Impact Of Section 281 On Transfer Of Assets: Myriad Issues Thereunder

An ever-present concern for purchasers or transferees in any transaction, be it an acquisition of immovable property or a share purchase, is the furnishing of a 'no dues certificate' or No Objection Certificate ('NOC') by the seller or transferor under Section 281 of the Income-tax Act, 1961 ('IT Act'). The said NOC draws its importance on account of the far-reaching powers granted to the Income-tax Department under Section 281 of the IT Act.

In order to understand the context of the operation of Section 281, reference must first be made of Section 222 of the IT Act which lays down the mechanism for the recovery of taxes. The said provision lays down that where a taxpayer is in default or is deemed to be in default in making the payment of income-tax, the Tax Recovery Officer ('TRO') may draw up a 'certificate' for the recovery of the tax dues inter-alia by way of the attachment and sale of such defaulting taxpayer' property. The first step after the issuance of