1990 (11) TMI 120 - HC - Income Tax

Summary

Issues:
- Auction purchasers seeking to set aside order forfeiting deposited amount towards sale price.
- Interpretation of rules 57, 58, and 60 of the Income-tax Act in relation to auction proceedings.
- Discretion of Tax Recovery Officer in forfeiting deposited amount.
- Application of principles from Order XXI, Civil Procedure Code to the case.

Analysis:
The judgment pertains to a writ petition filed by auction purchasers challenging the order forfeiting the amount they deposited towards the sale price of a defaulter's property. The petitioners were the highest bidders at the auction but failed to deposit the full amount within the stipulated 15 days. The defaulter's widow later deposited the entire amount due and applied for setting aside the sale, leading to a notice to the petitioners to show cause for forfeiting their deposited amount. The Tax Recovery Officer, citing a clear violation of rule 57(2) of the Income-tax Act, ordered the forfeiture of the part payment made by the petitioners and canceled the sale.

The key contention revolved around the discretionary power of the Tax Recovery Officer in forfeiting the deposited amount. The petitioners argued that under rule 58, forfeiture is not automatic but discretionary, requiring a consideration of all circumstances. They relied on a Supreme Court decision under Order XXI of the Civil Procedure Code to support their argument. The court agreed that the principles from the cited decision applied to the present case, emphasizing that forfeiture should be a matter of discretion. The Tax Recovery Officer was criticized for treating forfeiture as automatic and not considering relevant factors such as the defaulter's wife's application for setting aside the sale and the total amount deposited by the petitioners within the stipulated time.

Consequently, the court quashed the impugned order and directed the Tax Recovery Officer to reconsider the forfeiture decision. The Officer was instructed to assess whether the deposited amount should be forfeited and to what extent, taking into account the objections and representations of the petitioners. The petition was disposed of with these observations, and no costs were awarded. The judgment highlighted the need for a discretionary approach in forfeiture decisions and the importance of considering all relevant circumstances before reaching a conclusion.