Home Income tax Corporate Income tax Recovery Officer Can’t Invalidate a Sale Made by an Individual in Favour of a 3rd Party

Recovery Officer Can’t Invalidate a Sale Made by an Individual in Favour of a 3rd Party

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Recovery Officer Can’t Invalidate a Sale Made by an Individual in Favour of a 3rd Party
Madras High Court's Order for K.N.Subramaniam

The Madras Excessive Courtroom dominated {that a} tax restoration officer couldn’t declare a sale that the taxpayer made in favor of a 3rd get together void if he discovers that the property of the taxpayer was transferred by the taxpayer to a 3rd get together to defraud the income.

The bench of Justice C. Saravanan has famous that the Revenue Tax Division might want to file a swimsuit when it comes to Rule 11 (6) of the 2nd Schedule of the Revenue Tax Act, 1961, however beneath Rule 11 (6) of the 2nd Schedule of the Revenue Tax Act, 1961, the get together towards whom an order of attachment is incurred is required to institute a swimsuit in a civil court docket to construct the best which he avails over the property in dispute, and topic to the results of such swimsuit (if any), the order of the Tax Restoration Officer can be conclusive.

The applicant has contested the order handed via the second respondent/the Tax Restoration Officer-III beneath Rule 11(1) of the Second Schedule of the Revenue Tax Act, 1961. An extended historical past of litigation is there between the applicant and the respondent, who had defaulted in tax funds, and the Revenue Tax Division.

The Return of Revenue Tax of the respondent for the Evaluation Yr 2008-09 and Evaluation Yr 2009-10 consequence in a requirement for tax arrears together with an curiosity beneath Part 220(2) for the AY 2008-09 and a sum of Rs. 16,21,470 together with with curiosity beneath Part 220(2) of Rs. 32,428 for the AY 2009-10.

The respondent’s revenue tax authorities issued a requirement discover beneath Rule 2 of the Second Schedule to the Revenue Tax Act, 1961 because the respondent had defaulted in tax cost.

One other discover of demand seeks respondent pay arrears of tax together with curiosity. Because the fourth respondent was unable to pay the arrears of tax, the respondent’s property was connected by the Revenue Tax Division. For the sale of one of many properties along with land in Coimbatore District the applicant and the respondent had earlier entered right into a sale settlement.

The applicant argued that the respondent had the choice to file a civil swimsuit. Nonetheless, up to now, the respondent has not filed a swimsuit towards the petitioner. The sale in favor of the applicant is binding. 

The division has no jurisdiction to declare that the sale deed is registered as void beneath the provisions of the Revenue Tax Act, 1961. The council argued that the sale was void by operation of legislation when it comes to Rule 16(1) of the II Schedule of the Revenue Tax Act, 1961.

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Therefore the sale, which is acknowledged to have been carried out on February 24, 2012, vide Doc No. 1981 beneath the sale settlement dated February 19, 2009, was void ab initio. Regardless of if the council was not wanted to declare the sale as void, by operation of Rule 16 of the II Schedule of Revenue Tax Act, 1961, the sale was certainly void.

Within the resolution of the Supreme Courtroom, the court docket relied on the case of Tax Restoration Officer II, Sadar, Nagpur vs. Gangadhar Vishwanath Ranade for the revision to Part 281 of the Revenue Tax Act, 1961, wef October 1, 1975, beneath the Taxation Legal guidelines (Modification) Act, 1975. The expression “to defraud the Income” in Part 281 of the Revenue Tax Act, 1961, has been eliminated. Put up reproducing Sub-Rule (4), (5), and (6) of Rule 11 of the 2nd Schedule to the Revenue Tax Act, 1961, the Hon’ble Supreme Courtroom dominated that the Tax Restoration Officer is required to research who’s in possession of the property and what capability. The Courtroom dominated {that a} Tax Restoration Officer can connect property within the possession of the taxpayer in his personal proper or within the possession of the tenant or third get together on behalf of or for the benefit of the taxpayer.

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