A demand of Rs. 10 lakh including interest and penalty was raised by department on A, for non-payment of which recovery proceedings were initiated. Discuss the validity in each case if the market value of the property is Rs. 12 lakh and during such proceedings:

(i)    A sold his property to B for Rs. 12 lakh.

(ii)    A gifted is property to his friend B.

(iii)    A created a charge on such property to repay loan of B.

(iv)    A sold property to B for Rs. 6 lakh.

  Proper officer alleges that such transactions are void as the same were undertaken during the proceedings and no order was passed. B however contend that he was not aware of such proceedings and shall not bear such loss. Discuss.


As per section 81 of the act,

(i)    Since property was transferred with adequate considerations of Rs.12 lakh which was enough to discharge tax dues. Out of Rs.12 lakhs, Rs10 lakhs can be recovered by proper officer (along with interest and penalty) and balance shall be given to A. therefore not void.

(ii)    No adequate considerations -Gifted to defraud government revenue, therefore void.

(iii)    No adequate considerations + created charge to defraud government revenue + No prior permission from proper officer therefore void.

(iv)    Property is sold for Rs.6 lakh however market value is Rs.12 lakh therefore no adequate considerations + intention was to defraud government revenue therefore void.