Tax Recovery Officer cannot declare the sale by assessee to third party void: Madras HC
K.N. Subramaniam Vs PCIT (Madras High Court) Appeal Number : W.P.No.5336 of 2023
Facts:
1. The Income Tax Department, through the Tax Recovery Officer (TRO), attached the property for recovery of tax dues. The petitioner challenged the attachment, claiming ownership of the property through the sale deed. The TRO, however, declared the sale deed void, considering it was made during the pendency of tax proceedings.
2. The petitioner challenged the attachment, claiming ownership of the property through the sale deed. The TRO, however, declared the sale deed void, considering it was made during the pendency of tax proceedings.
Hon Madras HC held as below:
1. As per Rule 11(4) of the Income Tax Rules, the TRO, has to examine who is in possession of the property and in what capacity. He can only attach property in possession of the assessee in his own right, or in 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.
2. 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.
The copy of the order is as under:
