Follow Us :

Case Law Details

Case Name : C. Sowmyaraga Vs Inspector General of Registration (Madras High Court)
Appeal Number : W.P.No.28774 of 2019
Date of Judgement/Order : 23/02/2024
Related Assessment Year :

C. Sowmyaraga Vs Inspector General of Registration (Madras High Court)

In the matter of C. Sowmyaraga Vs Inspector General of Registration, the petitioner sought relief from the Madras High Court via a Writ Petition, aiming to remove the attachment entry made by the third respondent over the petitioner’s immovable property and subsequently allow the petitioner to enjoy the property without any encumbrances. The property in question was purchased by the petitioner on 02.11.2011, and the attachment was made on 31.03.2013.

The petitioner argued that they were a bona fide purchaser without any knowledge of encumbrances on the property at the time of purchase. However, it was revealed that the attachment was initiated subsequent to the sale, and the petitioner was unaware of any Income Tax proceedings or investigations by the Central Bureau of Investigation (CBI) against the previous owner.

The third respondent, through a counter affidavit, contended that the sale made by the previous owner to the petitioner was void as it occurred after the initiation of proceedings by the Income Tax Department. They provided details of assessments and penalties imposed on the previous owner for various assessment years, demonstrating that the transaction with the petitioner was made after receiving summons under the Income Tax Act.

After considering the arguments and evidence presented by both parties, the Madras High Court dismissed the Writ Petition. The court held that since the sale was made by the previous owner after the initiation of proceedings by the Income Tax Department and subsequent to the issuance of summons, the transaction was deemed void. Consequently, the petitioner was not entitled to the relief sought.

This case underscores the importance of due diligence in property transactions, particularly regarding any ongoing legal proceedings or encumbrances on the property. It highlights the principle that transactions made during the pendency of legal proceedings may be deemed void and may not confer any legal rights upon the purchaser. Therefore, it serves as a reminder for prospective buyers to exercise caution and conduct thorough investigations before entering into property transactions to avoid potential legal complications.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner has filed the above Writ Petition praying for issuance of a Writ of Mandamus to direct the second respondent to remove the attachment entry of the third respondent over the immovable property of the petitioner ad-measuring 67 cents, comprised in Survey No.238/4 (65 cents) and 238/5C (02 cents) situated at Mevalurkuppam Village, Sriperumbudur Taluk, Kancheepuram District and consequentially direct the second respondent to make appropriate entries stating that the said attachment has been lifted and allow the petitioner to enjoy the property without any hindrance.

2. Learned counsel for the petitioner submitted that the petitioner had purchased the property on 02.11.2011 and at that time, there was no encumbrance. Subsequently, attachment was made on 31.03.2013 and without any due process of law, entry was made and also twice, the property was attached, which is against law and he is a bona-fide purchaser of notice of defect in title for valuable consideration. He is not aware of either Income Tax proceedings or the CBI investigation. It is however that the entry was made in the Encumbrance Certificate, which is without following due process of law and also the attachment is subsequent to sale and therefore, the said entry has to be removed.

3. Learned Senior Standing Counsel appearing for the third respondent filed counter affidavit and submitted that the CBI conducted raid on 16.12.2010 and at the request of the Income Tax Department, the third respondent investigated the case on the basis of the information received from the CBI Investigation Wing of the Income Tax Department and summons were issued under Section 131 of the Income Tax Act on 17.02.2011 to the fourth respondent herein. They have completed the verification proceedings and forwarded the details before the concerned Assessing Officer on 26.07.2011. The fourth respondent was raided by the CBI on 16.12.2010 and summons under Section 131 of the Income Tax Act was issued on 17.02.2011. The scrutiny notice under Section 143(2) of the Income Tax Act for the assessment years 2009-2010 and 2010-2011, was issued on 30.09.2011. The fourth respondent transferred the immovable property to the petitioner on 02.11.2011.

4. Therefore, the transfer made by the fourth respondent in favour of the petitioner is after receiving the summons and after initiating the proceedings by the Income Tax Department, and therefore, the alienation made by the fourth respondent in favour of the petitioner itself is void and it will not bind the Income Tax Department. Subsequently, there are also no proceedings and they were already completed. The assessment details of the fourth respondent, viz., M/s. Sally Thermoplastics India Limited for the Assessment Years 2005-06 to 2010-11 are given below:

A.Y.
Notice issued under Sec-tion
Date of
issue of
notice
Date of
completion
of
assess-ment
Tax
Interest
Total
Remarks
2009-10
143(3)
29.09.2011
30.12.2011
4,35,075/-
1,95,985/-
6,31,060/-
Normal assess ment
2010-11
143(2)
29.09.2011
31.03.2013
1,12,221,204/-
40,45,637/-
1,52,66,841/-
-do-
2005-06
148
26.03.2012
30.03.2013
10,23,531/-
11,05,412/-
21,28,943/-
Re-open-ed Asses sment
2006-07
148
26.03.2012
30.03.2013
24,12,847/-
23,16,332/-
47,29,179/-
-do-
2007-08
148
23.03.2012
30.03.2013
14,78,812/-
12,43,615/-
27,22,427/-
-do-
2008-09
148
23.03.2012
30.03.2013
19,16,215/-
14,04,890/-
33,21,105/-
-do-
Total
1,84,87,684/-
1,03,11,871/-
2,87,99,555/-

A.Y. Notice issued u/s Date of issue of Penalty Notice Date of penalty order Penalty levied u/s 271(1)(c)
2009-10 271(1)(c) 30.12.2011 29.06.2012 19,435/-
2010-11 271(1)(c) 31.03.2013 30.09.2013 1,10,34,132/-
2005-06 271(1)(c) 30.03.2013 30.09.2013 15,55,393/-
2006-07 271(1)(c) 30.03.2013 30.09.2013 16,98,280/-
2007-08 271(1)(c) 30.03.2013 30.09.2013 14,51,398/-
2008-09 271(1)(c) 30.03.2013 30.09.2013 12,65,398/-
Total 1,70,24,036/-

It is also stated in the counter affidavit filed by the third respondent that the total demand determined for the above said Assessment Years comes to Rs.4,58,23,591/- and the assessments of the fourth respondent, viz., M/s. Sally Thermoplastics India Limited for all the above assessment years were completed ex-parte. Since the petitioner’s sale deed itself is void, the petitioner is not entitled to the relief sought for.

5. The learned Special Government Pleader appearing for the respondents 1 and 2 made his submissions by relying upon the counter affidavit and also prayed that the petitioner is not entitled to the relief sought for.

6. Heard both sides and perused the materials available on record.

7. Admittedly, the fourth respondent is the original owner of the property and there was a complaint against the fourth respondent before the CBI and they have also conducted raid on 16.12.2010 and they have also requested the investigation wing of the third respondent to investigate regarding the evasion of the Income Tax. They have also issued summons on 17.02.2011 under Section 131 of the Income Tax Act and issued scrutiny notice under Section 143(2) of the Income Tax for the assessment years 2009-10 and 2010-11 on 30.09.2011. Subsequently, the petitioner purchased the land from the fourth respondent only on 02.11.2011. Later, summons were issued by the third respondent and therefore, the transaction made by the fourth respondent is void. Since the sale made by the fourth respondent in favour of the petitioner is not valid one, the petitioner is not entitled to the relief sought for in the Writ Petition.

8. Hence, for the reasons stated above, the Writ Petition is dismissed.

There shall be no order as to costs. Consequently, W.M.P. is closed.

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
April 2024
M T W T F S S
1234567
891011121314
15161718192021
22232425262728
2930