Sec 281
This query is : Resolved
08 April 2016
Brief about 281 of IT act 1961
09 April 2016
281. (1) 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 36[Assessing] Officer.
(2) 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.]
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 36[Assessing] Officer.
(2) 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.]
09 April 2016
Can CA give NOC
23 July 2025
### Section 281 of the Income Tax Act, 1961
**Section 281** deals with the **transfer or charge on assets** of a taxpayer (assessee) during the pendency of any **proceedings** under the Income Tax Act. It aims to protect the interests of the **tax authorities** in cases where a taxpayer's assets may be transferred, thereby potentially reducing the taxpayer's ability to pay any tax dues.
#### Key Points of Section 281:
1. **Prohibition on Transfer or Charge of Assets:**
* **Section 281(1)** prohibits any transfer or creation of a charge (such as a sale, mortgage, gift, exchange, etc.) on the taxpayer's assets during the **pendency of proceedings** under the Income Tax Act, or after the proceedings but **before the service of notice under Rule 2 of the Second Schedule**.
* **Such transfer is void** in relation to any tax claims or sums payable by the taxpayer as a result of the ongoing proceedings or otherwise.
2. **Exceptions to the Rule:**
* **Adequate Consideration and Without Notice:** If the transfer is made **for adequate consideration** and the transferee has **no notice** of the pending proceedings or of any tax liability, then the transfer is not considered void.
* **Permission of the Assessing Officer:** The transfer may also be valid if the taxpayer has obtained **prior permission from the Assessing Officer (AO)** before making the transfer.
3. **Threshold for Application:**
* The provisions apply **only if the amount of tax or any other sum payable by the taxpayer exceeds ₹5,000**.
* Also, the assets involved in the transfer must be valued at more than ₹10,000.
4. **Definition of Assets:**
* The term "**assets**" includes **land**, **building**, **machinery**, **plant**, **shares**, **securities**, and **fixed deposits** in banks.
* However, **stock-in-trade** of the business is **not** included in the definition of assets for the purposes of Section 281.
#### Can a CA issue an NOC?
In relation to your follow-up question about whether a **Chartered Accountant (CA)** can issue an **NOC (No Objection Certificate)**:
* **No, a CA cannot issue an NOC** under **Section 281**.
* The issue of an NOC or permission for transferring assets under Section 281 falls under the jurisdiction of the **Assessing Officer (AO)**, not a CA.
* If a taxpayer wants to transfer any asset during the pendency of proceedings, they must obtain **prior permission from the AO**, who is responsible for determining whether the transfer would affect the tax collection process.
* The role of a CA would be to assist the taxpayer in seeking such permission, but the final decision rests with the AO.
### In summary:
* **Section 281** prevents transfers of assets during the pendency of income tax proceedings to safeguard tax claims.
* **NOCs** for such transfers can only be granted by the **Assessing Officer**, not a CA.
* The **transfer is valid** if made with **adequate consideration**, the transferee has **no notice** of the pending tax dues, or with the **permission of the AO**.
Let me know if you need further clarification on this!
**Section 281** deals with the **transfer or charge on assets** of a taxpayer (assessee) during the pendency of any **proceedings** under the Income Tax Act. It aims to protect the interests of the **tax authorities** in cases where a taxpayer's assets may be transferred, thereby potentially reducing the taxpayer's ability to pay any tax dues.
#### Key Points of Section 281:
1. **Prohibition on Transfer or Charge of Assets:**
* **Section 281(1)** prohibits any transfer or creation of a charge (such as a sale, mortgage, gift, exchange, etc.) on the taxpayer's assets during the **pendency of proceedings** under the Income Tax Act, or after the proceedings but **before the service of notice under Rule 2 of the Second Schedule**.
* **Such transfer is void** in relation to any tax claims or sums payable by the taxpayer as a result of the ongoing proceedings or otherwise.
2. **Exceptions to the Rule:**
* **Adequate Consideration and Without Notice:** If the transfer is made **for adequate consideration** and the transferee has **no notice** of the pending proceedings or of any tax liability, then the transfer is not considered void.
* **Permission of the Assessing Officer:** The transfer may also be valid if the taxpayer has obtained **prior permission from the Assessing Officer (AO)** before making the transfer.
3. **Threshold for Application:**
* The provisions apply **only if the amount of tax or any other sum payable by the taxpayer exceeds ₹5,000**.
* Also, the assets involved in the transfer must be valued at more than ₹10,000.
4. **Definition of Assets:**
* The term "**assets**" includes **land**, **building**, **machinery**, **plant**, **shares**, **securities**, and **fixed deposits** in banks.
* However, **stock-in-trade** of the business is **not** included in the definition of assets for the purposes of Section 281.
#### Can a CA issue an NOC?
In relation to your follow-up question about whether a **Chartered Accountant (CA)** can issue an **NOC (No Objection Certificate)**:
* **No, a CA cannot issue an NOC** under **Section 281**.
* The issue of an NOC or permission for transferring assets under Section 281 falls under the jurisdiction of the **Assessing Officer (AO)**, not a CA.
* If a taxpayer wants to transfer any asset during the pendency of proceedings, they must obtain **prior permission from the AO**, who is responsible for determining whether the transfer would affect the tax collection process.
* The role of a CA would be to assist the taxpayer in seeking such permission, but the final decision rests with the AO.
### In summary:
* **Section 281** prevents transfers of assets during the pendency of income tax proceedings to safeguard tax claims.
* **NOCs** for such transfers can only be granted by the **Assessing Officer**, not a CA.
* The **transfer is valid** if made with **adequate consideration**, the transferee has **no notice** of the pending tax dues, or with the **permission of the AO**.
Let me know if you need further clarification on this!
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