Case Law Details
Nitin Nagarkar Vs ITO (Bombay High Court)
The Supreme Court in Tax Recovery Officer V/s. Gangadhar Vishwanath Ranade (1998) 100 Taxman 236 (SC), while confrming the Division Bench judgment of the Bombay High Court held that the Tax Recovery Officer (TRO) could not have examined, whether the transfer was void under Section 281 of Income Tax Act, 1961 and that his adjudication of the transfer as being void under Section 281, was without jurisdiction and that the jurisdiction of TRO relates to examining possession, and only incidentally, any question of right to possession as claimed by the objector.
It was held :
“12. In the light of this discussion about the provisions of Order XXI rules 58 to 63, if we examine rule 11(4) of the Second Schedule to the Income-tax Act, it is clear that the TRO is required to examine whether the possession of the third party is of a claimant in his own right or in trust for the assessee or on behalf of the assessee. If he comes to a conclusion that the transferee is in possession in his or her own right, he will have to raise the attachment. If the department desires to have the transaction of transfer declared void under section 281, the department, being in the position of a creditor, will have to fle a suit for a declaration that the transaction of transfer is void under section 281.”
Incidentally, a Division Bench of this Court in the case of Ruchi Mehta V/s Union of India [2008] 170 Taxman 289 (Bombay) considered the same order dated 27th June, 2007 which is also impugned in the present petition, followed the ratio of the judgment in Gangadhar’s case and declared the order passed by the TRO in terms of Section 281 of the Act, 1961 as void and without jurisdiction. The order was also held to be bad on the ground that no opportunity was at all given to the Petitioner in the said case before exercising jurisdiction under Section 281, which was thus held to be in violation of principles of the natural justice.
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