2000 (11) TMI 95 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the sale proclamations.
2. Violation of Rule 53 of the Second Schedule to the Income-tax Act.
3. Undue hardship and loss to the petitioner.
4. Excessive properties brought to revenue sales.

Detailed Analysis:

1. Legality of the Sale Proclamations:
The petitioner, Smt. Moni Senan, argued that the sale proclamations were illegal and could not have been acted upon. The court examined the proclamation of sale, exhibit P-6, dated January 17, 2000, and found that it conformed to the prescribed form under rules 38 and 52(2) of the Second Schedule to the Income-tax Act, 1961. However, the court noted that the sale proclamation was issued before the lapse of the mandatory 15-day period after the notice under rule 2, exhibit P-3, dated January 6, 2000. This procedural lapse rendered exhibit P-6 invalid, as it violated the statutory requirement that no step in execution of a certificate shall be taken until 15 days have elapsed since the service of the notice.

2. Violation of Rule 53 of the Second Schedule to the Income-tax Act:
The petitioner contended that there was a violation of Rule 53(cc) as the sale proclamation did not specify the reserve price. The court examined Rule 53, which mandates that a proclamation of sale of immovable property shall state the time and place of sale and specify the property to be sold, the revenue assessed upon the property, the amount for recovery, the reserve price if any, and any other material information. The court found that the omission of the reserve price in the sale proclamation was a significant procedural irregularity, especially since a reserve price had been specified in a previous proclamation. This omission violated the statutory prescriptions, making the sale invalid.

3. Undue Hardship and Loss to the Petitioner:
The petitioner argued that the defective sale proclamation subjected her to undue hardship and loss, as the property was sold for a fraction of its market value. The court acknowledged that the property, located in the heart of Ernakulam, was sold for Rs. 36.25 lakhs, which was significantly lower than its previous upset price of Rs. 120 lakhs. The court recognized that the defective proclamation and the oversight by the Department contributed to the low sale price, resulting in prejudice against the petitioner.

4. Excessive Properties Brought to Revenue Sales:
The petitioner claimed that the liabilities of her husband were unrealistically boosted up, and properties far in excess of requirements were brought to revenue sales. The court noted that the Department had repeatedly attempted to sell the properties over the years, and the petitioner had raised objections each time. The court found that the Department's actions were justified given the default, but the procedural irregularities in the sale proclamation invalidated the auction process.

Conclusion:
The court held that the sale proclamation, exhibit P-6, and the subsequent sale of item No. 3 were in violation of statutory prescriptions due to procedural irregularities, including the premature issuance of the proclamation and the omission of the reserve price. Consequently, the sale was declared invalid, and the purchaser was entitled to a refund with interest. The Department was directed to comply with statutory formalities before conducting a new auction within three months. The original petition was allowed to this extent, with no order as to costs.