SULOCHANAMMA R Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner herein seeks a declaration that rules 16 and 51 of the Second Schedule to the IT Act, 1961, are ultra vires Art. 19(1)(f) of the Constitution. The petitioner also seeks a declaration that the attachment effected by the second respondent on November 17, 1976, should take effect only from the date of the attachment order and not from the date of service of notice under r. 2 of the Second Schedule.

(2.) ONE P. R. Damodaram Chetty of Chittoor was owing a considerable amount of income tax. Proceedings for recovery of tax were initiated as the said Damodaram Chetty committed default in the matter of payment of the taxes. A certificate was issued by the ITO assessing Damodaram Chetty to the TRO certifying the amount of tax due from the defaulter. After receipt of the certificate, the TRO issued a notice dated October 19, 1972, under r. 2 of the Second Schedule and served the same on December 25, 1972, on the defaulter assessee.

(3.) THE short contention canvassed by learned counsel for the petitioner is that rr. 16 and 51 of the Second Schedule are ultra vires article 19(1)(f) of the Constitution. It is urged that the petitioner is a bona fide mortgagee without notice of any proceedings against the defaulting assessee. It is submitted that the interests of a bona fide mortgagee, not having notice of proceedings against the defaulting assessee, should be protected and the provision to the contrary contained, in rr. 16 and 51 of the Second Schedule are arbitrary and unreasonable and violative of Art. 14 of the Constitution. Learned counsel invited our attention to S. 281 of the IT Act as it stood prior to amendments in 1975 and submitted that in letter and spirit, the position as it obtained prior to the amendment in 1975 of S. 281 should prevail even for the purpose of recovery under the Second Schedule to the IT Act. Learned counsel for the petitioner invited our attention to the decision of the Madras High Court in R. K. Raghavan ] Union of India (1983) 140 ITR 894. Learned standing counsel for the Revenue submitted that provisions contained in rr. 15, 16 and 51 of the Second Schedule are deliberately designed to protect the interests of the Revenue against the fraudulent transfers by the assessees who commit default in payment of taxes. If this object is kept in mind, contends learned standing counsel, there is nothing unreasonable or arbitrary in the provisions contained in Rr. 16 and 51.