2014 (10) TMI 667 - HC - Income Tax

Appealability of order under Rule 86 - appeal against an order of the Tax Recovery Officer confirming the sale - Held that - As decided in Subash Chand Goyal Versus Tax Recovery Officer And Others 2002 (2) TMI 75 - ALLAHABAD High Court - an appeal would lie against an order of the Tax Recovery Officer confirming the sale - The decision proceeds on the basis that, for the purposes of Rule 86, an appeal would lie from any original order passed by the Tax Recovery officer, which is not in the nature of an order that is conclusive, and, therefore, an order by the Tax Recovery Officer confirming the sale, not being one that is made conclusive under Second Schedule to the Income Tax Act, the order would be an appealable order for the purposes of Rule 86. The act of confirmation of sale by the Tax Recovery Officer is in terms of Rule 63 of the Second Schedule - when an order of sale is passed by the Tax Recovery Officer, a person aggrieved by that order cannot bypass the requirements in the Schedule, by not preferring an application to set aside the sale and then opting to challenge the order passed under Rule 63, confirming the sale - To allow a person to do so, would do violence to the procedural scheme contemplated in the Second Schedule there is no reason to interfere with the findings of the CCIT on the maintainability of an appeal, against the order confirming the sale in this case Having sold her interest over the property to a third person, the petitioner effectively lost her right to maintain a challenge against the actions of the Department in an appeal preferred under Rule 86 of the Second Schedule - Decided against the appellant.

Summary

Issues:
1. Challenge against Ext.P22 order of the Chief Commissioner of Income Tax in an appeal filed under Rule 86 of the IInd Schedule to the Income Tax Act, 1961.
2. Propriety of Tax Recovery Officer in conducting auction despite a stay order.
3. Correctness of arrears amount for property sale.
4. Permissibility of challenge against sale confirmation without challenging the sale order.
5. Maintainability of appeal under Rule 86 after selling interest in the property.

Analysis:
1. The petitioner challenged Ext.P22 order, contending that the Chief Commissioner did not consider the propriety of the Tax Recovery Officer conducting the auction despite a stay order. The petitioner argued that the property sold for less than its worth and questioned the correctness of the arrears amount. Additionally, the petitioner raised the issue of challenging the sale confirmation without contesting the sale order, citing a decision of the Allahabad High Court.

2. The Chief Commissioner found against the petitioner on two grounds. Firstly, the petitioner did not follow Rules 60 and 61 for setting aside the sale, leading to automatic confirmation under Rule 63. The Chief Commissioner held that without complying with Rules 60 and 61, there was no basis for appealing the confirmation order under Rule 63. Secondly, the petitioner had sold her interest in the property during the proceedings, making it impermissible to continue the appeal under Rule 86.

3. The court noted the decision cited by the petitioner but emphasized the procedural requirements under the Second Schedule to the Income Tax Act. The statutory scheme mandates filing an application to set aside a sale under Rules 60 and 61 before challenging the confirmation order under Rule 63. Allowing challenges without following this procedure would disrupt the intended process. The court agreed with the Chief Commissioner's findings that the petitioner, having sold her interest, lost the right to challenge the Department's actions through an appeal under Rule 86.

4. Ultimately, the court upheld the Chief Commissioner's order as legally sound. The petitioner's failure to adhere to procedural rules and selling her interest in the property rendered the appeal under Rule 86 unsustainable. The court dismissed the writ petition, affirming the legality of Ext.P22 order issued by the Chief Commissioner of Income Tax.