2018 (9) TMI 1923 - HC - Income Tax

Right of the purchaser of property on power of attorney over legal heirs for receiving deposits made against suit property - The property was acquired by the income tax department in 1978 u/s 269-I and 269-K - the petitioners' contention that in terms of the judgment of the Supreme Court in M.Mathew Thomas 1999 (2) TMI 7 - SUPREME COURT , the property never having vested in the Income Tax Department no compensation could be paid by that Department and hence it would continue to be owned by them (petitioners) Held that - argument has to be rejected firstly in view of the fact that the petitioners' suit seeking a declaration that they are owners-in-possession of the suit property and that the respondent department be injuncted from interfering in their possession thereof, has been dismissed, with, to again repeat, the said judgement dated September 16, 2008, passed in RSA No.1538 of 2005, having become final, very obviously this Court cannot sit upon that judgment to hold to the contrary. The case file of the said appeal having been called for, it is seen that, in fact, the contention raised by the petitioners presently with regard to Chapter XXA having been made inapplicable to any transfer of immovable property made after September 30, 1986, has been duly dealt with in that judgment, noticing Section 269RR of the Act, eventually therefore holding that since the property was acquired well prior to 1986 and the acquisition having become final by way of dismissal of the appeal and the writ petition filed against such acquisition, the amendment made, w.e.f. September 30, 1986, would not affect such proceedings of acquisition. Hence, simply because the judgment in Mathews' case was not brought to the notice of the Court in those proceedings, that would not change the fact that the petitioners contended right to the property was ousted in that civil suit, which obviously cannot been reopened by this Court. Consequently, the property having been acquired in terms of Section 269F(6) of the Act, from Manak Chand Khanna in the year 1978, in my opinion the learned Additional District Judge has correctly held in the impugned order that it would only be the legal heirs of Manak Chand Khanna, who would be entitled to payment of compensation, upon them filing any application before that Court. The petition dismissed.

Summary

Issues Involved:
1. Legality of the acquisition of the property by the Central Government.
2. Right of the petitioners to claim ownership and compensation for the property.
3. Competence of the Department of Income Tax to deposit compensation.
4. Applicability of Chapter XXA of the Income Tax Act post its repeal in 1986.
5. Physical possession of the property by the Income Tax Department.
6. Right of legal heirs to receive compensation.

Detailed Analysis:

1. Legality of the acquisition of the property by the Central Government:
The property in question was acquired by the Central Government under Section 269-F(6) of the Income Tax Act, 1961, via an order dated 17.02.1978. This acquisition was challenged by the then-owner, Manak Chand Khanna, but his appeal was dismissed by the Income Tax Appellate Tribunal on 05.10.1981, and the dismissal was upheld by the High Court. The acquisition order thus became final.

2. Right of the petitioners to claim ownership and compensation for the property:
The petitioners claimed ownership of half the property based on a sale deed executed in their favor in 1991 by the general attorney of Manak Chand Khanna. However, since the property was acquired by the government in 1978, Manak Chand Khanna was no longer the owner and had no right to sell it. The petitioners' civil suit seeking a declaration of ownership and injunction was dismissed by the Additional Civil Judge in 2000, and this dismissal was upheld by the Additional District Judge in 2005 and by the High Court in 2008 (RSA no.1538 of 2005). Consequently, the petitioners had no title, right, or interest in the property and no right to be heard in the proceedings under Section 269-I of the Act.

3. Competence of the Department of Income Tax to deposit compensation:
The petitioners argued that the Central Public Works Department (CPWD) was the competent authority to deposit the compensation. However, the court held that whether the compensation was deposited by the Income Tax Department or CPWD was immaterial, as the property vested in the Union of India. The compensation was deposited on behalf of the Union of India, satisfying the legal requirement.

4. Applicability of Chapter XXA of the Income Tax Act post its repeal in 1986:
The petitioners contended that since Chapter XXA was repealed in 1986, the property should revert to the original owner. However, the court noted that the acquisition had become final before the repeal, and the amendment did not affect proceedings that had already been concluded. The judgment in "M. Mathew Thomas and others Vs. Commissioners of Income Tax" was not applicable as the acquisition had attained finality long before the repeal.

5. Physical possession of the property by the Income Tax Department:
The petitioners claimed that the Income Tax Department had not taken physical possession of the property. The court found this issue irrelevant, as the petitioners' suit for a declaration of ownership was dismissed. Any occupation by the petitioners was deemed illegal, as the property had vested in the government, and an order for taking possession was passed in 1989.

6. Right of legal heirs to receive compensation:
The court held that only the legal heirs of Manak Chand Khanna were entitled to the compensation deposited by the Income Tax Department. The petitioners had no right to this compensation, as they had no valid claim to the property.

Conclusion:
The petition was dismissed, and the court imposed a cost of ?25,000/- on the petitioners for continuously litigating the matter despite losing in previous rounds. The legal heirs of Manak Chand Khanna were recognized as the rightful claimants to the compensation.