HIGH COURT OF BOMBAY

Ms. Ruchi Mehta

v.

Union of India

F. I. REBELLO AND J.P. DEVADHAR, JJ.

WRIT PETITION NO. 1752 OF 2007

August 28, 2007

Section 281 of the Income-tax Act, 1961 - Certain transfers to be void - ‘S’ paid earnest money on allotment of a shop and obtained possession on payment of balance money to builder - Petitioner purchased right, title and interest of ‘S’ in that shop and sale deed was executed between petitioner and builder - TRO attached said shop - On appeal, Commissioner held that since TRO had not issued any notice to builders for attaching said allotment, notice was not est and, therefore, action taken of attachment of subject property was to be set aside - However, TRO in exercise of his powers under section 281 passed an order declaring said sale as null and void - Whether following law declared by Supreme Court in TRO v. Gangadhar Viswanath Ranade [1998] 234 ITR/188/100 Taxman 236 action of TRO declaring transfer of property as null and void was without jurisdiction - Held, yes - Whether since petitioner was not given any opportunity before order under section 281 was passed, order was to be set aside for violation of principles of natural justice and fair play - Held, yes

FACTS

One ‘S’ had booked and was allotted a shop and had paid the earnest money for processing the said allotment. Later, ‘S’ paid the balance money to the builder and obtained the possession of the said shop. The petitioner purchased rights, title and interest of ‘S’ in the said shop. Sale deed was executed between the builder and the petitioner for sale of the said shop. Later, the TRO attached the said shop. On appeal, the Commissioner held that only on payment of balance amount by ‘S’ to the builders, the status of movable property was charged to into immovable property and, therefore, the correct approach for the TRO was to attach that allotment by sending a notice to the builders. He further held that since no communication was ever made with builders the notice was non est and, therefore, he set aside the action of attachment of the subject property. Thereafter, the TRO in exercise of his powers under section 281 passed an order declaring the sale of shop as null and void.

On writ:

HELD

Section 281 had come up for consideration before the Supreme Court in CIT v. Gangadhar Viswanath Ranade [1998] 234 ITR 188/100 Taxman 236. The Supreme Court observed that section 281 merely declared what the law was. The Supreme Court further held that section 281 does not prescribe any adjudicatory machinery for deciding any question which may arise under section 281. The Court further observed that in order to declare a transfer as fraudulent under section 281, appropriate proceedings would have to be taken in accordance with law in the same manner as they are required to be taken under section 53 of the Transfer of Property Act, 1882. [Para 9]

Considering the law declared by the Supreme Court in the case of Gangadhar Viswanath Ranade (supra) it would be clear that the action of TRO in declaring that the transfer of property in favour of the petitioner be void was clearly without jurisdiction. [Para 10]

The impugned order also attracted civil consequences. The TRO before passing any such order ought to have given opportunity to petitioner if in law the TRO could exercise jurisdiction under section 281. That opportunity was also not given. The order, therefore, must also be set aside for violation of the principles of natural justice and fair play. [Para 11]

Thus, the petition was to be allowed. [Para 12]

CASE REVIEW:

TRO v. Gangadhar Viswanath Ranade [1998] 234 ITR 188/100 Taxman 236 (SC) followed [Para 10]