Sections 280D and 281 of Income Tax Act 1961: Special Court Procedure and Certain Transfers to Be Void

Section 280D applies the criminal procedure law, including provisions relating to bail or bonds, to proceedings before an Income Tax Special Court and regulates Public Prosecutors. Section 281 protects specified tax claims by making certain charges or transfers of assets ineffective against those claims, subject to statutory exceptions.

Applicable-law note: For the requested pre-Bharatiya Sakshya Adhiniyam, 2023 framework, Section 280D is explained with reference to the Code of Criminal Procedure, 1973 and the Indian Evidence Act, 1872 as applicable before 1 July 2024. The Income-tax Act, 2025 came into force on 1 April 2026. Its Section 498 uses the Bharatiya Nagarik Suraksha Sanhita, 2023 for Special Court proceedings, while Section 499 carries forward the subject of certain transfers being void.

Section 280D - Application of criminal procedure to Special Court proceedings

Under Section 280D(1) of the Income Tax Act, 1961, save as otherwise provided in the Act, the provisions of the Code of Criminal Procedure, 1973, including provisions relating to bail or bonds, apply to proceedings before a Special Court. The person conducting the prosecution before the Special Court is deemed to be a Public Prosecutor.

Special Public Prosecutor

The Central Government may appoint a Special Public Prosecutor for a case or for a class or group of cases. This enables specialised prosecution in proceedings before designated Income Tax Special Courts.

Minimum professional qualification

Section 280D(2) provides that a person is not qualified to be appointed as a Public Prosecutor or Special Public Prosecutor under this section unless the person has been in practice as an advocate for not less than seven years and has the special knowledge of law contemplated by the provision.

Status under the Code of Criminal Procedure

Section 280D(3) deems every person appointed as a Public Prosecutor or Special Public Prosecutor under the section to be a Public Prosecutor within the meaning of Section 2(u) of the Code of Criminal Procedure, 1973. In the pre-BNSS framework, Section 2(u) broadly covered a person appointed under Section 24 of that Code and included a person acting under the directions of a Public Prosecutor.

Meaning of bail and bond

Section 280D expressly includes the provisions relating to bail or bonds. Accordingly, subject to any special provision in the Income Tax Act, the applicable criminal procedure rules governed release from custody, appearance obligations and related bond requirements before the Special Court.

Section 281 - Certain transfers to be void

Section 281(1) addresses an assessee who, during the pendency of a proceeding under the Act, or after its completion but before service of notice under Rule 2 of the Second Schedule, creates a charge on or parts with possession of an asset in favour of another person by sale, mortgage, gift, exchange or any other mode of transfer.

Where the statutory conditions are met, the charge or transfer is void as against a claim in respect of tax or another sum payable by the assessee as a result of completion of the proceeding or otherwise. The provision therefore protects the specified revenue claim rather than stating that every such transfer is void for every purpose.

Exceptions protecting a transfer

A charge or transfer is not void under Section 281 if either of the statutory exceptions applies:

It is made for adequate consideration and without notice of the pendency of the proceeding or, as the case may be, without notice of the tax or other sum payable by the assessee; or
It is made with the previous permission of the Assessing Officer.

Monetary conditions under Section 281(2)

Section 281 applies where the amount of tax or other sum payable or likely to be payable exceeds Rs. 5,000 and the assets charged or transferred exceed Rs. 10,000 in value.

Meaning of assets

For Section 281, "assets" means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent that those assets do not form part of the stock-in-trade of the assessee's business.

When Section 281 may operate

Requirement	Statutory effect
Relevant tax proceeding is pending, or completed but Rule 2 notice has not yet been served.	The statutory time window for Section 281 is engaged.
Assessee creates a charge or parts with possession of a specified asset.	The transaction may fall within the provision.
Relevant monetary thresholds are exceeded.	Section 281(2) permits the provision to apply.
No statutory exception protects the transaction.	The charge or transfer is void against the relevant tax or other sum claim.
Adequate consideration plus absence of required notice, or prior AO permission.	The statutory exception may protect the charge or transfer.

Section 280D and Section 281 serve different purposes

Section 280D belongs to Chapter XXII on offences and prosecutions and governs procedure before Special Courts. Section 281 is in Chapter XXIII on miscellaneous provisions and protects revenue claims against specified dealings with assets. A criminal prosecution issue under Section 280D and a revenue-protection issue under Section 281 therefore require separate statutory analysis.

Evidence law before Bharatiya Sakshya Adhiniyam, 2023

Before 1 July 2024, the Indian Evidence Act, 1872 was the general evidence statute, subject to special provisions of the Income Tax Act. In a Special Court prosecution, proof could also be affected by provisions such as Section 279B concerning entries in departmental records or documents, Section 278D concerning specified presumptions for search or requisition materials, and Section 278E concerning culpable mental state where applicable.

For a Section 281 dispute, relevant documentary evidence may include the transfer deed, mortgage or charge document, dates of the tax proceeding, Rule 2 notice, records concerning consideration, evidence of notice or knowledge, title and asset records, and any previous permission granted by the Assessing Officer.

Income-tax Act 2025 transition

For matters governed by the Income-tax Act, 2025, the corresponding provisions are Section 498 for application of the Bharatiya Nagarik Suraksha Sanhita, 2023 to proceedings before a Special Court and Section 499 for certain transfers to be void. Historical proceedings and transactions must be examined with the repeal, savings and transition provisions and the law applicable to the relevant period.

Official references

Important: For Section 280D, verify the Special Court designation, prosecution authority and procedural law applicable to the relevant proceeding. For Section 281, verify the exact dates of the tax proceeding, transfer or charge, Rule 2 notice, consideration, notice or knowledge, asset classification and any previous permission of the Assessing Officer.