Law: Income Tax Act, 1961

Section: 281,SchedII,R11,11(1)

Income-tax---Recovery of tax---Attachment and sale of property---Transfer of property during pendency of proceedings under Income-tax Act---Scope of proceedings under R.1 i of Second Sched.---T.R.O. has no power to declare transfer void---Indian Income Tax Act, 1961, S.281; Sched. II, R11----- Indian Code of Civil Procedure, 1908, O.XXI, Rr.58 to 63. Section 281 of the Income Tax Act, 1961, declares as void any transfer made by the assessee during the pendency of proceedings under the Act, with the intention to defraud the Revenue The powers of the Tax Recovery Officer, however, under Rule 11 of the Second Schedule to the Income Tax Act, 1961, are somewhat different. Under Rule 11(1) where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. The Tax Recovery Officer, therefore, has to examine who is in possession of the property and in what capacity. He can only attach property in the possession of the assessee in his own right, or in possession of a tenant or a third party on behalf of/for the benefit of the assessee. He cannot declare any transfer made by the assessee in favour of a third party void. If the Department finds that a property of the assessee is transferred by him to a third party with the intention to defraud the Revenue, it will have to file a suit under Rule 11(6) to have the transfer declared void under section 281. The provisions of Rule 11 are analogous to those of Order 21, Rules 58 to 61 and 63 of the Code of Civil Procedure, 1908, as they stood prior to the amendment of the Civil Procedure Code in 1976. In fact, the language of Order 21, Rules 60 and 61, is similar to the language of Rules 11(4) and 11(5) of the Second Schedule to, the Income-tax Act. Similarly, the language of Order 21, Rule 62, is similar to the language of Rule 11(6), Rules 59 to 62 of Order 21, prior to the amendment of 1976, provide for a summary investigation into possession as distinct from a thorough trial of ultimate right. No doubt, it is…

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