MURTHY ASSOCIATES Vs. TAX RECOVERY OFFICER

JUDGEMENT

(1.) THE petitioner is a partnership firm constituted by deed dated April 1, 1986. THEresa V. Murthy and P. J. Fernandez were the partners. Fernandez brought the property No. 44, Wellington Street, Civil Station, Bangalore, in the firm as contribution of his capital and Mrs. Murthy brought the property bearing No. 44/1, Wellington Street, Civil Station, Bangalore, as her capital. THE firm was reconstituted on November 4, 1987, and Mr. Ghazenfer Basha was admitted as one of the partners. Again on March 2, 1988, Mr. Munavar Basha was admitted as partner and P.J. Fernandez retired from the firm. Mrs. THEresa V. Murthy also retired on March 23, 1991. P.J. Fernandez expired on March 7, 1990, and Mrs. Fernandez has also expired. THEreafter, a notice dated July 4, 1994, was served on the petitioner-firm that Mr. P.J. Fernandez was in arrear of income-tax of Rs. 1,56,87,000. Property No. 44/1, Wellington Street, Civil Station, was attached on July 4, 1994. Objections were filed. Appeal under rule 86 of the Second Schedule to the Act was also filed which is stated to be pending. Directions were given in W. P. No. 29804 of 1994 to dispose of the said appeal. An order dated January 2, 1995, was passed under Section 281 of the Income-tax Act and Section 34B of the Wealth-tax Act, 1957. Writ Petitions Nos. 8467 and 8468 of 1995 against the sale proclamation in respect of properties Nos. 44 and 44/1 were filed in which it was observed that the petitioner could raise objection before the respondent. Objections under Rule 11 of the Second Schedule, Part I of the Act were filed by the petitioner. THE sale proclamation dated July 18, 1995, has been assailed in these petitions besides the orders which have been passed under Section 281 of the Income-tax Act and Section 34B of the Wealth-tax Act.

(2.) ACCORDING to the respondents, the arrears of Rs. 1,56,87,000 were for the assessment year 1977-78 and onwards and even notices have been served in ITCP-1 in 1983. The Tax Recovery Officer informed the petitioner-firm that the formation of the partnership in 1987 and retirement after taking a sum of Rs. 6 lakhs being after service of notice ITCP-1, the formation of partnership or alienation of the property is contrary to rule 16 of the Second Schedule to the Income-tax Act.

(3.) IN order to consider the argument of learned counsel for the petitioner the provisions of Section 281 are to be examined which are as under :