INAYAT HUSSAIN Vs. UNION OF INDIA

JUDGEMENT

(1.) THESE two appeals against an order of the civil Judge, Senior Division, Nagpur, raise common question of law and facts. They are, therefore, being heard and decided together. Special Civil Suit No. 237 of 1977, was filed by Inayat Hussain, appellant in A.O. No. 31 of 1977, while Special Civil Suit No. 236 of 1977, was filed by Smt. Sugarabi, the appellant in A.O. No. 32 of 1977. Both the suits were filed against the Union of India praying for a declaration that the property in suit belongs to them and was not liable to be taken for the satisfaction of dues against an assessee, Fakruddin. In both these suits, which were filed on 3rd March, 1977, an application for interim injunction was filed on 15th March, 1977. The defendant, Union of India, appeared and filed their reply to the application for interim injunction and by the order passed by the learned trial judge on 10th Oct., 1977, both the applications came to be rejected with costs. It is against this order of the trial Court that the present appeals are filed.

(2.) IN order to understand the controversy, which is raised before me, the facts giving rise to these applications may be stated. Fakruddin was an assessee liable to pay income tax on account of income from his dealings. Fakruddin was admittedly an assessee who was liable to pay income tax dues to the Union of India, which came to the tune of about Rs. 3,00,000. Recovery proceedings, therefore, were commenced against Fakruddin and a notice under r. 2 of Sch. II of the IT Act was issued to him on 17th Dec., 1971. Fakruddin was possessed of certain immovable properties situated within the city of Nagpur, namely, house Nos. 8 and 47 and godown No. 36 in Gandhibaug and another property, house No. 481 in circle No. 13/19, Boharipura. On 1st March, 1973, Fakruddin sold his house Nos. 8 and 47 and a godown in Gandhibaug to Inayat Hussain. This Inayat Hussain happens to be a nephew of Fakruddin. On 27th Oct., 1972, similarly, he sold his property, house No, 481, situated in Boharipura, to Smt. Sugarabi, who was his mother in law.

(3.) THE principal ground, on which it was contended on behalf of the appellants plaintiffs in the court below that interim injunction should be granted in their favour, was firstly that when the properties were purchased by them, they were not under attachment. The attachment was subsequent. The second ground which was urged was that upon a true and correct interpretation of s. 281 of the IT Act, as it stood prior to its amendment in October, 1975, it was for the Revenue to show that the transfer by the assessee, Fakruddin in this case, was with an intention to defraud the Department, and it is only then that the property can become available upon being so proved, for being taken for satisfaction of the dues from Fakruddin. It was, therefore, urged that the plaintiffs had proved a prima facie case that there was an issue which was triable, as to whether S. 281 applied and whether the transfer was with an intention to defraud and if it was urged there was a triable issue to go to trial before the Court, then the plaintiffs were entitled to an interim injunction. In the view of the learned trial judge who decided the applications, S. 281 of the IT Act applied only to cases where assessment proceedings were pending. In the view which he took, therefore, he held that S. 281 has no application. Considering the effect of rr. 2, 16, 45 and 51 of the Second Schedule attached to the IT Act he came to the conclusion that here there was no question of an intention to defraud and, therefore, the plaintiffs, in his opinion, had not made out a prima facie case. In that view of the matter, the learned trial judge rejected the application.