Ryan Plast vs ITO and Others

The petitioner is a registered partnership firm engaged in the business of manufacture of all types of adhesive tapes. The petitioner has challenged in this writ petition order dated 27-6-2007 passed by the 1st respondent u/s 281(1) of the Income Tax Act, 1961 (the Act for convenience). The said order is passed by the 1st respondent against Mr. K.K. Mistry, partner of M/s Simplex Enterprises (assessee hereinafter referred to as) as it was seen that during the pendency of the assessment proceedings under the Act or after completion of such proceedings but before the service of notice in Form ITCP-1 under Rule 2 of the Second Schedule by the TRO, the assessee had created a charge on, or parted with the possession by way of sale, mortgage, gift, exchange or some other mode of transfer of certain properties either owned by the assessee or owned by the firm of M/s Simplex Enterprises in which the assessee is a partner. In view of this any transaction entered into by the assessee in respect of the properties quoted in the order was declared to be void. Consequently, the property purchased by the petitioner from M/s Simplex Enterprises had been declared to be void. The petitioner is therefore, aggrieved by the said order. Hence this writ petition.

We have heard learned Counsel appearing for the petitioner at some length. Heavy reliance is placed by learned Counsel on the judgment of the Supreme Court in The Tax Recovery Officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade (Dead) Through Mrs. Shobha Ravindra Nemiwant, and the judgment of this Court in Ms. Ruchi Mehta and Others Vs. Union of India (UOI) and Others, . Learned Counsel contended1 that if the department desires to have the transaction of transfer declared void u/s 281, the department being in the position of a creditor will have to file a suit for a declaration that the transaction of transfer is void u/s 281 of the Income Tax Act.

In view of this settled position of law, learned Counsel for respondent Nos. 1 to 3 makes a statement that respondent Nos. 1 to 3 will file a suit in the appropriate court within a period of 12 weeks from today. This statement is accepted and in the light of the aforesaid judgments, the impugned order dated 27-6-2007 is quashed and set aside. However, in view of the statement made by learned Counsel for respondent Nos. 1 to 3, we direct that the attachment shall continue to operate for a period of 16 weeks from today so as to enable respondent Nos. 1 to 3 to obtain appropriate orders from the appropriate Court. We make it clear that we have not examined the merits of the case. The petition is disposed of in the aforestated terms.