2003 (12) TMI 42 - HC - Income Tax

Schedule II , Rule. 68B, Income Tax Act, 1961 - This writ petition has been filed for quashing the notice dated March 26, 1997, published in the Hindi newspaper Rashtriya Sahara dated March 28, 1997, and to quash the recovery proceedings against the petitioner and for vacating the attachment - The petitioner has also prayed for quashing the sale of immovable properties of the petitioner and has also prayed for a mandamus restraining the respondents from selling immovable properties All the orders became conclusive much before 1980 and the period of three years as given in rule 68B also expired much before the addition of rule 68B. Hence, rule 68B is not applicable to such orders which have become final and conclusive much before June 1, 1992. - Held that Rule 68B applies only in cases where a conclusive order was passed under section 245-1 or Chapter XX of the Act on or after June 1, 1992

Summary

Issues Involved:
1. Quashing of notice and recovery proceedings.
2. Quashing of sale of immovable properties.
3. Applicability of Rule 68B of the Second Schedule to the Income-tax Act, 1961.
4. Retrospective application of Rule 68B.
5. Discretionary jurisdiction under Article 226 of the Constitution.

Detailed Analysis:

1. Quashing of Notice and Recovery Proceedings:
The petitioner sought to quash the notice dated March 26, 1997, published in the Hindi newspaper Rashtriya Sahara on March 28, 1997, and to quash the recovery proceedings against him. The petitioner also requested the vacating of the attachment and restoration of the properties in question. The court noted that the recovery proceedings were initiated for unpaid taxes from assessment years 1942-43 to 1977-78, and the properties were attached as far back as 1979.

2. Quashing of Sale of Immovable Properties:
The petitioner challenged the sale of properties at Padrauna and Tamkuhi and sought a mandamus to restrain the respondents from selling immovable properties Nos. 170 and 360 Sahebganj, Padrauna. The Tax Recovery Officer had previously rejected the petitioner's request to release the properties. The court observed that the properties were attached due to the non-payment of a substantial tax demand, and the sale proclamation was duly served and published.

3. Applicability of Rule 68B of the Second Schedule to the Income-tax Act, 1961:
The petitioner argued that the recovery was barred by Rule 68B, which sets a time limit for the sale of attached immovable property. Rule 68B, inserted by the Finance Act, 1992, states that no sale of immovable property shall be made after three years from the end of the financial year in which the order giving rise to the demand has become conclusive. However, the court found that Rule 68B was not applicable to the present case as the recoveries pertained to assessment years long before the rule's effective date of June 1, 1992.

4. Retrospective Application of Rule 68B:
The court held that Rule 68B is not retrospective and does not apply to orders that became conclusive before June 1, 1992. The court cited several precedents, including Commissioner of Central Excise v. T.V.S. Suzuki Ltd. and Mafatlal Industries Ltd. v. Union of India, to support the view that retrospective application of statutes is generally not favored unless explicitly stated. The court emphasized that vested rights, including the State's right to collect taxes, should not be impaired by retrospective application of new rules.

5. Discretionary Jurisdiction under Article 226 of the Constitution:
The court noted that writ jurisdiction under Article 226 is discretionary. The petitioner must not only show a violation of law but also equity in his favor. The court found no equity in favor of the petitioner, as the tax demands were based on assessments that had become final long ago. The court stressed that an honest taxpayer should pay his taxes rather than rely on technicalities. Consequently, the court declined to exercise its discretion in favor of the petitioner and dismissed the petition, vacating the interim order.

Conclusion:
The petition was dismissed on the grounds that Rule 68B did not apply to the recoveries in question, which pertained to assessment years prior to the rule's effective date. The court also emphasized the importance of equity and the discretionary nature of writ jurisdiction, ultimately deciding not to interfere with the recovery proceedings.