2008 (8) TMI 199 - HC - Income Tax

Attachment, sale and auction of property for recovery of tax objection raised by lessee of property Tax recovery officer (TRO) found that lease was sham & appellant can t be recognized as valid tenant letter issued by dept. to vacate the premises held that appellant can t challenge the jurisdiction of TRO - Suit for a permanent injunction restraining the auction purchasers, is dismissed as not maintainable because it is not against department, therefore, bar of S. 293 not applicable

Issues Involved:
1. Jurisdiction of the Tax Recovery Officer (TRO) to declare the lease as invalid or void.
2. Applicability of Rule 39 vs. Rule 40 of the Income Tax (Certificate Proceedings) Rules, 1962.
3. Maintainability of the suit filed by the appellant.
4. Validity of the lease agreements.
5. Immediate delivery of possession ordered by the learned Single Judge.

Detailed Analysis:

Jurisdiction of the Tax Recovery Officer (TRO):
The TRO's jurisdiction to declare the lease as invalid or void was a central issue. The appellant argued that the TRO lacked jurisdiction to determine the validity of the lease deeds. However, the court found that the TRO was tasked with determining whether the resistance to possession was made in good faith, which necessitated scrutiny of the lease documents. The TRO concluded that the lease was a facade to transfer perpetual enjoyment of the property while avoiding the due process of law, thereby determining the applicability of Rule 39.

Applicability of Rule 39 vs. Rule 40:
The court examined whether Rule 39 or Rule 40 of the Income Tax (Certificate Proceedings) Rules applied. Rule 39 pertains to delivery of property in occupancy of the defaulter or someone claiming under a title created by the defaulter, while Rule 40 pertains to property in occupancy of a tenant. The TRO found that the appellant was in possession on behalf of the defaulter, making Rule 39 applicable. The court upheld this finding, stating that the TRO's determination was necessary to resolve the issue of bona fide resistance.

Maintainability of the Suit:
The learned Single Judge dismissed the suit as not maintainable, which the appellant contested. The court noted that the suit was for permanent injunction based on the alleged lease. Given the TRO's finding that the lease was invalid and the applicability of Rule 39, the court held that there was no need for further trial to decide the validity of the lease. The dismissal of the suit was thus deemed appropriate to avoid unnecessary litigation.

Validity of the Lease Agreements:
The appellant relied on three unregistered lease deeds to claim tenancy. The court scrutinized these deeds and found them to be created in violation of the attachment order and an undertaking given by the defaulter. The lease deeds were deemed to lack bona fide and were created for an ulterior purpose, likely to defraud the tax authorities. The court supported the TRO's finding that the lease arrangements were invalid.

Immediate Delivery of Possession:
The appellant argued against the immediate delivery of possession ordered by the learned Single Judge. The court noted that the appellant had given an undertaking to surrender possession if Rule 39 was found applicable. The learned Single Judge's order for immediate possession was justified, especially given the appellant's resistance and the need to uphold the TRO's findings. The court also pointed out that the appellant could seek restoration of possession under Section 144 of the Civil Procedure Code if they succeeded on appeal.

Conclusion:
The court dismissed both the original side appeal and the writ appeal, confirming the judgment of the learned Single Judge. The TRO's determination of the lease's invalidity and the applicability of Rule 39 was upheld. The suit was correctly dismissed as not maintainable, and the immediate delivery of possession was justified. The judgment emphasized the necessity of adhering to legal procedures and the TRO's role in scrutinizing claims of bona fide resistance.

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