Potluri Eswara Rao, V. THE UNION OF IND

WP/19801/2019

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The case involves a writ petition filed by a husband and wife challenging the validity of an order declaring their property transactions void and an associated order of attachment. The petitioners had purchased two parcels of land in Guntur District from Sri Anantha Sai Badrinath. When they attempted to sell these properties, they were presented with an order of attachment by the Assistant Commissioner of Income Tax, which was based on the claim that the transactions were conducted with knowledge of pending proceedings under the Income Tax Act, 1961. The petitioners argued that the transactions were conducted without knowledge of such proceedings and for adequate consideration, thus should not be declared void under the Proviso to Section 281 of the IT Act. The court found that the 3rd respondent did not properly consider the petitioners' submissions as required by the Proviso to Section 281 of the IT Act, leading to the setting aside of the impugned order and remanding the matter for fresh consideration.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 725544 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 05-11-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: M KIRANMAYEE
• Assessee Lawyers: KEERTHI KOTA
• Keywords: Attachment; Income Tax; Property Transfer; Void transaction; Writ petition
• Section: 281; 281-B(2)

Judgement Text

" 1 THE HON’BLE SRI JUSTICE A.V.SESHA SAI AND THE HON’BLE SRI JUSTICE R.RAGHUNANDAN RAO WRIT PETITION No.19801 of 2019 ORDER: (per the Hon’ble Sri Justice A.V. Sesha Sai) Heard Sri Keerthi Kiran Kota, learned counsel for the Writ Petitioners and Smt.M.Kiranmayee, learned Standing Counsel for Income Tax. 2. Petitioners herein are the husband and wife respectively. The 1st petitioner herein purchased an extent of Ac.0.40 cents of land, vide registered sale deed, dated 15.12.2017, for a sale consideration of Rs.6,00,000/- and the 2nd petitioner purchased an extent of Ac.0.64 cents, vide registered sale deed, dated 15.12.2017, for a consideration of Rs.9,60,000/- and the said properties are situated in Survey No.1176-M & N of Tadikonda village, Guntur District. The petitioners herein purchased the said properties from Sri Anantha Sai Badrinath. 3. According to the petitioners, they wanted to sell the property in the month of April, 2019 and when they went to the office of the 6th respondent for the purpose of registering the said land, the 6th respondent handed over an order of attachment, dated 30.11.2018 passed by the 3rd respondent herein/the Assistant Commissioner of Income Tax (hereinafter referred as ‘the Assistant Commissioner’) and refused to register the documents. On 20.04.2019, the 2 petitioners herein submitted a representation to the 3rd respondent, requesting the 3rd respondent to lift the attachment over the subject properties. Thereafter, the 3rd respondent/the Assistant Commissioner passed an order on 05.11.2019, under Section 281 of the Income Tax Act,1961 (hereinafter referred to as ‘the IT Act’), declaring the transfers effected vide document Nos.5528 of 2017 and 5529 of 2017 as void on the ground that the assessee had knowledge of pendency of the proceedings under the IT Act and no permission was obtained from the Assessing Officer for transfer of the properties. 4. Challenging the validity and legal sustainability of the said order passed by the 3rd respondent on 05.11.2019, declaring the transactions as void and the order of attachment, dated 30.11.2018, the present Writ Petition has been filed. 5. It is contended by the learned counsel for the Writ Petitioners that the order impugned in the Writ Petition is highly illegal, arbitrary, unreasonable and opposed to the very spirit and object of the provisions of the IT Act. In elaboration, it is further contended by the learned counsel that the 3rd respondent grossly erred in considering the issue in terms of the Proviso to Section 281(1) of the IT Act. It is also his submission that since the assessment was completed as long back as on 28.12.2018, the order of attachment cannot continue as per the Proviso to Section 281-B(2) of the IT Act. It is further submitted by the learned counsel that though the petitioners herein made a representation, dated 20.04.2019 along 3 with the Encumbrance Certificate of the subject properties, the 3rd respondent herein failed to consider the same in proper perspective. 6. On the contrary, it is contended by Smt. Kiranmayee, learned Standing Counsel for Income Tax appearing for the respondents that since the property was transferred by way of sale with the knowledge of pendency of the proceedings initiated under the IT Act, the 3rd respondent is perfectly justified in declaring the transactions as void. It is also the submission of the learned Standing Counsel that only after considering the representation submitted by the petitioners herein, the 3rd respondent passed the impugned order, as such, the order impugned cannot be faulted. 7. It is absolutely not in dispute that after coming to know about the order of attachment, dated 30.11.2018, the petitioners herein submitted a representation on 20.04.2019, principally stating about the absence of any charge on the date of purchase by them. It is also not in dispute that the petitioners herein enclosed a copy of Encumbrance Certificate obtained from the concerned authorities. 8. As per Section 281(1) of the IT Act, if any assessee creates a charge on, or parts with, the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under Rule 2 of the Second Schedule, such charge or transfer is void one. 4 9. Proviso to Section 281 of IT Act is an exception to the same. As per the said Proviso, charge or transfer so effected shall not be treated as void, if it is made (i) for adequate consideration and without notice of the pendency of such proceeding or without notice of such tax or other sum payable by the assessee. As per clause (ii) of the Proviso, such charge or transfer shall not become automatically void if the same is effected with the previous permission of the Assessing Officer. 10. It is very much clear from the language employed in the Proviso to Section 281 of the IT Act that when the person pleads that he or she purchased the property for adequate consideration and without notice of the pendency of the proceedings under the IT Act, in the considered opinion of this Court, the Proviso to Section 281 of IT Act obligates the Assessing Officer to consider the issue in terms of clauses (1) and (2) of the Proviso. 11. A reading of the order impugned in the present Writ Petition demonstrates that the 3rd respondent herein did not make any such exercise in terms of the Proviso to Section 281 of the IT Act, though the petitioners herein made submissions in their representation as per clause(1) of the Proviso to Section 281 of the IT Act. On this ground alone, in the definite opinion of this Court, the order passed by the 3rd respondent on 05.11.2019, is liable to be set aside, for a fresh consideration of the issue by the 3rd respondent. It is made clear that the sustainability of the order of attachment, dated 5 30.11.2018 would depend on the outcome of the order to be passed by the 3rd respondent after this remand. 12. For the aforesaid reasons, the Writ Petition is partly allowed, setting aside the order bearing No.PAN:ADKPT9802E passed by the 3rd respondent, dated 05.11.2019 and the matter is remitted to the 3rd respondent for fresh consideration of the issue within a period of three months. It is also made clear that the petitioners herein are entitled to file additional material, if any, in support of their case within a period of one (1) month from the date of receipt of a copy of this Order. There shall be no order as to costs of the Writ Petition. As a sequel, miscellaneous petitions pending, if any in the Writ Petition, shall stand closed. __________________ A.V.SESHA SAI, J _________________________ R.RAGHUNANDAN RAO, J 12.02.2020 MP "