-Report by Vedanti Wanjari
It has been held by the Supreme Court in the case of The Commissioner, Trade Tax, Uttar Pradesh Vs. M/s. Radico Khetan Ltd. that the power of Section 34 can be exercised only in a case where the transfer of immovable property belonging to the original assessee is made during the pendency of any proceedings under the Act and such transfer is found to be to defraud any such tax and other dues.
M/s. Shaw Scott Distillery (P) Ltd., Rampur, the original assessee, owed trade tax in the amounts of Rs. 11,28,877 and Rs. 53,89,035 for the years 1980-1981, and 1981-1982 respectively. The recovery process had started and a certificate of recovery was issued. The equipment, tools, and products that belonged to the original assessee were purchased by the respondent for an amount of Rs. 12,12,000/-. The assessing officer (AO) discovered that the original assessee had transferred the aforementioned property during the pendency of ongoing assessment proceedings inorder to deceive the Revenue Department. As a result, the recovery certificate was issued in accordance with Section 34 of the U.P. Trade Tax Act in the name of the original assessee and endorsed by the assessment officer concluding the transfer to be void and to be recovered from the purchaser. This endorsement was challenged by the respondents which was initially dismissed but on a second appeal, it was held by the trade tax tribunal that the recovery certificate and the endorsement were bad in law. The appellants filed a revision application before the High Court which was dismissed. Feeling unsatisfied by the decisions of the High Court of Judicature in Allahabad in the area of trade, the appeal had been filed.
On April 15, 1990, the recovery certificate was issued against the initial assessee. Consequently, when the assessee transferred its immovable property, there was no proceedings under the Act for value/consideration. To the detriment of recurrence, it is remarked that given the case’s particular events and circumstances as previously described, Section 34 of the Act shall not be applicable in any way. It was observed
“Section 34 of the Act shall be applicable only in a case where there is a transfer of immovable property belonging to the original assesee, during the pendency of any proceedings under the Act with the intention of defrauding any such tax or other dues. As per proviso to Section 34, nothing in Section 34 shall impair the rights of a transferee in good faith and for consideration. Thus, the power of Section 34 can be exercised only in a case where the transfer of immoveable property belonging to the original assessee is made during the pendency of any proceedings under the Act and such transfer is found to be with the intention to defraud any such tax and other dues.”
It was further held that given the circumstances, the High Court did not err in dismissing the revision applications and upholding the Trade Tax Tribunal’s rulings that had set aside the endorsement of the recovery certificate that had been granted in favour of the original assessee against the purchaser. In light of the aforementioned and the reasons already indicated, both appeals are rejected and should be dismissed as a result.