1990 (3) TMI 49 - HC - Income Tax

Summary

Issues:
1. Legality of recovery proceedings against the petitioner's property.
2. Validity of the sale of the property.
3. Jurisdiction over the vendors in obtaining tax clearance certificate.
4. Application of rule 16 of Schedule II to the Income-tax Act.

Analysis:
1. The petitioner challenged the legality of recovery proceedings against his property known as "Janki Niwas" by the Tax Recovery Officer. The petitioner claimed to have purchased the property in good faith for Rs. 80,000 and had taken necessary steps before the purchase, including obtaining a tax clearance certificate. The Tax Recovery Officer initiated recovery proceedings and proposed to sell the property through auction.

2. The Income-tax Officer stated that the vendors were in arrears, and the property had been attached in 1976. The Income-tax Officer alleged that the vendors obtained the tax clearance certificate through misrepresentation. The court found that the property was under attachment and the tax clearance certificate was obtained from the wrong jurisdiction, rendering the sale void under rule 16 of Schedule II to the Income-tax Act. The Tax Recovery Officer was deemed entitled to proceed with recovering taxes from the vendors through the property.

3. The court assumed that the petitioner purchased the property in good faith and may not have been aware of the attachment or the jurisdictional issues with the tax clearance certificate. However, the court held that the sale was void due to the attachment and incorrect tax clearance certificate. The court could not delve into disputed facts but directed the Commissioner of Income-tax to hear the petitioner's appeal if filed within 30 days against the Tax Recovery Officer's order, as per rule 86 of Schedule II.

4. The court discharged the rule, indicating that the sale was void, and no costs were awarded. The judgment emphasized the application of rule 16 of Schedule II to declare the sale as invalid due to the property's attachment and the incorrect tax clearance certificate obtained by the vendors. The petitioner was granted the opportunity to appeal the Tax Recovery Officer's decision to the Commissioner of Income-tax within the specified timeframe.