late .Mr.D.Jayaramanduring her lifetime on 30.06.1994. The third and fourthrespondents were minors at the time of execution of saleagreement. 5. The said property is a house property. It was originallybelonged to the said third and fourth respondents' father’sfamily. Late Mrs.J.Padmini the mother of the third and fourthrespondents along with the third and fourth respondents becamesubsequent owners of the said property. 6. At the time of execution of the aforesaid sale agreementdated on 30.06.1994, the sale consideration for the property wasfixed at Rs.16,75,000/-. The petitioner is said to have paid anadvance amount of Rs.3,20,000/- to the said late Mrs.J.Padminiat the time of the execution of the sale agreement dated30.06.1994. After execution of the sale agreement dated30.06.1994, late Mrs.J.Padmini however refused to execute thesale deed in favour of the petitioner. 7. Since sale deed was not executed by late Mrs.J.Padmini infavour of the Petitioner, despite receipt of advance under thesale agreement dated 30.06.1994, the petitioner filed O.S.No.632of 2004 before the Additional District Court and Sessions Court, 6. At the time of execution of the aforesaid sale agreementdated on 30.06.1994, the sale consideration for the property wasfixed at Rs.16,75,000/-. The petitioner is said to have paid anadvance amount of Rs.3,20,000/- to the said late Mrs.J.Padminiat the time of the execution of the sale agreement dated30.06.1994. After execution of the sale agreement dated30.06.1994, late Mrs.J.Padmini however refused to execute thesale deed in favour of the petitioner. 7. Since sale deed was not executed by late Mrs.J.Padmini infavour of the Petitioner, despite receipt of advance under thesale agreement dated 30.06.1994, the petitioner filed O.S.No.632of 2004 before the Additional District Court and Sessions Court, Coimbatore for specific relief to direct the said lateMrs.J.Padmini to execute a sale deed in her favour afterreceiving the balance sale consideration of Rs.13,55,000/-. 8. During the pendency of the above suit, third and fourthrespondents' mother Mrs.J.Padminidied died. Thus, the third andfourth respondents were impleaded in the aforesaid suit who hadby them attained majority. 9. The suit was however dismissed by the said Court by itsjudgment and decree dated 18.05.2005 in O.S.No.632 of 2004.Against the judgment and decree dated 18.05.2005, the petitionerherein filed A.S.No.773 of 2005 before this Court. 10. A.S.No.773 of 2005 was partly allowed by this Court byits order dated 24.03.2010. This Court directed the third andthe fourth respondents herein to refund the advance amount ofRs.3,20,000/- paid by the petitioner to late MrsJ.Padmini at thetime of execution of the aforesaid sale agreement. 11. The petitioner therefore filed SLP before the Hon’bleSupreme Court in SLP (Civil) No.26881 of 2010. After admission,the said SLP was renumbered as C.A.No.4827 of 2017. By an orderdated 31.03.2017 the aforesaid appeal filed by the petitionerwas allowed by the Hon’ble Supreme Court. 12. The petitioner thereafter filed E.P.No.22 of 2017 beforethe Additional District Court and the Sessions Court, Coimbatoreto execute the sale deed. On 07.08.2017, the petitioner alsopaid the balance sale consideration of Rs.13,55,000/- to thecredit of O.S.No.632 of 2004. The aforesaid E.P.No.22 of 2017was ordered on 22.02.2018. 13. As the third and fourth respondents failed to comeforward to execute the sale deed in terms of the aforesaid saleagreement dated 30.06.1994 and order dated 31.03.2017 of theHon’ble Supreme Court in SLP (Civil) No.26881 of 2010, theLearned III Additional District Judge executed the sale deed infavour of the petitioner on 29.06.2018 and presented it beforethe second respondent on 29.06.2018 for registration. 14. The learned counsel for the petitioner relied on thefollowing case laws :-i. Sanjeev Lal and others Vs. Commissioner of IncomeTax, Chandigarh and another, (2015) 5 SCC 775ii.Tax Recovery Officer II Vs. Gangadhar VishwanathRanade, (1998) 6 SCC 658iii.M/s Agasthiya Holdings Pvt., Ltd., Vs.Commissioner of Income Tax, 2018 (403) ITR 288 15. The first respondent has opposed the prayer in the WritPetition on the ground that M/s. Beetle Exports and M/s.Ultimate Solutions, two partnership firms of which the fourthrespondent and her husband Mr.V.Balasubramaniam were taxdefaulters and in arrears of tax for the Assessment Year 2012-13and 2013 and 14 as detailed below:- 16. It is submitted that since the two firms were in arrearsof tax, on 26.10.2016, the case was referred to the firstrespondent to recover the tax and interest due from them.Thereafter, a notice dated 07.11.2016 was issued to them as“assessee in default”. 17. Since these defaulters still failed to pay the arrearsof tax as detailed above, the property in question for which asale deed has been now executed in favour of the petitioner wasattached on 27.03.2017. 16. It is submitted that since the two firms were in arrearsof tax, on 26.10.2016, the case was referred to the firstrespondent to recover the tax and interest due from them.Thereafter, a notice dated 07.11.2016 was issued to them as“assessee in default”. 17. Since these defaulters still failed to pay the arrearsof tax as detailed above, the property in question for which asale deed has been now executed in favour of the petitioner wasattached on 27.03.2017. 18. It is submitted that the property was attached just fourdays before the Hon’ble Supreme Court pronounced its judgment inCivil Appeal No. 4827 of 2017 on 31.3.2017. Therefore, thepurported sale deed executed by the Court was contrary toSection 281 of Income Tax Act, 1961. 19. On behalf of the first respondent, it is furthersubmitted that a copy of the attachment order issued on27.03.2017 in Form No. ITCP-16 was also served on the office ofthe second respondent an entry of encumbrance in respect of thesaid property was also entered on 28.03.2017 as is evident fromthe reading of the encumbrance certificate. It is thereforesubmitted that the petitioner cannot perfect the title over theproperty and the second respondent cannot release the registeredsale deed dated 29.06.2018 in favour of the petitioner unlessthe tax arrears are cleared. 20. Heard the learned counsel for the petitioner and thelearned counsel for the first respondent Tax Recovery Officer. Ihave also perused the impugned order/communication dated06.07.2018 of the second respondent and the counter and theadditional counter filed on behalf of the first respondent andthe documents filed in support of the present Writ Petition. https://hcservices.ecourts.gov.in/hcservices/ 21. In this case, the petitioner has been fighting for herrights over the property in terms of a sale agreement dated30.06.1994. The Hon’ble Supreme Court ultimately accepted thecontention of the petitioner that the third and fourthrespondent’s mother late Mrs.J.Padmini ought to have executed asale deed in favour of the petitioner in terms of the aforesaidsale agreement dated 30.06.1994. 22. The third and the fourth respondents who were minors atthe time of execution of the sale agreement on 30.06.1994 oughtto have executed the sale deed in favour of the petitioner.Therefore, the subsequent tax liability of the fourth respondentand her husband for the Assessment Years 2012-13 and 2013 -14cannot be to the disadvantage of the petitioner, since thepetitioner has been diligently litigating since 2004.Therefore, fruits of the decree in a contested suit cannot bedenied merely because the seller or one of the persons hadincurred subsequent tax liability. The fruits of a decree willdate back to the date of the suit. 23. In fact, the records also indicate that earlier anapplication in H.M.G.O.P No.433 of 1994 was filed by lateMrs.J.Padmini before the Principal District Court, Coimbatore toobtain court’s permission to execute the sale deed. If IT washowever withdrawn by her. Thus, the attachment of the propertyon 27.03.2017 by the officer of the 1[st] respondent cannotoverride the commitment under sale agreement dated 30.6.1994. 24. Section 281 of the Income Tax Act, 1961 applies only toa situation where an assessee during the pendency of anyproceeding under the Act, or after completion thereof, butbefore the service of a notice under Rule 2 of the SecondSchedule, creates a charge on, or parts with the possession (byway of sale, mortgage, gift, exchange or any other mode oftransfer whatsoever) of, any of his/her assets in favour of anyother person. 25. Only such charge or transfer is void as against anyclaim in respect of any tax or any other sum payable by theassessee as a result of completion of the said proceedings orotherwise. 24. Section 281 of the Income Tax Act, 1961 applies only toa situation where an assessee during the pendency of anyproceeding under the Act, or after completion thereof, butbefore the service of a notice under Rule 2 of the SecondSchedule, creates a charge on, or parts with the possession (byway of sale, mortgage, gift, exchange or any other mode oftransfer whatsoever) of, any of his/her assets in favour of anyother person. 25. Only such charge or transfer is void as against anyclaim in respect of any tax or any other sum payable by theassessee as a result of completion of the said proceedings orotherwise. 26. In this case admittedly the transfer was on account thefinal culmination of the litigation by the order of Hon’bleSupreme Court on 31.03.2017 in Civil Appeal No.4827 of2017.There was only a delay in the execution of sale deed due tothe pendency of the proceedings as the third and fourthrespondent’s mother declined to execute sale deed under the saleagreement dated 30.6.1994. 27. Therefore the impugned communication dated 06.07.2018asking the petitioner to obtain clearance from the secondrespondent cannot be countenanced. Further as per proviso tosection 281 of Income Tax Act, 1961 such charge or transfershall not be void if it is made— (i) for adequate consideration and without noticeof the pendency of such proceeding or, as thecase may be, without notice of such tax or othersum payable by the assessee ; or (ii) with the previous permission of theAssessing Officer. 28. The tax liability of the aforesaid firms of which thefourth respondent and her husband were the partners aresubsequent to the commitment in the sale agreement dated30.6.1994. Therefore, there is no justification in notreleasing the registered sale deed in favour of the petitioneras the petitioner is a bonafide purchaser who has purchased theproperty after a long drawn litigation . 29. Therefore, this Court is inclined to allow this writpetition as prayed for. Thus, this writ petition deserves to beallowed. The second respondent is directed to release the saledeed dated 29.06.2018 registered vide Document No. 86 of 2018 infavour of the petitioner within a period of two weeks from dateof receipt of this order. 30. The second respondent is also directed to cancel all theencumbrances recorded against the property in respect of taxarrears of the firms of the fourth respondent and her husbandnamely Mr.V.Balasubramaniam. 31. The writ petition stands allowed with the aboveobservation. No cost. Sd/- Assistant Registrar(CCC) //True Copy// Sub Assistant Registrar jen /kkd To 1. The Tax Recovery Officer – 1, Income Tax Departmebnt, Office of the Tax Recovery Officer-1, 67-A, Race Course Road, Coimbatore – 18.2. The Sub Registrar, The Office of the Sub-Registrar, Gandhi Puram, Coimbatore. Income Tax Departmebnt, Office of the Tax Recovery Officer-1, 67-A, Race Course Road, Coimbatore – 18.2. The Sub Registrar, The Office of the Sub-Registrar, Gandhi Puram, Coimbatore. +1cc to Mr.A.P.Srinivas, Advocate, S.R.No.23724 W.P.No.33221 of 2018 PVS(CO)RGA(09/08/2021)