Law:

Section:

Section 222, read with rules 16 and 51 of of Second Schedule, to the Income-tax Act, 1961 - Collection and recovery of tax - Certificate proceedings - D owing considerable amount of tax was owner of a house property - TRO served notice for attachment of said property en defaulter on 25-12-1972 - Thereupon, D mortgaged said property to petitioner on 22-5-1074 - TRO, however, attached aforesaid property on 17-11-1976 - Petitioner claimed that her interest of a bona fide mortgagee, not having notice of proceedings against defaulting assessee, should be protected and that provisions to the contrary contained in rules 16 and 51 of Second Schedule were violative of article 19 of Constitution - Whether fact that aforesaid transaction of mortgage was bona fide and was without notice of pendency of proceedings against defaulting assessee, did not affect department's right to treat said mortgage transaction as void - Held, yes FACTS One D was owing considerable amount of tax. Proceedings for the recovery of tax were initiated as the said D committed default in the matter of payment of the taxes. After receipt of the certificate, the TRO issued a notice dated 19-10-1972 under rule 2 of the Second Schedule and served the same on 25-12-1972 on D. D was the owner of a house property. The petitioner was the second mortgagee of the aforesaid property, under a mortgage deed executed on 22-5-1974. The TEO attached the aforesaid property on 17-11-1976. The petitioner filed a suit in the Sub-Judge's Court contending that her interest of a bona fide mortgagee, not having notice of proceedings against defaulting assessee, should be protected. The suit was, however, dismissed. On writ, the petitioner contended that rules 16 and 51 of the Second Schedule were ultra vires of article 19(1)(f) and that she was a bona fide mortgagee without notice of any proceedings against the defaulting assessee. HELD In view of the Supreme Court's in the case of Balaji v. ITO [1961] 43 ITR 393 where it was held that it is well settled that the provisions in a taxing statute designed to prevent evasion of tax or to prevent fraud and to secure payment of tax which had become due, do not amount to…

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