Mrs. Sujata V. Manohar, J. - (1.) This is an appeal from the judgment and order of 15th of December, 1982 of the Bombay High Court reported in (1989) 177 ITR 176. Under the impugned judgment the High Court has set aside the attachment levied under Rule 11 of the Second Schedule to the Income-tax Act, 1961 by the Tax Recovery Officer on an immovable property originally belonging to the assessee (since deceased). The property was claimed by the wife of the assessee (since deceased) and his daughter, original respondent No. 2 as of their ownership and in their possession in the objections which they had filed against attachment proceedings under Rule 11.
(2.) For the period relevant to the assessment years in question, the assessee was carrying on business as a partner of a firm known as United Capital Construction Company, and also as a Contractor. For the assessment years 1962-63, 1963-64 and 1964-65 he was assessed to income-tax and the amounts of tax so assessed became final on 7-8-1967. There were also income-tax demands which were outstanding for the subsequent assessment years at the time when the Tax Recovery Officer served notices on the assessee under Rule 2 of the Second Schedule to the Income-tax Act, 1961 on 21-10-1972. Thereafter on 23-10-1972 an immovable property being a residential house of the assessee in Ramdaspeth, Nagpur was attached by the Tax Recovery Officer. In the objections filed by the assessee, original respondent No. 1 it was stated that on 2-12-1967 he had executed a mortgage in respect of this property in favour of the Bank of Maharashtra for raising a loan of Rs. 75,000/-. He further stated that on 21-2-1969 he had executed a trust-deed in respect of the said property in favour of his wife and his daughter. On 27-2-1969 the assessee, the original respondent No. 1 had, by a registered deed, conveyed the said property to his wife and his daughter, original respondent No. 2. Similar objections were filed on behalf of the wife of the assessee and his daughter, original respondent No. 2 claiming that the title to the said property vested in them as full owners and they were in possession of the said property. Objections were also filed by the Bank of Maharashtra. The assessee as well as his wife and his daughter, therefore, contended that on the date when notice was issued under Rule 2 of the Second Schedule to the Income-tax Act and also on the date when the said property was attached by the Tax Recovery Officer, the property was of the ownership of the wife of the assessee and his daughter, original respondent No. 2 who were also in possession of this property. Hence the property was not liable to attachment for the dues of the assessee, original respondent No. 1.
(3.) Thereafter a show-cause notice dated 21-1-1974 was issued under Section 281 of the Income-tax Act as then in force, on original respondent No. 1. It seems that the concerned Income-tax Officer held an inquiry, recorded evidence and passed an order dated 9-5-1974 declaring, inter alia, that the transfer in favour of the wife of the assessee and his daughter, original respondent No. 2 of the said immovable property was void as against the Department under Section 281 of the Income-tax Act. This decision was the subject matter of challenge in earlier proceedings before the High Court. The High Court by its judgment and order dated 9-1-1981, in the case of Gangadhar Vishwanath Ranade (No. 1) v. Income-tax Officer (1989) 177 ITR 163 (Bombay) held that the proceedings taken pursuant to the declaration or expression of an opinion by the Income-tax Officer or authority under Section 281 were a mere prelude to the procedure for the recovery of tax and that the order of 9-5-1974 did not, in any way, affect the rights of the parties pertaining to the said property which could be considered in the proceedings under Rule 11.;