M/s. Agasthiya Holdings Private Limited Vs CIT (Madras High Court)
In Tax Recovery Officer Vs. Gangadhar Viswanath Ranade (Decd.,) reported in AIR 1999 SC 427, the scope of Section 281 of the Income Tax Act and Rule 11 of the Second Schedule came up for consideration. The question arose for consideration before the Honourable Supreme Court of India is whether in a proceedings under Rule 11 of the Second Schedule of the Income Tax, the Tax Recovery Officer can declare a transfer as void under Section 281. The Honourable Supreme Court of India has noted that Rule 11 of the Second Schedule is 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 the year 1976. In the above said decision, the Honourable Supreme Court of India has observed as follows:
“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 the 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 as 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.”
