Law:

Section:

Section 222, read with section 281, of the Income-tax Act, 1961 - Collection and recovery of tax - Certificate Proceeding (Attachment of property) - State corporation sanctioned a term loan in favour of assessee-developer 'V' to establish a hotel - However said loan was subsequently transferred to 'V.K' clubs - Borrower created an equitable mortgage in favour of said corporation by depositing title deed of certain land and buildings - Pursuant to an Income-tax proceeding initiated against assessee 'V' and 'V.K.', TRO passed an order attaching properties mortgaged with said corporation - Whether where transfer to said corporation by way of mortgage was without notice of pendency of assessment proceeding, transfer could not be said void - Held, yes - Whether therefore order passed by TRO attaching immovable property for purpose of sale was to be quashed - Held, yes [Para 5] [In favour of assessee] FACTS â–  The respondent, was a state owned corporation. It sanctioned a term loan in favour of the assessee developer, 'V' to establish a luxury hotel. However, said term loan was transferred to 'V.K' clubs. â–  The borrower created an equitable mortgage in favour of the state corporation by deposit of title deed of certain land and buildings. â–  A notice under section 143(2) was issued to 'V' developers and subsequently the Tax Recovery Officer passed an order attaching the immovable properties including the properties mortgaged by 'V' developers and 'V.K.' Clubs to the state corporation. â–  The said order of attachment was called in question before instant Court by state corporation and consequently the order attaching immovable properties was quashed by single Judge. â–  On writ appeal: HELD â–  In the matter on hand, there cannot be any dispute that the transfer was for adequate consideration. The records reveal that the term loan obtained by 'V' developers and subsequently transferred to 'V.K.' is to the tune of Rs. 211 lakhs. Whereas the notice under section 143(2) by the Income-Tax Department is for recovery of Rs. 80 lakhs. Hence, it is clear that the transfer was for adequate consideration. It is also clear from the records…

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