The main legal point established in the judgment is that s. 281 of the I.T. Act, 1961, does not contemplate the making of any order by any authority and is declaratory in nature, declaring transfers made with the intent to defraud the revenue during the pendency of any proceedings under the Act as void against any claim in respect of any tax or other sum payable by the assessee as a result of the completion of the said proceedings.

M.K. Srinivasa Iyengar, J.—In this petition filed under arts. 226 and 227 of the Constitution of India, an order purporting to have been made under s. 281 of the I.T. Act, 1961, dated April 7, 1963 (Ex. I), and the sale proclamation issued for the sale of properties - Survey Numbers 69/2 and 70/1 of Kempapura Agrahara Village, Bangalore North Taluk (Ex. II dated May 19, 1973), by the second respondent, Tax Recovery Officer, are challenged and it is prayed that the same may be quashed.

2. The petitioner was the owner of these properties and according to him, he transferred these properties to his sons on January 24, 1966, by way of gift. The gift was an oral one and in accordance with the Mohammadan law. The ITO, on February 26, 1973, issued a notice to the petitioner and a notice dated February 28, 1973, to his sons and others asking them to show cause why the transfers of the said properties on January 24, 1966, should not be held as void and were intended to defraud the revenue. On the ground that the petitioner and others did not show any cause, the ITO made an order dated April 7, 1973. In that order he stated hat proceedings for assessment years 1964-65 to 1967-68 were pending and huge tax liabilities were anticipated and accordingly he held that the transfer of the immovable properties to the sons was with the intention to defraud the revenue and the provisions of s. 281 are clearly attracted. The sale proclamation dated May 19, 1973, was issued to recover the amount of tax due for the assessment years 1964-65 and 1965-66, pursuant to the certificate issued in that behalf on March 29, 1971.

3. It is common ground that so far as the assessments made for 1964-65 and 1965-66 are concerned, they have been set aside and as yet there is no demand outstanding or those years. It is, therefore, clear that the properties could not be sold or any recovery proceedings taken for the recovery of any tax for the said two assessment years. Consequently, the sale proclamation dated May 19, 1973, has become infructuous and is liable to be quashed.

4. The order made by the ITO dated April 7, 1973, is challenged various grounds. It is contended, (i) that s. 281 does not contemplate making of any order at all and the purported order has no sanction of law (ii) that only proceedings for assessment for 1964-65 and 1965-66 were pending at the date of transfer and those proceedings were yet to be completed and there is no demand against which the transaction could be declared as void, and (iii) there were no other proceeding for assessment pending as at the date of transfer and a general order as has been made is untenable.

5. Section 281 of the I.T. Act, 1961, is as follows :

"Where, during the pendency of any proceedings under this Act, any assessee creates a charge on or parts with the possession by way of sale, mortgage, exchange or any other mode of transfer whatsoever, of any of his assets in favour of any other person with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceedings....."

6. The section by itself does not contemplate making of any order by any authority. It is declaratory in nature. It declares that transfers effect by way assessee with intent to defraud the revenue during the pendency of any proceedings under the Act shall be void against any claim a respect of any tax or other sum payable by the assessee "as a result of the completion of the said proceedings." Therefore, three requirements under the section are, (i) that there must be a transfer of property, (ii) that it should be during the pendency of a proceeding under the Act, and (iii) that the transfer must be with intent to defraud the revenue, and if these conditions are satisfied then the transfer shall be void in respect of any tax or sum payable by the assessee as a result of the completion of the proceedin