1998 (4) TMI 90 - HC - Income Tax

Summary

Issues Involved:
1. Controversies under the Income Tax Act, 1961.
2. Attachment and sale of immovable property for recovery of income-tax arrears.
3. Validity of private sale authorization under Rule 66 of the Second Schedule to the IT Act.
4. Maintainability and jurisdiction of appeal under Rule 86 of the Second Schedule to the IT Act.
5. Locus standi of the appellants challenging the sale.

Issue-wise Detailed Analysis:

1. Controversies under the Income Tax Act, 1961:
The petition, pending for almost 15 years, involves disputes under the IT Act, 1961, specifically regarding the attachment and sale of a property in Kanpur to recover income-tax arrears amounting to Rs. 58,27,534.

2. Attachment and sale of immovable property for recovery of income-tax arrears:
The IT Department attached several properties of the defaulters, including the property at 7/76 Tilak Nagar, Kanpur. Initial attempts to sell the property via public auction in 1967 failed due to inadequate bids. Consequently, the defaulters were authorized to negotiate a private sale under Rule 66 of the Second Schedule to the IT Act, provided the sale proceeds were paid to the IT Department and confirmed by the Tax Recovery Officer (TRO).

3. Validity of private sale authorization under Rule 66 of the Second Schedule to the IT Act:
The defaulters received an offer of Rs. 3,50,000 from a petitioner, Amar Chand Agrawal, in May 1982, which was higher than the previous auction bids. The IT Department, after verifying the property valuation and obtaining the consent of all co-owners, accepted the offer. The TRO issued a certificate authorizing the sale, and the petitioner deposited the sale consideration. The sale was confirmed by the TRO on 2nd December 1982, completing the transaction under Rule 66.

4. Maintainability and jurisdiction of appeal under Rule 86 of the Second Schedule to the IT Act:
An appeal was filed under Rule 86 by two advocates, D. P. Bajpayee and B. K. Agrawal, challenging the sale. The appellate authority set aside the sale, citing higher offers made by the appellants and procedural irregularities. However, the Court found that the appellate authority erred in its interpretation of Rule 66, which operates independently and is not subject to the 30-day objection period applicable to public auctions. The TRO's authorization and confirmation of the sale were deemed valid and within jurisdiction.

5. Locus standi of the appellants challenging the sale:
The Court held that the appellants, D. P. Bajpayee and B. K. Agrawal, had no locus standi as they had no legal interest or investment in the property. Their higher offers were made after the sale was concluded, and they were not parties to the initial negotiations. The Supreme Court precedent in K. Basavarajappa vs. Tax Recovery Commissioner affirmed that mere agreement to sell does not create a legal interest in the property.

Conclusion:
The Court quashed the appellate order dated 1st September 1983, which set aside the sale, and upheld the validity of the sale conducted under Rule 66. The petition was allowed with costs against the respondents, emphasizing that the appellants had no right to challenge the sale and the TRO's actions were lawful and justified.