Tax Recovery Officer has no power to declare alienation of property as null and void – High Court

Tax Recovery Officer has no power to declare alienation of property as null and void when sale is made under sale deed by alleged tax defaulter – High Court

ABCAUS Case Law Citation:
ABCAUS 2023 (2017) (08) HC

Brief Facts of the Case:

The present writ petition had challenged the order passed by the Income Tax Recovery Officer by which, he had declared the sale made in favour of the petitioner in respect of property under sale deed by the alleged defaulters as null and void, in view of the fact that the said property had been attached by the Income Tax Department for the income-tax arrears.

The Hon’ble High court observed that the second schedule of the Income-tax Act, 1961 provides for procedure for recovery of tax. One of the modes of recovery of tax is by attachment and sale of the defaulter’s immovable property as per Rule 4 of the second schedule. Rule 11 provides for adjudication of claims made to the attachment or sale of, any property in execution of a certificate, issued by the Tax Recovery Officer. Rule 16 provides where a notice has been served on a defaulter under rule 2, the defaulter or his representative interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer.

It was further observed Rule 16 (2) reads as follows.

“…..(2)Where an Attachment has been made under this Schedule, any private transfer or delivery of the property attached or of any interest therein and any payment to the defaulter of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.”

The Hon’ble High court further observed that Rule 48 provides for attachment of the immovable property and Rule 50 provides for proclamation of attachment. The impugned order had been passed by the Tax Recovery Officer under Rule 16(1) and (2). A reading of Rule 16(1) and (2) would show that the Tax Recovery Officer had no power to declare the alienation as null and void. Accordingly, the impugned order is liable to be quashed and it is quashed.

However, the Hon’ble High court made clear that the department will be at liberty to proceed against the properties of the defaulters which have been attached. Also It will be open to the petitioner to approach the Tax Recovery Officer under Rule 11(1) claiming that this property is not liable for attachment. Once such claim is preferred, it would be for the Tax Recovery Officer to adjudicate the sale of the property under Rule 11. If the claim is rejected, the aggrieved party has got a right to move the Civil Court to establish his right.

Decision:
The writ petition was allowed. However, the right of the department to proceed against the property on the basis of the attachment made was protected with liberty to the petitioner to move the Tax Recovery Officer under Rule 11 seeking adjudication of his claim.