Recovery of tax: Attachment: Section 281: A. Y. 2005-06: Transfer of property during pendency of assessment proceedings: TRO has no power to declare sale deed void: Appropriate proceedings to be taken in civil court:

The petitioner purchased a property by means of a registered sale deed on 25-09-2007 from A when the assessment of A for the A. Y. 2005-06 was in process. The assessment resulted in certain demand. On 03-01-2008, the Assessing Officer of A issued a notice u/s. 281 of the Income-tax Act, 1961 to the petitioner to show cause why the sale deed executed by the seller in favour of the petitioner should not be treated as a void document. The petitioner’s objection was overruled by the Assessing Officer holding that there was inadequate consideration for the transfer of the property by the seller in favour of the petitioner and, therefore, the conveyance was a void document.

On a writ petition challenging the said order of the Assessing Officer, the Allahabad High Court held as under:

“i) The Legislature does not intend to confer any exclusive power or jurisdiction upon the Income-tax Authority to decide any question arising u/s. 281 of the Income-tax Act, 1961. The section does not prescribe any adjudicatory machinery for deciding any question which may arise u/s. 281 and in order to declare a transfer as fraudulent u/s. 281, an appropriate proceeding in accordance with law is required to be taken u/s. 53 of the Transfer of Property Act, 1882.

ii) The Income-tax Officer, in order to declare the transfer void u/s. 281 and being in the possession of the creditor, is required to file a suit for declaration to the effect that the transaction of transfer is void u/s. 281.

iii) The Income-tax Officer had exceeded his jurisdiction in adjudicating the matter u/s. 281. He had no jurisdiction to declare the sale deed as void. Consequently, the order cannot be sustained and was quashed.”