Section 281

Section 281 — the law in short

What the courts have decided on section 281, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• TRO v Gangadhar Vishwanath Ranade Supreme CourtHelps taxpayer
  The TRO has attached property the defaulter transferred years ago and calls the transfer void. Can he do that?
  No. In a Rule 11 enquiry under the Second Schedule the Tax Recovery Officer can only decide who is in possession and in what capacity; he has no power to declare a transfer by the assessee to a third party void under s.281. To get that declaration the Department must file a suit.
• Xiaomi Technology India Private Limited v DCIT High CourtHelps taxpayer
  The Assessing Officer has provisionally attached our deposits under s.281B saying a large demand is likely. Is an expected demand enough?
  No. A mere apprehension that huge tax demands are likely to be raised on completion of assessment is not enough. The officer must record his own formation of opinion, on tangible material, that the assessee is likely to defeat the demand and that attachment is necessary - not merely expedient - to protect the revenue, and the attachment must be proportionate. An order resting on the Investigation Wing's and the Transfer Pricing Officer's findings is borrowed satisfaction, and the Principal Commissioner's approval is not an empty formality.
• Leo Edibles & Fats Ltd v Tax Recovery Officer High CourtHelps taxpayerNo later treatment found
  I bought a property at the liquidator's e-auction. The Income Tax Department had attached it before the liquidation started and the Sub-Registrar will not register my sale deed. Where do I stand?
  Section 178 has no application at all to a liquidation under the Insolvency and Bankruptcy Code, so the department cannot claim the priority that s.178(3) and (4) would otherwise give it. The Income Tax Department is not a secured creditor; at best it has a charge under its attachment order in terms of s.281, and an attached asset still forms part of the liquidation estate under s.36(3)(b) of the Code. The department must file its claim with the liquidator and take its place in the s.53(1) waterfall.
• Shriya Bhupal v ACIT High CourtHelps departmentNo later treatment found
  The department has declared my purchase void under s.281 and attached the property. Do they not have to go to a civil court first, as the Supreme Court said in Gangadhar Vishwanath Ranade?
  The Andhra Pradesh High Court held that they do not. It reasoned that once a statute itself declares a transfer void there can be no further judicial declaration to be obtained, that s.281 is unlike s.53 of the Transfer of Property Act because it makes the transfer void and not voidable, and that since the words 'with the intention to defraud the revenue' were deleted in 1975 there is nothing left for the Revenue to prove in a suit. The remedy under Rule 11(6) of the Second Schedule belongs to the transferee, who must go to the civil court, not to the department.
• Nawal Kishore Chowdhury v ITO High CourtHelps taxpayer
  The department has treated my client's trust as revocable, taxed the income in the settlor's hands, and is now attaching the trust's rents under s.226(3) to recover the settlor's arrears for a string of other years. Can it do that?
  Not on that basis. Section 65 is the only route by which the person in whose name the asset stands can be made to pay, and it permits recovery only on the service of a notice of demand on that person and only of the portion of the tax levied on the assessee which is attributable to the income so included. Where no such notice was served, and where the demand covers years and amounts unrelated to the trust income, s.65 has been breached and the recovery notices are liable to be quashed.
• Section 84 of the Black Money Act - the Income-tax Act provisions applied CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Which provisions of the Income-tax Act apply to the Black Money Act, and can the officer borrow one that is not on the list?
  Section 84 applies a closed list: clauses (c) and (d) of s.90(1), clauses (c) and (d) of s.90A(1), ss.119, 133, 134, 135 and 138, the whole of Chapter XV, and ss.237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act, with necessary modifications, as if they referred to undisclosed foreign income and asset instead of to income-tax. The list is expressed as an enumeration and the decided points located in this area turn on what is left out of it. Sections 234A, 234B and 234C are not on it, which is why the Chennai Bench in Pascal Postel held that the interest charge in s.40(2) has no advance-tax machinery to operate on; s.230 is not on it either, which is the omission on which Preetha Krishna (Madras High Court) is understood to turn, though no copy of that judgment was opened for this note.
• CBDT Circular 4/2011 CBDT Circulars & InstructionsCuts both ways
  I want to sell an asset or mortgage business assets while a tax demand is pending. How do I get permission?
  Apply to the Assessing Officer in the prescribed form at least thirty days before the proposed transaction. Permission is to be granted where there is no demand and none likely within six months, where an undisputed demand is paid with interest, or where a disputed demand is stayed and secured by bank guarantee, sufficient other assets or a departmental first charge; refusal must be by a reasoned order approved by the range head.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.