G. R. Swaminathan, J. - (1.) One S.Rajendran proprietor of Inland Real Estate, Madurai - 14 was served with notices of demand under Section 156 of the Income Tax Act, 1961 on 30.05.2012 and 12.06.2012 in respect the assessment year 2005-06 to 2011- 12. It was finally quantified that he was liable to pay a sum of Rs.4,04,56,280/- and notice of demand was served on him on 05.01.2013 under Rule 2 of II Schedule to the Income Tax Act 1961 in the relevant form. The petitioners herein purchased the properties that are the subject matter of these writ petitions from the said defaulter-assessee thereafter. Subsequent to the said purchases, orders of attachment were made on 21.12.2015. The petitioners lodged their objections with the Tax Recovery Officer for raising the attachment. Since the said objections were not considered by the Tax Recovery Officer, the petitioners herein filed W.P(MD)Nos.19829 to 19840 of 2016 before this Court. This Court by order dated 18.10.2016 directed the Tax Recovery Officer II, Madurai to conduct enquiry in accordance with Rule 11 of the Second Schedule to the Income Tax Act. Pursuant to the aforesaid direction, the orders impugned in these writ petitions came to be passed. The respondent not only declined to vacate the attachment earlier made but also declared the sale transactions effected by the said Rajendran in their favour as null and void.
(2.) The learned counsel appearing for the petitioners contended that the issue on hand is no longer res integra. He drew the attention of this Court to Section 281 of the Income Tax Act, 1961. This Section was considered by the Hon'ble Supreme Court in the decision reported in (Tax Recovery Officer II, Sadar, Nagpur vs. Gangadhar Vishwanath Ranade, 1998 6 SCC 658). It was held therein that the Tax Recovery Officer will not have the jurisdiction to declare the transaction that according to him falls under Section 281 of Income Tax Act as null and void. The Tax Recovery Officer has to examine who is in possession of the property and in what capacity. He can only attach the property in possession of the assessee in his own right, or in possession of a tenant or a third party on behalf of or for the benefit of the assessee. This decision was followed by the Madras High Court in Sancheti Leasing Company Ltd., and another vs. Income Tax Officer and another, 2000 246 ITR 814 (Mad). The Madras High Court specifically observed that it is only the Civil Court that can make a declaration that a transaction is void.
(3.) Placing reliance on the decision of the Gujarat High Court in Tax Recovery Officer v. Industrial Finace Corporation of India and another, 2012 346 ITR 11 (Guj) and a similar decision of the Karnataka High Court in Commissioner of Income Tax and another v.Karnataka State Industrial Development Corporation Ltd, 2015 378 ITR 234 (Kar), the learned counsel for the petitioners contended that the proviso to section 281 of the Income Tax Act clearly protects bonafide purchasers of properties for adequate consideration and without notice of the tax arrears of the transferor. He further pointed out that the Revenue did not dispute the petitioners' claim that the properties purchased by the petitioners were for adequate consideration and that the petitioners had no notice of the arrears of Income Tax. The properties stood in the name and possession of the petitioners even before the attachment was effected by the respondent.;