In M/s. Agasthiya Holdings Private Limited vs. CIT & Ors., the Madras High Court held that the Tax Recovery Officer doesn’t have the authority to declare the transfer of a property as null and void under Section 281 of the Income Tax Act,1961.
The assessee bought a property from the legal representatives of the one Mr. Jeyappan. The property was purchased after obtaining encumbrance certificates and seeking legal opinions. The sale was effected in April, 2008. The appellant was served with a show cause notice in September 2008, as to why the sale in their favour should not be declares as void. It was then, the assessee learnt that the property was attached by the Tax Department in the year 1987. In the year 2009, the Tax Recovery Officer vide proceedings declared the sale in favour of the appellant as null and void.
The Counsel for the assessee argued that the Tax Recovery Officer has no jurisdiction to declare a sale as null and void and that it is only a civil Court has such jurisdiction. It was also argued that the appellants were bona fide purchasers and the fact of the attachment of the property was not reflected in the encumbrance certificates obtained by the appellant.
The Counsel for the Revenue contended that the Tax Recovery Officer in his order dated 09.08.2011 has noted that the property has been illegally transferred by way of a registered sale deed dated 18.06.2008 and since it has been sold after service of the demand notice, it has to be declared as null and void as per the provisions of the Income Tax Act. The counsel argued that the action of the officer was well within the scope of law.
The division bench comprising of Justice M. Sathyanarayanan and Justice R. Hemalatha relied on the decision of the Supreme Court in the case of Tax Recovery Officer Vs. Gangadhar Viswanath Ranade, and observed “In the light of the ratio laid down in the above cited decision, it is not open to the Tax Recovery Officer to declare the said transfer/alienation as null and void as per the provisions of the Income Tax Act. Revenue is granted liberty to file a civil suit to declare the sale transaction/sale deed in favour of the writ petitioner as null and void”.
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