2000 (1) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the auction sale of the property.
2. Service of demand notices.
3. Combination of recovery certificates.
4. Applicability of Rule 68B of the Second Schedule.

Detailed Analysis:

1. Validity of the Auction Sale of the Property:
The petitioner challenged the auction sale of house property No. D-53/91-D in Varanasi, confirmed by the Tax Recovery Officer, on the grounds that the dues for which the sale was held had ceased to exist when the petitioner's appeals against the ex parte assessments were allowed. The petitioner argued that the Tax Recovery Officer should have canceled or amended the recovery certificate under section 225(3) of the Income-tax Act, 1961. However, the court held that the sale was valid when it was held on January 11, 1980, and the subsequent cancellation or reduction of the demand did not invalidate the sale. The court relied on the Supreme Court judgments in Janah Raj v. Gurdial Singh and Sardar Govindrao Mahadik v. Devi Sahai, which protected the equity in favor of a stranger auction purchaser, even if the decree was set aside after the sale.

2. Service of Demand Notices:
The petitioner contended that no notices of demand were served on him or his partner, making the recovery proceedings illegal. However, the court found no specific averment in the writ petition that demand notices were not served. The petitioner had not raised this contention before the Commissioner of Income-tax in his revision petition. The court noted that the petitioner knew about the recovery proceedings and the proposed sale, as evidenced by his letter dated December 24, 1979, to the Tax Recovery Officer. The court concluded that the petitioner could not successfully raise this contention in the writ petition filed after 18 years.

3. Combination of Recovery Certificates:
The petitioner argued that combining recovery certificates against him and the firm for the sale of the property was illegal. The court held that a firm is not a legal person, and its dues can be recovered by attaching and selling the properties belonging to the partners. Since the petitioner was responsible for the tax assessed on him as an individual and for the tax assessed on the firm, issuing a sale proclamation for the total amount was neither illegal nor irregular.

4. Applicability of Rule 68B of the Second Schedule:
The petitioner relied on Rule 68B, which was inserted by the Finance Act, 1992, and provides that no sale of immovable property shall be made after the expiry of three years from the end of the financial year in which the order giving rise to a demand has become conclusive. The court held that this rule did not exist at the time of the relevant sale in 1980 and, therefore, could not affect the sale.

Conclusion:
The court dismissed the writ petition, upholding the validity of the auction sale and rejecting the petitioner's contentions regarding the service of demand notices, combination of recovery certificates, and applicability of Rule 68B. The petitioner was ordered to pay costs to the respondents.