NILESH POPATLAL PATEL vs. TAX RECOVERY OFFICER 3

Facts

The writ-applicant, Nilesh Popatlal Patel, challenged an order of attachment passed by the Tax Recovery Officer (TRO) under Section 222 of the Income Tax Act, 1961. The attachment was of Plot No. 85/1 + 85/2/1, GIDC, Vatva, for the alleged failure of M/s Newempire Infrastructure Pvt. Ltd. to pay dues amounting to Rs. 4,79,50,640 plus interest. The petitioner claimed to be the rightful owner of the property, having entered into a supplementary agreement for transfer on March 22, 2016, with M/s Newempire Infrastructure Pvt. Ltd., with the GIDC granting permission for transfer on March 5, 2016, and the plot being transferred in his name on March 29, 2016. He had also executed a sale deed on March 1, 2017, and made complete payment. The attachment order was passed on November 22, 2017.

Held

The High Court held that the writ petition was not maintainable. While acknowledging the petitioner's grievance that the property was not liable for attachment, the Court found that Rule 11 of the Second Schedule to the Income Tax Act, 1961, provides a specific remedy for such claims. This rule mandates the Tax Recovery Officer to investigate any claim or objection made against the attachment or sale of property on the ground that it is not liable. The Court referred to the Supreme Court's decision in Isha Beevi and others v. Tax Recovery Officer, Quilon and others, which emphasized that preliminary notices of recovery proceedings could only be quashed if entirely without jurisdiction, and that the existence of an alternative remedy under Rule 11 is generally not a bar to a writ, but the applicant must demonstrate a total absence of jurisdiction. In this case, the TRO had the power to proceed under another provision, even if a wrong section was cited. Therefore, the petitioner was directed to file a claim before the TRO under Rule 11(1) within four weeks, and the TRO was directed to investigate the claim in accordance with law. The writ applications were rejected as not maintainable.

Key Issues

1. Whether the Tax Recovery Officer erred in attaching the immovable property of the petitioner under Section 222 of the Income Tax Act, 1961, read with Rule 48 of the Second Schedule, when the property was allegedly no longer owned by the defaulter, M/s Newempire Infrastructure Pvt. Ltd. (Assessee's contention: The property belongs to the petitioner and not the defaulter, making the attachment illegal and in violation of Articles 14 and 19(1)(g) of the Constitution. The TRO erred in believing the property belonged to the defaulter and attaching it for their dues, especially since the petitioner purchased it before the assessment order and demand. The TRO must examine possession and capacity. Revenue's contention: Not recorded in the judgment. 2. Whether a writ petition under Article 226 of the Constitution is the appropriate remedy for challenging the attachment order, given the existence of alternative remedies under the Income Tax Act. (Assessee's contention: The order is bad, illegal, contrary to law, and without jurisdiction, necessitating High Court intervention. Revenue's contention: Not recorded in the judgment.)