M/S.agasthiya Holdings Private Limited,Kochi v. The Commissioner Of Income Tax – I (I/C)

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURTRESERVED ON : 20.03.2018DELIVERED ON : 13.04.2018 CORAM:THE HONOURABLE MR.JUSTICE M.SATHYANARAYANANANDTHE HONOURABLE MRS.JUSTICE R.HEMALATHA W.A(MD)No.1186 of 2017 and C.M.P(MD)No.8250 of 2017ANDW.A(MD)No.1150 of 2017 and C.M.P(MD)Nos.7953 and 7954 of 2017 W.A(MD)No.1186 of 2017: M/s.Agasthiya Holdings Private Limited,Kochi, through its Authorised Signatory S.S.Sarma,having its Branch Office at Tuticorin,at Door No.3611, 2[nd] Street,Muniasamypuram,Kamaraj Salai,Tuticorin – 628 003.... Appellant/Writ Petitioner Vs. 1.The Commissioner of Income Tax – I (i/c), 2, V.P.Rathinasamy Nadar Road, Bibikulam, Madurai – 02. 2.The Tax Recovery Officer, Income Tax Office, WGC Road, Tuticorin. 3.The Secretary/Commissioner Registration, Government of Tamil Nadu, St.George, Chennai. 4.The Sub Registrar Joint – I, District Registrar Office, Tuticorin.5.J.Vivekavathi 6.J.Jeyasekar 7.J.Sampathkumar https://hcservices.ecourts.gov.in/hcservices/8.J.Subramanian 9.J.Prakash 10.J.Shankar 2 11.D.Kalaiselvi... Respondents/ RespondentsPRAYER: Appeal filed under Clause 15 of the Letters Patent,against the order passed in W.P(MD)No.10885 of 2011, dated29.06.2017.For Appellant: Mr.P.S.SundaramFor Respondents: Mr.C.M.Mari Chelliah Prabu Additional Government Pleader for R.3 & R.4Mrs.S.Srimathy for R.1&2,No appearance for R.5 to R.11****** W.A(MD)No.1150 of 2017:1.The Commissioner of Income Tax – I (i/c), 2, V.P.Rathinasamy Nadar Road, Bibikulam, Madurai – 02.2.The Tax Recovery Officer, Income Tax Office, WGC Road, Tuticorin.... Appellants/Respondents 1 & 2Vs. 1.M/s.Agasthiya Holdings Private Limited, Kochi, through its Authorised Signatory S.S.Sarma, having its Branch Office at Tuticorin, at Door No.3611, 2[nd] Street, Muniasamypuram, Kamaraj Salai, Tuticorin – 628 003.... 1[[st]]2.The Secretary/Commissioner Registration, Government of Tamil Nadu, St.George, Chennai.3.The Sub Registrar Joint – I,https://hcservices.ecourts.gov.in/hcservices/ District Registrar Office, Tuticorin. ... 1[[st]] Respondent/ Writ Petitioner ... Respondents 2 & 3/ Respondents 3 & 4 4.J.Vivekavathi 5.J.Jeyasekar 6.J.Sampathkumar7.J.Subramanian 8.J.Prakash 9.J.Shankar10.D.Kalaiselvi... Respondents 5 to 11/ Respondents 4 to 10 PRAYER: Appeal filed under Clause 15 of the Letters Patent,against the order passed in W.P(MD)No.10885 of 2011, dated29.06.2017. Writ Petition is filed under Article 226 of theConstitution of India, praying this Court To issue a WRIT OFCERTIORARI, to call for the records of the impugned order passedby the 1st Respondent in C.No.TRC/CIT-I/2010-11, dated 03-03-2011and consequential orders pased by the 2nd Respondent inT.R.No.31003 to 31009/TTN/10-11, dated 09-08-2011 and quash thesame. COMMON JUDGMENT M.SATHYANARAYANAN,J. The appellants in W.A.(MD)No.1150 of 2017 are the respondents1 and 2/Income Tax Department/Revenue in W.P.(MD)No.10885 of 2011. The appellant in W.A.(MD)No.1180 of 2017, whowas the writ petitioner, made a challenge to the order of thefirst respondent, dated 03.03.2011, in and by which, the requestmade by the writ petitioner to drop the proceedings initiated todeclare the transfer of property as void under Rule 16(2) ofSecond Schedule of the Income Tax Act, came to be rejected as wellas the consequential order of the second respondent, dated09.08.2011, wherein the second respondent communicated that thehttps://hcservices.ecourts.gov.in/hcservices/transfer of property by way of sale is declared as null and voidas per the provisions of Income Tax Act. The appellants in W.A.(MD)No.1150 of 2017 are the respondents1 and 2/Income Tax Department/Revenue in W.P.(MD)No.10885 of 2011. The appellant in W.A.(MD)No.1180 of 2017, whowas the writ petitioner, made a challenge to the order of thefirst respondent, dated 03.03.2011, in and by which, the requestmade by the writ petitioner to drop the proceedings initiated todeclare the transfer of property as void under Rule 16(2) ofSecond Schedule of the Income Tax Act, came to be rejected as wellas the consequential order of the second respondent, dated09.08.2011, wherein the second respondent communicated that thehttps://hcservices.ecourts.gov.in/hcservices/transfer of property by way of sale is declared as null and voidas per the provisions of Income Tax Act. 2. The writ petition, after contest, came to be allowed partlyand observed that the right of the Department to proceed againstthe property on the basis of the attachment dated 06.01.1988 isprotected with liberty to the writ petitioner to move the TaxRecovery Officer under Rule 11 seeking adjudication of his claim. 3. The writ petitioner/appellant in W.A.(MD)No.1186 of 2017 aswell as the Income Tax Department/Revenue/the appellant in W.A.(MD)No.1150 of 2017, aggrieved by the said order, had filed thesewrit appeals. 4. The facts leading to the filing of these writ appealsbriefly narrated and necessary for the disposal, are as follows: 4.1. The appellant/writ petitioner, in the affidavit filed insupport of the writ petition in W.P.(MD)No.10885 of 2011, wouldaver, among other things, that it is a private limited companyengaged in real estate business and before purchasing the propertythrough the legal representatives of the deceased P.Jeyappan –respondents 5 to 11 to cull pre-causes by getting legal opinionfrom their Advocate and also by verifying the encumbrances throughencumbrance certificate bearing No.2701/2008, dated 06.06.2008,which pertains to the period from 01.01.1960 to 30.06.1974 andthey also applied for encumbrance certificate and it is alsobearing No.3058/2008, dated 10.06.2008, which pertains to theperiod from 01.07.1974 to 31.12.1986 and yet another encumbrancecertificate bearing No.3047/2008 which pertains to the period from01.01.1987 to 06.06.2008 and another encumbrance certificatebearing No.4217/2010 which pertains to the period from 01.01.1987to 16.09.2010 and according to them, the entries which containedin the said encumbrance certificates, showed no encumbrance. 4.2. It is the case of the appellant in W.A.(MD)No.1186 of2017/writ petitioner that the property which is the subject matterof the present litigation/attachment made by the secondrespondent/Tax Recovery Officer, Tuticorin, originally belonged toP.Jeyappan and after his demise, his daughter viz., the respondentNo.11 had executed a release deed in favour of the privaterespondents 5 to 10, vide a registered Document No.1339 of 2008,dated 10.04.2008. 4.3. The appellant in W.A.(MD)No.1186 of 2017/writ petitionerwas issued with a show cause notice, dated 23.09.2008 by thesecond respondent as to why the sale in their favour, should notbe declared as void and the said notices were issued to therespondents 5, 8, 9 and 10 alone and not to all the legal heirs ofthe deceased P.Jeyappan. https://hcservices.ecourts.gov.in/hcservices/4.4. The appellant in W.A.(MD)No.1186 of 2017/writ petitionerwould further add that the assessment order was passed on20.10.2009, after a search of original assessee's house after twowould further add that the assessment order was passed on20.10.2009, after a search of original assessee's house after two 4.3. The appellant in W.A.(MD)No.1186 of 2017/writ petitionerwas issued with a show cause notice, dated 23.09.2008 by thesecond respondent as to why the sale in their favour, should notbe declared as void and the said notices were issued to therespondents 5, 8, 9 and 10 alone and not to all the legal heirs ofthe deceased P.Jeyappan. https://hcservices.ecourts.gov.in/hcservices/4.4. The appellant in W.A.(MD)No.1186 of 2017/writ petitionerwould further add that the assessment order was passed on20.10.2009, after a search of original assessee's house after twowould further add that the assessment order was passed on20.10.2009, after a search of original assessee's house after two years, four months and two days and after the sale of the saidproperty in favour of the petitioner vide registered documentNo.2212/2008, dated 18.06.2008 registered on the file of the JointSub-Registrar, Tuticorin. The appellant/writ petitioner sent aresponse, dated 14.10.2008, wherein it has been clearly statedthat the encumbrance certificates did not disclose/reflect anyencumbrance of the said property and they are bona fide purchasersfor value and consideration without any notice to any priorencumbrance and as such, the order of attachment, when an attemptto sell the property, cannot be sustained in law. 4.5. It is also the stand of the appellant/writ petitionerthat the tax payable through the attachment notice dated18.12.1987 was intimated belatedly on 28.09.2000 and videproceedings, dated 09.08.2011, the said official has declared thesale effected on 18.06.2008 in favour of the appellant/writpetitioner as null and void and he has no jurisdiction to declareso for the reason that it is only a civil Court havingjurisdiction to do so. The appellant/writ petitioner, afterpurchase, also changed the revenue records in their favour andcontinued to be remained in possession of the sale and therefore,prayed for quashment of the impugned notice. 4.6. The second respondent had filed the counter affidavitcontending among other things that before passing the impugnedorder, the appellant/writ petitioner was given an opportunity ofhearing and the last assessment order was passed on 20.10.2009.As per Rule 68-B(1) of II Schedule of the Income Tax Act, no saleof immovable property shall be made under the said Act after theexpiry of three years from the end of the financial year, inwhich, the order which gave rise to a demand of any tax, interest,fine, penalty or any other sum for the recovery of which theimmovable property has been attached, has become conclusive. 4.7. The second respondent has also filed additional affidavitstating that the dues of the income tax have been recovered. It isrelevant to extract the same, which is as follows:06.10.1989Rs.50,000/-15.11.1990Rs.86,000/-19.11.1990Rs.14,000/-By auction sale of another propertyRs.81,00,000/- Amount attached from legalheirs of the defaulter fromdifferent banksRs.14,02,094/- https://hcservices.ecourts.gov.in/hcservices/4.8. The learned Judge, after taking note of the rivalsubmissions and rule positions, found that in terms of Rule (16)(1) and (2) of II Schedule of Income Tax Act, the Tax Recoverysubmissions and rule positions, found that in terms of Rule (16)(1) and (2) of II Schedule of Income Tax Act, the Tax Recovery Officer has no power to declare the alienation as null and voidand granted liberty to the Department to proceed against theproperties of the defaulters which came to be attached on06.01.1988 and granted liberty to the appellant/writ petitioner toapproach the Tax Recovery Officer under Rule 11(1) of II Scheduleof Income Tax Act claiming that the property purchased by them isnot liable for attachment and with a further direction that as andwhen such claim is preferred, it has to be adjudicated anddisposed of in accordance with law as stipulated in the Act. Officer has no power to declare the alienation as null and voidand granted liberty to the Department to proceed against theproperties of the defaulters which came to be attached on06.01.1988 and granted liberty to the appellant/writ petitioner toapproach the Tax Recovery Officer under Rule 11(1) of II Scheduleof Income Tax Act claiming that the property purchased by them isnot liable for attachment and with a further direction that as andwhen such claim is preferred, it has to be adjudicated anddisposed of in accordance with law as stipulated in the Act. 5. The learned Counsel appearing for the appellant in W.A.(MD)No.1186 of 2017 has made the following submissions: 5.1. In the light of Rule 68B of Second schedule of the IncomeTax Act, there cannot be a postponement of sale beyond the periodof limitation. It is for the Department to move the civil Courtto declare the transaction in the form of sale in their favour asnull and void. 5.2. Admittedly in the encumbrance certificates obtained bythe appellant/writ petitioner prior to their purchase, theattachment effected in respect of the said property, had not beenreflected and as such, they are the bona fide purchasers for valueand consideration without any notice of pre-encumbrance andtherefore, the property is liable to be released from attachment. 5.3. Admittedly the eleventh respondent/daughter of theoriginal owner has executed a registered Document No.1339 of 2008,dated 10.04.2008 in favour of the other private respondents andthe said document has not been attached as null and void by theTax Recovery Officer. 6. The learned Counsel for the appellant/writ petitioner, uponmaking his submissions, has placed reliance upon the followingdecisions: (i) Tax Recovery Officer Vs. Gangadhar Viswanath Ranade(decd.,) reported in AIR 199 SC 427; (ii) Smt. Shanty Devil. Singh and another Vs. Tax RecoveryOfficer and others reported in AIR 1991 SC 1880; (iii) Chaturbhuj and another Vs. Recovery Officer and anotherreported in MANU/MAHARASHTRA/0227/1991; (iv) A.R.C.I. Ltd., Vs. Commissioner of Income-Tax, Range &Others reported in 2012(1) D.R.T.C. 361 (Gujarat) (DB); 7. Per contra, Mrs.S.Srimathy, learned Counsel appearing forthe respondents/revenue in W.A.(MD)No.1186 of 2017 and theappellants in W.A.(MD)No.1150 of 2017 made the followingsubmissions:https://hcservices.ecourts.gov.in/hcservices/7.1. Under Section 222 of the Income Tax Act 1961, if anassessee is in default or is deemed to be in default in making apayment of tax, the Tax Recovery Officer may draw up under his signature a statement in the prescribed Form specifying the amountof arrears due from the assessee and shall proceed to recover fromsuch assessee the amount specified in the certificate by one ormore of the modes mentioned in accordance with the rules laid downin the Second Schedule and one of the modes is attachment and saleof the assessee's movable property and admittedly, the property inquestion was attached on 18.12.1987 and the alienation was made bythe legal representatives of the original assessee on 18.06.2008vide two registered documents and the claim made by the appellantin W.A.(MD)No.1186 of 2017 has been rightly considered and takinginto consideration the factual aspects and legal decisions, it wasrightly rejected. 8. The learned Counsel appearing for respondents/revenue inW.A.(MD)No.1186 of 2017 and the appellants in W.A.(MD)No.1150 of2017 has invited the attention of this Court to the SecondSchedule of the Income Tax Act and would submit that as per Rule16, private alienation shall be void in certain cases and in thecase on hand, admittedly, after the attachment of the property wasmade, the legal representatives of the original assessee hadalienated one of the properties in favour of the appellant/writpetitioner and as such, the claim made by them is unsustainable inlaw. 8. The learned Counsel appearing for respondents/revenue inW.A.(MD)No.1186 of 2017 and the appellants in W.A.(MD)No.1150 of2017 has invited the attention of this Court to the SecondSchedule of the Income Tax Act and would submit that as per Rule16, private alienation shall be void in certain cases and in thecase on hand, admittedly, after the attachment of the property wasmade, the legal representatives of the original assessee hadalienated one of the properties in favour of the appellant/writpetitioner and as such, the claim made by them is unsustainable inlaw. 9. The learned Counsel appearing for the respondents/revenuein W.A.(MD)No.1186 of 2017 and the appellants in W.A.(MD)No.1150of 2017 has further drawn the attention of this Court to theproceedings of the Commissioner of Income Tax, dated 03.03.2011and would submit that the representation dated 23.09.2010submitted in this regard, was rightly considered andcategorically, a finding has also been recorded and that the TaxRecovery Officer has acted in accordance with Rule 16(2) of SecondSchedule, after providing opportunity to both buyer and sellerbefore declaring the said transaction as void and it is followedthe proceedings of the Tax Recovery Officer, dated 09.08.2011declaring the said sale transaction as null and void as per theprovisions of the Income Tax Act and in the light of the saidorder, it is for the appellant in W.A.(MD)No.1186 of 2017 byfiling a civil suit and since adjudication has already been madeunder Rule 11 by the Tax Recovery Officer, the leave granted tothe appellant/writ petitioner to move the Tax Recovery Officerdoes not arise at all and prays for interference. 10. This Court paid it's best attention to the rivalsubmissions and also perused the materials placed before thisCourt. 11. It is relevant to extract the following provisions of thehttps://hcservices.ecourts.gov.in/hcservices/Income Tax Act: Sections 222, 226 and 228A of the Income Tax Act: “Certificate to Tax Recovery Officer. 222: “[(1) When an assessee is in default or is deemed tobe in default in his signature a statement in theprescribed form” specifying the amount of arrears duefrom the assessee (such statement being hereafter in thisChapter and in the Second Schedule referred to as “certificate” ) and shall proceed to recover from suchassessee the amount specified in the certificate by oneor more of the modes mentioned below, in accordance withthe rules laid down in the Second Schedule - ] (a) attachment and sale of the assessee's movableproperty;(b) attachment and sale of the assessee's immovableproperty;(c) arrest of the assessee and his detention inprison; (d) appointing a receiver for the management of theassessee's movable and immovable properties. [Explanation – For the purposes of this sub-section, theassessee's movable or immovable property shall includeany property which has been transferred, directly orindirectly on or after the 1[st] day of June, 1973, by theassessee to his spouse or minor child or son's wife orson's minor child, otherwise than for adequateconsiderations, and which is held by, or stands in thename of, any of the persons aforesaid; and so far as themovable or immovable property so transferred to his minorchild or his son's minor child is concerned, which shall,even after the date of attainment of majority by suchminor child or son's minor child, as the case may be,continue to be included in the assessees movable orimmovable property for recovering any arrears due fromthe assessee in respect of any period prior to suchdate.] [2. The Tax Recovery Officer may take action undersub section (1), not withstanding the proceedings forrecovery of the arrears by any other mode have beentaken.] [2. The Tax Recovery Officer may take action undersub section (1), not withstanding the proceedings forrecovery of the arrears by any other mode have beentaken.] Other modes of recovery:226. [ (1) where no certificate has been drawn up underSection 222, the Assessing Officer may recover the tax byany one or more of the modes provided in this section.(1A) where a certificate has been drawn up underSection 222, the Tax Recovery Officer may, withoutprejudice to the modes of recovery specified in thathttps://hcservices.ecourts.gov.in/hcservices/section, recover the tax by any one or more of the modesprovided in this section. ] (2) If any assessee is in receipt of any income chargeable under the head “salaries”, the (Assessing)Officer (or Tax Recovery Officer) may require any personpaying the same to deduct from any payment subsequent tothe date of such requisition any arrears of tax due fromsuch assessee, and such person shall comply with any suchrequisitions and shall pay the sum so deducted to thecredit of the Central Government or as the Board directs; Provided that any part of the salary exempt fromattachment in execution of a decree of a civil Courtunder Section 60 of the Code of Civil Procedure, 1908 (5of 1908), shall be exempt from any requisitions madeunder this sub-section. (3) (i) The [Assessing] Office [or Tax RecoveryOfficer] may, at any time or from time to time, by noticein writing require any person from whom money is due ormay become due to the assessee or any person who holds ormay subsequently hold money for or on account of theassessee to pay to the [Assessing] Officer [ or TaxRecovery Officer] either forthwith upon the moneybecoming due or being held or at or within the timespecified in the notice (not being before the moneybecomes due or is held) so much of the money as issufficient to pay the amount due by the assessee inrespect of arrears or the whole of the money when it isequal to or less than that amount. (ii)A notice under this sub-section may be issued toany person who holds or may subsequently hold anymoney for or on account of the assessee jointly withany other person and for the purposes of this sub-section, the shares of the joint holders in suchaccount shall be presumed, until the contrary isproved, to be equal. (iii) A copy of the notice shall be forwarded to theassessee at his last address known to the [Assessing]Officer [or Tax Recovery Officer], and in the case ofa joint account to all the joint holders at theirlast addresses known to the [Assessing] Officer [orTax Recovery Officer]. (iv)Save as otherwise provided in this sub- section,every person to whom a notice is issued under thissub- section, shall be bound to comply with suchnotice, and, in particular, where any such notice isissued to a post office, banking company or aninsurer, it shall not be necessary for any pass book,deposit receipt, policy or any other document to beproduced for the purpose of any entry, endorsement orthe like being made before payment is made,notwithstanding any rule, practice or requirement tohttps://hcservices.ecourts.gov.in/hcservices/the contrary. (v)Any claim respecting any property in relation towhich a notice under this sub- section has been (iv)Save as otherwise provided in this sub- section,every person to whom a notice is issued under thissub- section, shall be bound to comply with suchnotice, and, in particular, where any such notice isissued to a post office, banking company or aninsurer, it shall not be necessary for any pass book,deposit receipt, policy or any other document to beproduced for the purpose of any entry, endorsement orthe like being made before payment is made,notwithstanding any rule, practice or requirement tohttps://hcservices.ecourts.gov.in/hcservices/the contrary. (v)Any claim respecting any property in relation towhich a notice under this sub- section has been issued arising after the date of the notice shall bevoid as against any demand contained in the notice.(vi)Where a person to whom a notice under this sub-section is sent objects to it by a statement on oaththat the sum demanded or any part thereof is not dueto the assessee or that he does not hold any moneyfor or on account of the assessee, then, nothingcontained in this sub-section shall be deemed torequire such person to pay any such sum or partthereof, as the case may be, but if it is discoveredthat such statement was false in any materialparticular, such person shall be personally liable tothe Assessing] Officer or Tax Recovery Officer] tothe extent of his own liability to the assessee onthe date of the notice or to the extent of theassessee' s liability for any sum due under this Act,whichever is less. (vii)The [Assessing] Officer [or Tax Recovery Officer]may, at any time or from time to time, amend orrevoke any notice issued under this sub- section orextend the time for making any payment in pursuanceof such notice. (viii)The[ []Assessing] Officer [or Tax Recovery Officer]shall grant a receipt for any amount paid incompliance with a notice issued under this sub-section, and the person so paying shall be fullydischarged from his liability to the assessee to theextent of the amount so paid. (ix)Any person discharging any liability to the assessee after receipt of a notice under this sub-section shall be personally liable to the [Assessing]Officer [or Tax Recovery Officer] to the extent ofhis own liability to the assessee so discharged or tothe extent of the assessee's liability for any sumdue under this Act, whichever is less. (x)If the person to whom a notice under this sub-section is sent fails to make payment in pursuancethereof to the [Assessing] Officer [or Tax RecoveryOfficer], he shall be deemed to be an assessee indefault in respect of the amount specified in thenotice and further proceedings may be taken againsthim for the realisation of the amount as if it werean arrear of tax due from him, in the manner providedin sections 222 to 225 and the notice shall have thesame effect as an attachment of a debt by the TaxRecovery Officer in exercise of his powers undersection 222. 4. The[Assessing] Officer [or Tax Recovery Officer] mayhttps://hcservices.ecourts.gov.in/hcservices/apply to the court in whose custody there is moneybelonging to the assessee for payment to him of the entire amount of such money, or, if it is more than thetax due, an amount sufficient to discharge the tax.5. The [Assessing] Officer [or Tax Recovery Officer] may,if so authorised by the [[Principal Chief Commissioneror] Chief Commissioner or [Principal Commissioner or]Commissioner] by general or special order, recover anyarrears of tax due from an assessee by distraint and saleof his movable property in the manner laid down in theThird Schedule.] Recovery of tax in pursuance of agreements with foreigncountries. 4. The[Assessing] Officer [or Tax Recovery Officer] mayhttps://hcservices.ecourts.gov.in/hcservices/apply to the court in whose custody there is moneybelonging to the assessee for payment to him of the entire amount of such money, or, if it is more than thetax due, an amount sufficient to discharge the tax.5. The [Assessing] Officer [or Tax Recovery Officer] may,if so authorised by the [[Principal Chief Commissioneror] Chief Commissioner or [Principal Commissioner or]Commissioner] by general or special order, recover anyarrears of tax due from an assessee by distraint and saleof his movable property in the manner laid down in theThird Schedule.] Recovery of tax in pursuance of agreements with foreigncountries. "228A. (1) Where an agreement is entered into by theCentral Government with the Government of any countryoutside India for recovery of income-tax under this Actand the corresponding law in force in that country and theGovernment of that country or any authority under thatGovernment which is specified in this behalf in suchagreement sends to the Board a certificate for therecovery of any tax due under such corresponding law froma person having any property in India, the Board mayforward such certificate to any Tax Recovery Officerwithin whose jurisdiction such property is situated andthereupon such Tax Recovery Officer shall- (a) proceed to recover the amount specified in thecertificate in the manner in which he would proceed torecover the amount specified in a certificate receivedfrom an Income-tax Officer; and (b) remit any sum so recovered by him to the Board afterdeducting his expenses in connection with the recoveryproceedings. Where an assessee is in default or is deemed to be indefault in making a payment of tax, the Tax RecoveryOfficer may, if the assessee has property in a country outside India (being a country with which the CentralGovernment has entered into an agreement for the recoveryof income-tax under this Act and the corresponding law inforce in that country), forward to the Board a certificatedrawn up by him under Section 222 and the Board may takesuch action thereon as it may deem appropriate havingregard to the terms of the agreement with such country.(2) Notwithstanding the issue of a certificate undersection 222 to the Tax Recovery Officer, where an assesseeis in default or is deemed to be in default in making apayment of tax, the Income-tax Officer may, if theassessee has property in a country outside India (being ahttps://hcservices.ecourts.gov.in/hcservices/country with which the Central Government has entered intoan agreement for the recovery of income-tax under this Act and the corresponding law in force in that country),forward to the Board a certificate specifying the amountof arrears due from the assessee and the Board may, takesuch action thereon as it may deem appropriate havingregard to the terms of the agreement with such country.".12. The following dates and events are relevant to adjudicatethe issues involved in these writ appeals: and the corresponding law in force in that country),forward to the Board a certificate specifying the amountof arrears due from the assessee and the Board may, takesuch action thereon as it may deem appropriate havingregard to the terms of the agreement with such country.".12. The following dates and events are relevant to adjudicatethe issues involved in these writ appeals: 13. The legal representatives of the original assessee viz.,P.Jeyappan in respect of the assessment made under Section 143(3)read with Section 147 of the Income Tax Act pertaining to theassessment years 1978-1979 to 1983-1985, filed appeals before theCommissioner of Income Tax (Appeals) and vide orders, dated12.12.1988, the said Authority had confirmed the majority of theadditions and remanded back to the same Assessing Officer inrespect of some points for reconsideration. The legalrepresentatives of the assessee filed Second Appeal before theIncome Tax Appellate Tribunal and the Income Tax AppellateTribunal, vide order dated 23.05.1995 in ITA Nos.283, 626 and628/Mds/89, had set aside the assessment with direction to allowthe legal representatives of the assessee to inspect all theseized documents and to re-do the assessment after givingreasonable opportunity and accordingly, fresh adjudication wasdone and after doing so, the Income Tax Officer, Ward I(2),Tuticorin, has adjusted the excess payments towards interestcharged under Section 220(2) of the said Act and also communicatedthat the penalty proceedings under Sections 271(1)(a), 271(1)(c)and 273 have to be initiated separately. 14. The Tax Recovery Officer, Tuticorin, who is the secondrespondent in W.A.(MD)No.1186 of 2017 and the second appellant inW.A.(MD)No.1150 of 2017, has sent a communication dated 22.02.2010to the legal representatives of the original assessee by pointinghttps://hcservices.ecourts.gov.in/hcservices/out that they have illegally transferred the attached property,which was, as per proceedings dated 18.12.1987, attached on06.01.1988 in favour of the appellant in writ appeal in W.A.(MD) No.1186 of 2017/writ petitioner and they are calling upon to showcause as to why the illegal transaction made by them should not bedeclared as null and void as per Rule 16(1) of the Second Scheduleof the Income Tax Act. 15. The appellant/writ petitioner submitted a representationdated 23.09.2010 to the Commissioner of Income Tax, Madurai,narrating the events that had happened and claimed that they areinnocent and bona fide purchasers for valid and considerationwithout any notice of prior encumbrance and therefore, prayed forappropriate direction to direct the Assessing Officer to drop anyfurther proceedings pertaining to the said property and raise theattachment and also enclosed the supporting documents. 16. The Commissioner of Income Tax, Madurai, vide proceedingsin C.No.TRC/CIT-I/2010-11, dated 03.03.2011, has taken intoconsideration the said representation and noted that on a perusalof the Assessing Officer's and the Tax Recovery Officer's reportand other evidence, the attachment of the said property was madeon 18.12.1987 and it was duly intimated to the Sub-Registrar'sOffice by the Tax Recovery Officer on 28.09.2007 and it was servedon 03.10.2007 and only after the said information, the transfer ofproperty had taken place and in the light of the Rule 16(1)(2) ofthe Second Schedule, the defaulter or his legal representative isnot competent to alienate any property except with the permissionof the Tax Recovery Officer and since the Tax Recovery Officer hasacted within his jurisdiction in the light of the said Rule, therepresentation/petition submitted by them is to be rejected andaccordingly, the same is rejected on the ground of no merits. 17. As already pointed out, the Tax Recovery Officer in hisorder dated 09.08.2011 has noted that the property has beenillegally transferred by way of a registered sale deed dated18.06.2008 and since it has been sold after service of the demandnotice, it has to be declared as null and void as per theprovisions of the Income Tax Act. 18. In Tax Recovery Officer Vs. Gangadhar Viswanath Ranade(Decd.,) reported in AIR 1999 SC 427, the scope of Section 281 ofthe Income Tax Act and Rule 11 of the Second Schedule came up forconsideration. The question arose for consideration before theHonourable Supreme Court of India is whether in a proceedingsunder Rule 11 of the Second Schedule of the Income Tax, the TaxRecovery Officer can declare a transfer as void under Section 281.The Honourable Supreme Court of India has noted that Rule 11 ofthe Second Schedule is analogous to those of Order 21, Rules 58 to61 and 63 of the Code of Civil Procedure, 1908, as they stoodprior to the amendment of the Civil Procedure Code in the year1976. https://hcservices.ecourts.gov.in/hcservices/ 19. In the above said decision, the Honourable Supreme Courtof India has observed as follows: “The Tax Recovery Officer, therefore, has to examine whois in possession of the property and in what capacity. Hecan only attach property in the possession of the assesseein his own right, or in the possession of a tenant or athird party on behalf of/for the benefit of the assessee.He cannot declare any transfer made by the assessee infavour of a third party as void. If the Department findsthat a property of the assessee is transferred by him to athird party with the intention to defraud the Revenue, itwill have to file a suit under Rule 11(6) to have thetransfer declared void under Section 281.” 20. The Honourable Supreme Court of India, on the facts of thecase, found that the Tax Recovery Officer could not have examinedwhether the transfer was void under Section 281 of the Income TaxAct and his adjudication of the transfer as void under Section 281is without jurisdiction and granted liberty to the Income TaxDepartment to take appropriate proceedings in accordance with lawfor having the transfer declared as void under Section 281 of theIncome Tax Act. 21. The said decision was followed by a Division Bench ofGujarat High Court in A.R.C.I. Ltd., Vs. Commissioner of Income-Tax, Range & Others reported in 2012(1) D.R.T.C. 361 (Gujarat)(DB). The question arose for consideration is as to the priorityover dues of the Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest Act, 2002 (SRFAESIAct) and the Income Tax Act. 22. The Division of Gujarat High Court, in the above saiddecision, has considered the scope of Sections 222, 281 and SecondSchedule, Rule 11(6) of the Income Tax Act. The earlier decisionrendered by the Gujarat High Court, in Tax Recovery Officer Vs.Industrial Financial Corporation of India reported in 2011(3)G.L.R. 2342, has also taken into consideration, wherein theDivision Bench held that “the transfer of property was made forvaluable consideration without notice of proceeding of recovery ofarrears of income – tax held that the Financial Institution wasentitled to protection under the proviso to Cl.(1) of sub-section(1) of Section 281 of the Income Tax Act against the arrears ofincome tax dues of the revenue.” 23. In paragraph No.18 of the said decision, the DivisionBench of Gujarat High Court has taken into consideration thedecision rendered by the Honourable Apex Court in Tax RecoveryOfficer Vs. Gangadhar Viswanath Ranade (Decd.,) reported in AIR1999 SC 427 [cited supra] and held that the revenue cannot raise aplea of transfer being void under Section 281 of the Income Taxhttps://hcservices.ecourts.gov.in/hcservices/Act and this writ petition was filed by the third party and thesuit has to be filed by the revenue to get the transfer declaredas void. 23. In paragraph No.18 of the said decision, the DivisionBench of Gujarat High Court has taken into consideration thedecision rendered by the Honourable Apex Court in Tax RecoveryOfficer Vs. Gangadhar Viswanath Ranade (Decd.,) reported in AIR1999 SC 427 [cited supra] and held that the revenue cannot raise aplea of transfer being void under Section 281 of the Income Taxhttps://hcservices.ecourts.gov.in/hcservices/Act and this writ petition was filed by the third party and thesuit has to be filed by the revenue to get the transfer declaredas void. 24. The learned Counsel appearing for the revenue/appellantsin W.A.(MD)No.1150 of 2017 placed reliance upon the decisionrendered by a single Bench of Bombay High Court in Inayat HussainFakhruddin and another Vs. Union of India and another reported in1979 Maharashtra L.J. 514. The Single Bench of Bombay High Courtin paragraph No.16 has observed that “As I pointed out, the heartof Section 281 is the intention to defraud and if the intention todefraud the Revenue is absent or is not claimed to be present,Section 281 cannot be invoked.” 25. The Single Bench of Bombay High Court has also consideredthe Rules 2, 16, 48 and 51 of the Second Schedule of the IncomeTax Act and observed that “as per sub-rule (2) of Rule 16, alltransfer of immovable properties void as against claimsenforceable under the attachment. ...... No question of bona fidetransfer with value or any other question as contemplated inSection 281 or an intention to defraud the Revenue arises at alland by the force of attachment itself the property becomes open tobe taken and sold for satisfaction of the claim of the attachingdepartment and the two provisions of the Act do not operate on thesame field.” The matter decided by the Bombay High Court pertainsto the grant of interim order and despite the said finding, theorder of interim injunction was granted subject to certainconditions. 26. The Division Bench of Bombay High Court in Shamim BanoG.Rathi and another Vs. Oriental Bank of Commerce Ltd., and Othersreported in (2008) Vol.306 ITR 234 (Bombay) has taken intoconsideration the decision in Tax Recovery Officer Vs. GangadharViswanath Ranade (Decd.,) reported in AIR 1999 SC 427 : (1998)149CTR (SC) 90:(1998)234 ITR 188(SC) and held that unless it is foundthat the property of the assessee is transferred by him to thethird party with intention to defraud the revenue, the remedy opento them is to file a suit under Rule 11(6) to have the transferas to declare as void as per Section 281 of the Income Tax Act. 27.The facts projected would also lead to the incidentalquestion as to whether the sale by the legal representatives ofthe deceased in favour of the appellant/writ petitioner was donewith a view to defraud the revenue. It is the categorical case ofthe appellant/writ petitioner that before purchasing the property,they got the legal opinion and also obtained encumbrancecertificates and any entries therein have not declared anysucceeding encumbrance including the attachment of the saidproperty by the Income Tax Department. 28. In S.S.Karthikeyan Vs. Sivasalam and Another reported inhttps://hcservices.ecourts.gov.in/hcservices/(2009)2 MLJ 473 (Single Bench), the revision petitioner prays forstay of execution of the proceedings pending pertaining to animmovable property pending adjudication of the claim under Order 21 Rule 58 of the Code of Civil Procedure by contending that hewas bona fide purchaser of the property after verifying theencumbrance and the order of attachment was no reflected in thesaid encumbrance. 29. The learned Single Judge, after taking into considerationthe various decisions and on appraisal of the facts, in paragraphNo.10, observed as follows:“..... the order of attachment over the petition mentionedproperty is based on the Encumbrance Certificate; if it isnot reflected, then the Court has to consider the matterby taking into account the material evidence.” 21 Rule 58 of the Code of Civil Procedure by contending that hewas bona fide purchaser of the property after verifying theencumbrance and the order of attachment was no reflected in thesaid encumbrance. 29. The learned Single Judge, after taking into considerationthe various decisions and on appraisal of the facts, in paragraphNo.10, observed as follows:“..... the order of attachment over the petition mentionedproperty is based on the Encumbrance Certificate; if it isnot reflected, then the Court has to consider the matterby taking into account the material evidence.” 30. The learned Judge further held that as per Order 21 andRule 58-A of the Code of Civil Procedure, the order of attachmentas well as the order raising the attachment by removal,determination or removal passed under Rule 55 shall becommunicated to the Registering Officer within the local limitswhose jurisdiction the whole or any part of the immovable propertycomprised in such order is situated. 31. Now, coming to the facts of the case, the order ofattachment was made on 18.12.1987 and as per the additionalaffidavit of the second appellant, dated 12.12.2011, filed inW.P.(MD)No.10885 of 2011, the intimation was sent to the JointSub-Registrar, Tuticorin, on 28.09.2007 and it was acknowledged byhim on 03.10.2007 and notice for settling a sale proclamationunder Section 53 of the Second Schedule of the Income Tax Act wasserved on the legal heirs of the original assessee as such thesale of the property to the writ petitioner was to be held as nulland void on 09.08.2011 which was the subject matter of challengein the writ petition. 32. Admittedly, the entry relating to attachment is notreflected in the encumbrance certificates issued by the Joint Sub-Registrar, Tuticorin and the stand taken by the writ petitioner inW.P.(MD)No.10885 of 2011 that he has purchased of the said suitproperty, vide a registered sale deed bearing DocumentNo.2212/2008, dated 18.06.2008, after verifying the encumbranceand was not seriously disputed by the revenue in their counteraffidavit, but they would contend the operation of law, alienationby the legal representatives of the deceased assessee is declaredas null and void. 33. In the light of the ratio laid down by the HonourableSupreme Court of India in Tax Recovery Officer Vs. GangadharViswanath Ranade (Decd.,) reported in AIR 1999 SC 427, it is notopen to the Tax Recovery Officer to declare the said sale as nullhttps://hcservices.ecourts.gov.in/hcservices/and void. The above said decision also held that “the TaxRecovery Officer is required to examine whether the possession ofthe third party is of a claimant in his own right or in trust for the assessee or on account of the assessee. If he comes to aconclusion that the transferee is in possession in his or her ownright, he will have to raise the attachment.If the departmentdesires to have the transaction of transfer declared void underSection 281, the Department being in the position of a creditor,will have to file a suit for a declaration that the transaction oftransfer is void under Section 281.” [emphasis supplied.'] the assessee or on account of the assessee. If he comes to aconclusion that the transferee is in possession in his or her ownright, he will have to raise the attachment.If the departmentdesires to have the transaction of transfer declared void underSection 281, the Department being in the position of a creditor,will have to file a suit for a declaration that the transaction oftransfer is void under Section 281.” [emphasis supplied.'] 34. In the light of the ratio laid down in the above citeddecision, it is not open to the Tax Recovery Officer to declarethe said transfer/alienation as null and void as per theprovisions of the Income Tax Act. It is al