Amended and updated notes on section 281 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Certain transfers to be void.
Chapter XXIII (Sections 281 to 298) of the Income Tax Act 1961 deals with the provisions related to Miscellaneous. Section 281 of IT Act 1961 provides for Certain transfers to be void.
Recently, we have discussed in detail section 280D (Application of Code of Criminal Procedure, 1973 to proceedings before Special Court(SC)) of IT Act 1961. Today, we learn the provisions of section 281 of Income-tax Act 1961. The amended provision of section 281 is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 281 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-281: Certain transfers to be void
Section 281(1) of Income Tax Act
Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, 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 proceeding or otherwise:
Provided that such charge or transfer shall not be void if it is made—
- (i) for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee; or
- (ii) with the previous permission of the Assessing Officer.
Section 281(2) of Income Tax Act
This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds five thousand rupees and the assets charged or transferred exceed ten thousand rupees in value.
Explanation: In this section, “assets” means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee.