2017 (2) TMI 395 - HC - Income Tax

Order of attachment of the property - permissible for the Tax Recovery Officer to sell the property in question for the dues of the original assessee - Held that - Even in a case where the property is already sold by the department in an auction for the dues of the original assessee, in that case also, defaulter, or the person interested in the property can submit an appropriate application to set aside the sale on payment of entire amount due and payable by the assessee / defaulter along with other amount as mentioned in Rule 60. At this stage, it is required to be noted that as such no further proceedings were initiated by the department and the property was not even put to auction and before that, the entire amount due and payable under the Certificate for which the property was attached, has been paid along with interest under section 220(2) of the Act. Under the circumstances, when the entire amount due and payable under the Certificate for which the property was attached under Rule 48, has been paid along with interest under section 220(2) of the Act, the impugned order declaring the transaction in favour of the petitioner as null and void deserves to be quashed and set aside. The order of attachment under Rule 48 can be issued only with respect to the Certificate issued for the amount due and payable by the original assessee. Therefore, the contention on behalf of the revenue that the impugned attachment order dated 4/1/2005 can be said to be continued with respect to amount due and payable under penalty order dated 17/3/2006, has no substance and the same cannot be accepted. It is required to be noted that when the order of attachment was passed on 4/1/2005, the penalty order was not even in existence, as the same has been passed subsequently on 17/3/2006 i.e. after a period of more than one year. However, still it will be open for the revenue to initiate appropriate proceedings to recover the amount due and payable under penalty order dated 17/3/2006 and may be from the very property in question, if permissible under the law. However, on the aforesaid ground, the impugned order cannot be continued, as the amount due and payable under the Certificate has been paid by the original assessee with interest is 220(2) of the Income Tax Act.

Summary

Issues involved:
1. Validity of the impugned order declaring a sale of property null and void under the Income Tax Act, 1961.

Detailed Analysis:
1. The petitioner sought a writ to quash an order by the Recovery Officer declaring the sale of a property null and void under the Income Tax Act. The property was jointly owned by four individuals, including the original assessee, who transferred it to the petitioner. The impugned order declared the sale deed as null and void, leading to the petitioner filing a petition under Article 226 of the Constitution of India.

2. The petitioner's counsel argued that the original assessee had paid the entire amount due under the Certificate issued by the Tax Recovery Officer, rendering the impugned order unnecessary. The counsel highlighted that the original assessee had paid the remaining amount due as well, demonstrating compliance with the tax obligations.

3. The Revenue's counsel contended that the attachment order should continue until all dues, including penalties, are settled. However, the petitioner's counsel emphasized that the attachment was related to specific dues mentioned in the Certificate and did not extend to penalties imposed later. The petitioner had paid the entire amount due under the Certificate, making the impugned order unjustified.

4. The court noted that the original assessee had paid all dues mentioned in the Certificate, including interest, and the impugned order was based on erroneous grounds. The court referred to Rule 60 of the Income Tax Act, emphasizing the defaulter's right to set aside a property sale by paying the entire due amount. Since the original assessee had cleared all dues, the impugned order was deemed invalid.

5. Consequently, the court quashed the impugned order dated 28/9/2015, ruling in favor of the petitioner. The court held that the entire amount due under the Certificate had been paid, and there was no justification for declaring the sale null and void. The court made the rule absolute and awarded no costs in the case.