K.N. Subramaniam Vs PCIT (Madras High Court)
In a significant ruling, the Madras High Court has quashed an order issued by the Income Tax Department that sought to cancel a sale deed and attach a property. The court held that the Income Tax Department lacks the statutory power to order the cancellation of a sale deed between two private parties, effectively overturning a decision by a learned Single Judge and allowing the appeal filed by K.N. Subramaniam.
The case originated from a property purchase by K.N. Subramaniam (the appellant) from a fourth respondent via an agreement dated February 24, 2012. Shortly thereafter, on May 25, 2012, the Income Tax Department (represented by respondent No. 2, a tax authority) issued an order attaching the said property.
The situation was complicated by a criminal complaint filed in April 2015 by the fourth respondent, alleging that Subramaniam had forged documents to register the property in his name without paying the sale consideration. This dispute eventually reached the Supreme Court, which categorized it as a civil matter and directed the fourth respondent to pursue civil remedies. Notably, the fourth respondent has not initiated a civil suit to date.
Despite the ongoing civil dispute and the Supreme Court’s direction, the Income Tax Department proceeded with its attachment order. After considering objections and submissions from both Subramaniam and the fourth respondent, the department issued an order-in-original on February 16, 2023. This order, crucially, directed the registration authorities to “cancel the same [sale deed] and restore title and ownership over the said asset to the Assessee in default and in-turn confirm the attachment of the impugned asset by the income-tax department for the purpose of recovery of tax dues from the Assessee in default.” The attached property included a land and building in Annur Village, Coimbatore.
