High Court Of Calcutta
ITO & Ors. vs. Nawal Kishore Choudhury & Ors.
Section 281
Ashok Kumar Mathur, C.J. & Subhro Kamal Mukherjee, J.
Appeal from Original Order No. 220 of 1987
20th December, 2001
Counsel Appeared
Ram Chandra Prasad, for the Appellants : J.P. Khaitan & Sourav Ghosh, for the Respondents
JUDGMENT
Subhro Kamal Mukherjee, J. :
This appeal is directed against an order dt. 9th Jan., 1979, passed by a learned Single Judge of this Court in connection with an application under Art. 226 of the Constitution of India.
2. Admittedly, Narayan Prasad Choudhury was the owner of the premises No. 2/2B Harington Street, Calcutta, to the extent of 35/96th share and 1/6 of 61/96th share. Narayan Prasad Choudhury was an assessee of the IT Act. Narayan Prasad Choudhary was liable to pay certain sums on account of income-tax, super-tax, penalty, interest and fine. He was, also, liable to pay certain sums under the WT Act. Since, Narayan Prasad Choudhury did not satisfy the claim of Revenue on account of his said liabilities, Revenue initiated proceedings before the Tax Recovery Officer (TRO) to recover its dues. The ITO forwarded the claim to the TRO on 21st March,1972. The TRO issued an order restraining the said Narayan Prasad Choudhury from transferring or changing the said premises No. 2/2B Harington Street, Calcutta, and prohibited all persons from taking any benefit under such transfer or charge. The notices under s. 226(3) of the IT Act were issued and served upon the tenants asking the tenants to pay rent to the IT Department.
3. The writ petitions, namely, Nawal Kishore Choudhury and Shrimati Chandra Devi Choudhury, who are the son and the wife of the said Narayan Prasad Choudhury, respectively, moved the present application under Art. 226 of the Constitution of India challenging the certificate proceedings, the notices of demand and the notices under s. 226(3) of the IT Act. It is claimed in the writ petition that the said Narayan Kishore Choudhury executed a deed of trust on 18th May, 1972, concerning his shares in the premises No. 2/2B Harington Street, Calcutta, and appointed the present writ petitioners as the trustees thereof. It is contended that Revenue acted erroneously in treating the said deed of trust as a revocable trust. It is, further, alleged that Revenue was not entitled to initiate proceedings against the trustees to recover the dues from Narayan Prasad Choudhury.
4. The respondents filed an affidavit-in-opposition. It was contended that the deed of trust was createdfraudulently and to defraud the creditors including the Revenue to whom large sums of money were due.
The learned Single Judge in his order dt. 9th Jan., 1979, however, decided to proceed on the basis that the said trust was a revocable trust. However, the learned Judge quashed the notices under s. 226(3) of the IT Act and quashed the certificate proceedings challenged before him. So far as the assessment for the asst. yr. 1973-74 was concerned, since the appeal was preferred before the appellate authority, the appellate authority was directed to dispose of the appeal in accordance with law. It was made clear that nothing in the said decision would anyway prejudice the right of Revenue to take appropriate steps by a suit or otherwise for setting aside the deed of trust, if so advised, and if they were entitled in law to do so. Being aggrieved Revenue has come up with this appeal.
5. Mr. Ram Chandra Prasad, learned advocate, appearing in support of the appeal, argued that in view of the provisions made in the deed of trust, which was admittedly executed on 18th May, 1972, that is, after the claim of Revenue were forwarded to the TRO, the deed was fraudulent and was created in order to defraud Revenue. Mr. Prasad, therefore, submitted the learned trial Judge ought not to have relegated Revenue to a suit for declaring that the deed of trust was void one.
6. Mr. J.P. Khaitan, learned advocate, appearing on behalf of the writ petitioners/respondents in this appeal, argued that the ITO and the TRO were not competent to examine whether the transfer by way of trust by Narayan Prasad Choudhury was void under s. 281 of the IT Act, 1961, and as such the learned trial Judge rightly granted liberty to Revenue to take appropriate proceedings in accordance with law for having the such transfer declared void under s. 281 of the said Act.
7. In the order impugned the learned Judge himself has observed that having regard to the terms of the deed and the conduct of the parties, it left little scope for doubt as to what purpose the said deed of trust was created, but the learned Judge refrained from making any final observation in the matter holding, inter alia, that the learned Judge was not called upon to decide the said question finally as a fact.
8. We have considered the deed of trust. The said deed of trust was created for the maintenance, education, marriage and other expenses and benefits of the minor children of Narayan Prasad Choudhury and his wife. It is also clear from the provisions of the deed of trust that part of the income and benefit has been derived by the settlor himself. The settlor has been given the right of residence and as well as 1/17 of the net income of the trust property for his maintenance. Prima facie, we are, also of opinion that the deed of trust was created to avoid payments.
9. However, concerning the jurisdiction of the TRO to declare any transfer as void under s. 281 of the IT Act, the point is no long res integra. The Supreme Court of India in TRO vs. Gangadhar Viswanath Ranade (Decd) (1998) 149 CTR (SC) 90 : (1998) 234 ITR 188 (SC) : TC S52.4149 has categorically held that Revenue could not have examined whether the transfer was void under s. 281 of the IT Act, 1961. The adjudication by Revenue that the transfer as void under s. 281 of the said Act was without jurisdiction. However, the right of Revenue to have the transfer declared as void under s. 281 of the said Act, as it stood at the relevant time, was not thereby taken away. The Department might take appropriate proceedings in accordance with law for having the transfer declared void under s. 281 of the said Act. However, Mr. Ram Chandra Prasad sought to distinguish the said case by contending that the fraud is so apparent in this case that it was not necessary to relegate the Department to a suit. We are unable to accept such contentions of Mr. Prasad.
10. Accordingly, we do not find any infirmity in the order impugned before us. We, however, make it clear that the Department may initiate the proceedings, as indicated in the order of the learned single Judge, within three months from the date of receipt of the certified copy of this order and in the event such proceeding is initiated by the Department within the aforesaid time frame, the writ petitioners and the said Narayan Prasad Choudhury, who was subsequently added as a party before the learned single Judge, will not be entitled to challenge the claim of the Department on the ground of limitation. The appeal is, thus, dismissed with the aforesaid observations.
There will be no order as to costs.
Ashok Kumar Mathur, C.J. : I agree.
[Citation : 257 ITR 426]
