S. Mukharji, J.
1. This application is by Nawal Kishore Chowdhury and Smt. Chanda Devi Choudhury who claim to be the trustees under a deed of trust dated 18th March, 1972. In this application under Article 226 of the Constitution, the petitioners challenge the notice under Section 226(3) of the I.T. Act, 1961, issued to the various tenants in respect of the erstwhile share of rent of the owner, Shri Narayan Prosad Chowdhury, in premises No. 8/1 A, Little Russel Street, Calcutta. There were several of such notices. Some of these notices have been set out in annex. ' P ' which are at page 69 onwards of the petition. In order to appreciate the contention urged in this application it would be necessary to set out certain portion of the said notice which was as follows:
'A sum of Rs. 78,320 is due from Sri Narayan Prosad Chowdhury, 2/2B, Harrington Street, Cal., on account of income-tax/super-tax/penalty/interest/fine. You are hereby required under Section 226(3) of the Income-tax Act, 1961, to pay to me forthwith any amount due from you to or held by you for or on account of the said Sri Narayan Pd. Chowdhury or trustees as noted in letter dt. 10-11-78 up to the amount of arrears shown above, and also request you to pay any money which may subsequently become due from you to him/them or which you may subsequently hold for or on account of him/them up to the amount of arrears still remaining unpaid forthwith on the money becoming due or being held by you as aforesaid as such payment is required by me as amount due by the taxpayer in respect of arrears of income-tax/super-tax/penalty/interest/fine. I am to say that any payment made by you in compliance with this notice is in law deemed to have been made under the authority of the taxpayer and my receipt will constitute a good and sufficient discharge of your liability to the person to the extent of the amount referred to in the receipt.'
2. The petitioners also challenge in this application four certificate cases bearing Nos. 177/TR/XIV/71-72/XIII; 826/TR/XIV/72-73/XIII; 260/TR/ XIV/72-73 and 261/TR/XIV/72-73 and all proceedings taken in respect thereof. The petitioners also challenge the notice dated 31st October, 1975, issued under Section 156 of the I.T. Act, 1961, which appear as annex. 'K' in page 63 of the present petition. The said notice is important and has been issued to the petitioners as trustees settled by a trust by one Shri Narayan Prosad Chowdhury. The said notice is in the same term as usual in case of notice under Section 156 of the I.T. Act, 1961. The said notice, however, is only in respect of the assessment year 1973-74 and a sum of Rs. 11,455 has been claimed on account of the tax due. It is also necessary to refer to the letter dated 18th December, 1975, which appears at page 68 as annex. 'Q' to the petition. The said letter was written by the ITO in reply to the letter written by the petitioners regarding the demand notice under Section 156. The said letter reads as follows :
'Please refer to your letter dated 15-11-1975 regarding copy of assessment order of Shri Narayan Prosad Chowdhury for the assessment year 1973-74. The assessment of your alleged trust of which you are a trustee has not been assessed by me for the assessment year 1973-74. If you have filed any return for the trust for the assessment year 1973-74 you are requested to contact Shri S. K. Kar, ITO., 'C' Ward, Dist-II(2), Calcutta, as he has jurisdiction of new case having first alphabet 'N'.
In the assessment of Shri Narayan Prosad Chowdury, the settlor of the trust, the income from the trust house property has been assessed in his hands as per income-tax law (the trust has been treated as revocable) and a demand notice has been served on you as trustee under Section 65 of the I.T. Act, 1961. '
3. It is the case of the petitioners that by the deed of trust dated 18th May, 1972, a trust was created by one Narayan Prosad Chowdhury of his 35/96ths and l/6th of 61/96 the shares in premises No. 2/2B, Harington Street, Calcutta. The two present petitioners one of whom is the wife of the settlor (sic) which is described in the trust as an irrevocable deed of trust and by Clause (1) it is provided that the said trust has been created for the maintenance, education and marriage and other expenses and benefit of the minor sons and daughters of the settlor as well as for the maintenance of his wife, Smt. Chanda Devi Chowdhury, being one of the trustees and one of the petitioners in this case. By Clause (1) of the said trust the deed provides for ' the maintenance and residence of the settlor and his wife, Smt. Chanda Devi Chowdhury'. Clause (5) of the said trust deed is important and provides, inter alia, as follows:
'(5) That after meeting the expenses mentioned in clause (2) hereof the trustee or trustees shall hold the balance of the net income of the said trust property in seven equal shares, one each of such shares to be held by the trustee or trustees and be appropriated and spent for the maintenance, education, marriage and other expenses and benefits of the said minors, Hemant Kumar Chowdhury, Basant Kumar Chowdhury and Ashok Kumar Chowdhury and the said minor daughters, Kumari Rani and Kumari Renu, and for the maintenance of Smt. Chanda Devi Chowdhury. In the matter of such expenditures the trustee or trustees shall have absolute discretion and his or their decisions in such matters shall be final and binding, if after meeting the aforesaid expenses, there remains any money in the hands of the trustee or trustees the same will form part of the trust under these presents and the trustee or trustees will be entitled to invest the same in such manner and in such securities as the trustee or trustees may in his or their absolute discretion consider proper. The trustee or trustees shall pay to the settlor and his wife one equal seventh part of the net income to each of them during their respective life for their maintenance. '
4. Now, part of the income and benefit is derived by the settlor by the trust deed. The settlor has been given the right of residence and maintenance as well as 1/7th of the net income of the trust property for his maintenance.
5. Under Section 63 of the I.T. Act, 1961, a transfer is deemed to be revocable if it contains any provision for the retransfer, directly or indirecty, of the whole or any part of the income or assets to the transferor. In this respect Section 63 is significantly different from the provisions of the proviso of Section 16(1)(c) of the Indian I.T. Act, 1922. This aspect has been noticed by the Supreme Court in the case of Hrishikesh Ganguly v. CIT : 82ITR160(SC) , where the Supreme Court was construing the provisions of Section 16(1)(c) of the I.T. Act, 1922, and noted at page 165 of the report the difference of this section with Section 63 of the Act. The trust was created on the 18th May, 1972. Therefore, the question whether it was a valid trust or whether it was a revocable trust and the consequence of such revocable trust apply to the income of the trust property became relevant only for the assessment year 1973-74. The ITO in the assessment order for the assessment year 1973-74 has categorically found that this is a revocable trust In respect of the assessment of Shri Narayan Prosad Chowdhury. About what else he has found in the said assessment order there is some dispute and I shall refer to the relevant portion of the assessment order to deal with the contentions connected therewith. But it is indisputable that it has been held that it was a revocable trust by the said assessment order. The next question, however, is, even if it is a revocable trust what is the position of the liability of persons in respect of income included in the income of another person that has been specifically provided for in Section 65 of the I.T. Act, 1961, which provides as follows :
'65. Liability of person in respect of income included in the income of another person.--Where, by reason of the provisions contained in this Chapter or in clause (i) of Section 27, the income from any asset or from membership in a firm of a person other than the assessee is included in the total income of the assessee, the person in whose name such asset stands or who is a member of the firm shall, notwithstanding anything to the contrary contained in any other law for the time being in force, be liable, on the service of a notice of demand by the Income-tax Officer in this behalf, to pay that portion of the tax levied on the assessee which is attributable to the income so included, and the provisions of Chapter XVIID shall, so far as may be, apply accordingly : Provided that where any such asset is held jointly by more than one person, they shall be jointly and severally liable to pay the tax which is attributable to the income from the assets so included. '
6. Reading the section it appears to me that in order to include in the income of another, any income from the settled property, notice must be given by service of demand to the person for whose benefit the trust is made or to the trustee of the trust property and upon that notice only that portion of the tax levied on the income which is attributable to the income included from the trust property that can be included in the demand from the beneficiary or the trustees of the trust property.
7. Counsel for the petitioners in this application contended, firstly, that this was not a revocable trust in any event. He urged that the right of residence reserved for the settlor in a portion of the settled property was not a benefit which could come within the mischief of Section 63 of the I.T. Act, 1961, which could have made the settlement a revocable trust. He submitted that there were certain authorities of other High Courts where it has been so held. Speaking for myself, I should have thought that reservation of such a right might be construed as one which brings it within the mischief of Section 63 of the Act. But, for the purpose of this application, it is not necessary for me to decide that question and I do not intend to express any final opinion on this aspect. There is, however, no doubt that there has been reservation of some income as set out in Clause (5) of the trust deed as indicated before for the benefit of the settlor which can be called to contain a provision of retransfer of a part of the income to the transferor in terms of Sub-clause (i) of Clause (a) of Section 63 of the I.T. Act, 1961. But counsel for the petitioners further contended that in view of the proviso to Clause (ii) of Section 62(1) of the I.T. Act, 1961, read with Section 61 of the said Act, even such benefit or reservation of the part of the income would not make the trust revocable. He tried to draw support for this contention from certain observations of the Supreme Court in the case of CIT v. Rani Bhuwaneshwari Kuer : 53ITR195(SC) .
8. Though I have again, in my mind, no doubt that reservation of the part of income in the manner done under Clause (5) of the present trust deed has provision for transfer of the assets transferred by the settlor and as such brings the said settlement within the mischief of Section 63 of the Act, I do not propose to rest my decision on this finding, lest the appeal, which is pending before the AAC, filed by the petitioner, as a result of the notice served under Section 156 of the I.T. Act, 1961, is in any way prejudiced. But for the purpose of this application in view of the finding made by the ITO in his assessment order for the year 1973-74, which has not yet been set aside or modified by any appropriate authority, prima facie, I must proceed on the basis that this was a revocable trust. If the trust created or purported to be created by the document dated 18th May, 1972, was a revocable trust the steps taken by the revenue to realise the arrear dues of Narayan Prosad Chowdhury were legal in view of the relevant provisions of the Act from this aspect of the matter. It appears from a letter, which I direct to be kept on record of this court, which was produced before me during the hearing of this application, dated 27th December, 1978, that the following amounts were outstanding from Shri Narayan Prosad Chowdhury on his account:
' With reference to your letter dated 14-12-78, you are informed that the following amount is still outstanding after giving effect to the AAC's order;
Asst. Year Income-taxIncome-taxInt. u/s. 220(2)Total Rs.Rs.Rs.
Asst. Year Wealth-taxWealth-taxInt. u/s. 31(2)Total Rs.Rs.Rs.
9. A perusal of the amounts and figures would make it quite clear that apart from the alleged amount due on account of the incomes for the assessment year 1973-74, the other amounts alleged to be due from Narayan Prosad Chowdhury were in respect of years either prior or subsequent to the year in which the trust was created. It is also clear that in respect of those demands against Narayan Prosad Chowdhury, taxes have been included in respect of incomes, which were levied on incomes other than the portion which is leviable on the income attributable to the income from the trust property. It is also clear that save and except for the year 1973-74, no notice of demand had been given to the trustees or the present petitioners or to the beneficiaries of the trust. On this aspect, therefore, in my opinion, the provisions of Section 65 of the I.T. Act, 1961, has been clearly breached except for the assessment year 1973-74. But even for that assessment year it is not clear whether the sums demanded were only the tax which was attributable to the income from the trust property. From the assessment order, it appears that the tax demanded was not only for the portion attributable to the income from the trust property. Such amounts have also been included in the amounts due under the W.T. Act, 1957. It will be relevant to refer to the provisions of Section 4(1)(a)(iii) and the Explanation to Section 4 and Section 32 of the said Act which are in identical terms with the relevant provisions of the I.T. Act, 1961, which I have set out hereinbefore.
10. On behalf of the revenue, it was contended relying on certain statements in the affidavit-in-opposition of one Shri Brojendralal Mazumdar that the trust in question was fraudulent and had been created to defraud the creditors including the revenue to whom large sums of money were due. On the other hand, counsel for the petitioner, drew my attention to the averments made in sub-para. (F) of para. 4 of the said affidavit wherein it has been stated that the notices under Section 226(3) of the I.T. Act, 1961, have been issued treating the trust as a revocable trust. It was submitted on behalf of the petitioners and not without some justification that a trust which has been treated as a revocable trust cannot be, at the same breath, called a void trust because a void trust is a trust which is non-existent in the eye of law. It was further the case of the petitioners that the assessment order had not been proceeded on the basis that the trust was a void one. On the contrary, the assessment order for the assessment year 1973-74 proceeds on the basis that the trust was a revocable trust as it reserved part of the income directly or indirectly to the settlor. I had directed the revenue to produce the assessment order which was done and a copy of the assessment order has been filed before me and given to the petitioner. I direct that the said copy be kept on record of this court. In the said assessment order, the ITO has observed, inter alia, as follows :
'As per trust deed dated 18-5-72 assessee transferred the property to a Trust which was duly registered with the Registrar of Assurance. Trustees are (i) Shri Nawal Kishore Chowdhury, and (ii) Smt. Chanda Debi Chowdhury, wife of the assessee. In spite of the fact that the assessee had huge income-tax and wealth-tax liabilities, the transfer of property was registered treating the property at 2/2B, ' A ' Block Ho Chi Min Sarani, Cal. valued at Rs. 45,000 only, though the value of the said property was Rs. 2,42,864 as per W.T. return for the assessment year 1972-73. From this it is clear that the house property has been transferred in order to avoid payment of tax liabilities. '
11. But he has further gone on to observe as follows :
' As per trust deed assessee is entitled to be maintained and also entitled to the 1/7th share of net income from the trust property. Hence the assessee derives direct or indirect benefit from the income of the property which has been transferred and which transfer cannot be said to be irrevocable, as under proviso to the Section 62(1), it has been stated that if transferor derives direct or indirect benefit from such income the transfer is revocable. Section 63(a) reads as under: ' A transfer shall be deemed to be revocable if--(i) it contains any provision for the retransfer directly or indirectly of the whole or any part of the income or assets to the transferor. ' From the above it is clear that the trust is a revocable one as the settlor derives direct or indirect benefit from the trust income, as per aforesaid provision of the trust deed. Hence, I include the trust income in the hands of the assess Under Section 62(1) and Under Section 63. As the details of the property income are not available from the assessee or from the trustees, I estimate the income on the basis of local enquiry at Rs. 20,000 for the period of June, 1972, to March, '73. '
12. It is, therefore, clear on reading the two observations that though the ITO had doubts about the bona fides of the said trust he had proceeded to make the assessment on the basis of the document dated 18th May, 1972, by which the trust had been created. Counsel for the revenue drew my attention to Section 281 of the I.T. Act, 1961, as it stood at the relevant time, which is as follows:
'281. Certain transfers to be void.--(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 Income-tax 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 towhich any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee. '
13. He submitted that the same was in consonance with the principles behind Section 53 of the Transfer of Property Act as well as Section 4 of the Trusts Act. In essence the principle is that if any document or trust or settlement is created to defraud the legitimate debtors the same is void and he rightly drew my attention to the observation of Mr. Justice Harman in the case of In re Eichholz (deed.)  1 All ER 166 ;  Ch 708 (Ch D), where the old principle was reiterated that persons must be just before they are generous and dues must be paid before gifts can be made. This principle, however, is very often, specially in the context of present fiscal provisions by certain sections of the community, breached more than followed. But speaking for myself I have very great doubts as to the genuineness of the said trust, though counsel for the petitioner protested before me, that the settlor of this trust was an absolutely irresponsible man and had to make the settlement for the provision of the maintenance of his daughter and other children. Be that as it may, when the settlor had so much liabilities, as indicated in the affidavit-in-opposition filed on behalf of the revenue, as also as indicated in the assessment order for the assessment year 1973-74, and when he himself had valued his share of the property in his wealth-tax return at Rs. 2,42,864 but valued the same property for creating the trust at Rs. 45,000, it leaves little scope for doubt as to for what purpose this trust was created. But again, I am not called upon to decide this question finally as a fact.
14. The question with which I am concerned is, whether in view of Section 281 of the I.T. Act, 1961, the proceedings taken in the background of the facts and circumstances of the case were legal and valid. As I have mentioned, there are two kinds of proceedings which are impugned in this application. One is a proceeding for the certificate filed against the alleged certificate debtor, Shri Narayan Prosad Chowdhury. But in execution of the said certificates, attachment and proclamation of sale in respect of the properties had been issued to which the petitioners had filed objections and the Certificate Officer has asked for the particulars of the documents. On this aspect, counsel for the revenue contended that there was an alternative remedy. There is undoubtedly an alternative remedy but the Certificate Officer would not be competent to decide the question as to the title. He would only be competent to decide as to who was in possession of the property and undoubtedly on the finding of the ITO and the notice that I have set out before, the trustees were in possession of the income of the property. Therefore, this insistence on perusing the alternative remedy to this end would be insisting on an empty formality in the facts and circumstances ofthe case. But the more fundamental objection in this case is that notice has been issued under Section 226(3) of the I.T. Act, 1961, to the different tenants and other creditors for payment of the amounts due to the income-tax department. Counsel for the revenue, at one point of time, sought to urge that the persons to whom the notice had been given were free to ignore the notices and pay to the legal owners and if they paid to others in discharge of the liability irrespective of as to who are the legal owners of the property then those debtors would not get any discharge. But the difficulty in this case is that in the notices under Section 226(3) it has been indicated that amounts were due to Narayan Prosad Chowdhury or the trustees of the trust created by him. This position is not tenable by the revenue. Furthermore, the letters written by the ITO upon which the notices have been issued which have been mentioned before make it quite clear that these notices had been issued treating the trust as a revocable one. So far as the assessment order for the assessment year 1973-74 is concerned, of course there is a notice given and an appeal is pending and for other years no such notices of demand had been included. Furthermore, it appears to me that Section 281 will not be attracted in respect of this notice except for the assessment year 1973-74, because the trust was created for the assessment year , 1973-74 and the assessment proceeding could be said to be pending at that time. Counsel for the revenue, however, sought to refer to the proceedings that were pending before them. That would not help the position because it must be such proceedings which relate to any sum becoming payable as a result of the completion of the proceedings. If that is the position then Section 281, in my opinion, would not be attracted except for the recovery of the dues of the income-tax for the assessment year 1973-74 and, furthermore, I have great doubt whether Section 281 gives any procedural right or only gives a substantial right to the revenue.
15. Before I conclude this matter, I must further observe, that the manner in which this application was moved on behalf of the petitioner, leaves great suspicion because the settlor was a very vital and important person affected. But for one reason or other he was not made a party to this proceeding. It is said that he made an application to be added and he did make an application. But strangely enough on his behalf a letter was filed on the 4th December, 1978, stating that he was not interested in taking part in the proceedings. Let this letter also form part of the proceeding and be kept on record.
16. Having regard to the facts and circumstances of the case and in view of the reasons given before, I pass the following order. According to me, the appropriate order would be to quash the notices issued under Section 226(3) of the I.T. Act, 1961, mentioned in the petition and to quash also the certificate proceedings mentioned before and so far as the assessment for the assessment year 1973-74 is concerned the petitioners have been given notice of demand and the petitioners have filed an appeal before the AAC. The AAC will proceed to dispose of the appeal in accordance with law. The observations made in the judgment will also not in any way prejudice the rights of the petitioners to contend that this is not a revocable trust and to take all points before the appellate authority. I make it also clear that nothing in this decision would in any way prejudice the rights of the revenue 'to take appropriate steps by a suit or otherwise for setting aside the trust deed if they are so advised and if they are entitled in law to do so.
17. The rule is made absolute to the extent indicated above. But a sum of Rs. 62,000 may be kept with the receiver for a period of 3 weeks from this date and on the expiry of this period the receiver will also refund to the petitioners the sum deposited but the receiver will keep with him Rs. 11,455 until the appeal before the appellate authority is disposed of.
18. There will be no order as to costs.