1981 (1) TMI 33 - HC - Income Tax

Issues Involved:
1. Whether the intimation in Form No. ITCP 10 sent as per Ex. P-1 on August 10, 1972, to the Principal Munsiff's Court amounted to notice to the 1st Addl. Munsiff.
2. Whether the property in question bearing No. MYK 4448 was in the custody of the court.

Issue-wise Detailed Analysis:

Issue 1: Whether the intimation in Form No. ITCP 10 sent as per Ex. P-1 on August 10, 1972, to the Principal Munsiff's Court amounted to notice to the 1st Addl. Munsiff.

The court held that the intimation sent to the Principal Munsiff's Court did indeed amount to notice to the 1st Addl. Munsiff. The reasoning was based on the interpretation of the Karnataka Civil Courts Act, 1964, which states that where more than one Munsiff is appointed to a Munsiff's court, they are considered to be part of the same court for the purpose of distribution of work. Therefore, the notice sent to the Principal Munsiff was effectively a notice to the First Addl. Munsiff as well. The court noted, "The Court of the Munsiff at Hubli was only one. There were more than one Munsiff appointed to that court under s. 8 of the Karnataka Civil Courts Act, 1964."

Issue 2: Whether the property in question bearing No. MYK 4448 was in the custody of the court.

The court found that the vehicle in question was indeed in the custody of the court. The vehicle was attached and kept under the court's custody, and the keys were produced in the court along with the bailiff's report. The court emphasized, "As such, it was in the custody of the court when the notice as required by r. 31 of Sch. II to the I.T. Act was received by the Court of Principal Munsiff, Hubli, on August 10, 1972." Consequently, the court was required to hold the vehicle subject to further orders from the Tax Recovery Officer (TRO).

Additional Findings and Legal Reasoning:

Rule 16 and Rule 31 of Schedule II to the I.T. Act:

The court elaborated on the implications of Rule 16 and Rule 31 of Schedule II to the I.T. Act. Rule 16 stipulates that once a notice under Rule 2 is served on a defaulter, neither the defaulter nor his representative can deal with the property without the TRO's permission, and civil courts are barred from issuing any process against such property. Rule 31 requires the court to hold the property subject to further orders from the TRO when it is in the court's custody.

The court stated, "From r. 16, it is clear that when once a defaulter is served with the notice under r. 2 of the Rules...the civil court also is prevented from issuing any process against the property of the defaulter in execution of a decree for the payment of money."

Priority of Crown Debts:

The court reiterated the doctrine of priority of Crown debts over private debts, which is also reflected in Section 73(3) of the CPC and Rule 8 of the Rules. The court held that the sale of the vehicle was a nullity because the court was not competent to proceed against the vehicle under the circumstances. The court stated, "The legal position is well established that the doctrine of priority of Crown debts over other private debts is applicable in the case of arrears of income-tax."

Final Orders:

The civil revision petition was allowed, and the order dated May 28, 1976, by the First Addl. Munsiff, Hubli, was set aside to the extent it directed the payment of sale proceeds to the decree-holder in Execution Case No. 18 of 1974. The court directed that the amount of Rs. 16,000 be made available to the petitioner (TRO). The court also clarified that the decree-holder could continue to recover the amount due under the decree from the 2nd respondent by continuing Execution Case No. 18/74. The court concluded, "The lower court is directed to make available the amount of Rs. 16,000 being the sale proceeds of the vehicle in question to the petitioner."

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