2019 (7) TMI 1375 - HC - Income Tax

Sale proclamation /auction of property by department to collect tax - Scheme for attachment and sale of immovable property of an assessee in default - limitation as prescribed in Rule 68B of the Schedule II - HELD THAT - Appreciating the said Rule in the light of the purpose for which the same was inserted would show that under sub-rule (1), the legislature has now provided for the first time w.e.f. 1.6.1992 a time limit of a period of three years for sale of attached immovable property starting from the end of financial year in which the order giving rise to a demand of tax, interest etc has become conclusive. Sub-rule (4) of Rule 68B provides for the consequences of the immovable property not being sold within such time. As per this sub-rule in such a situation, the attachment order in relation to the said property would be deemed to have been vacated on the expiry of the time limit specified. In the present case, Rule 68B would apply with full force. The attachment of the said immovable properties was ordered way back in the year 1997. The sale proclamation which was made in February, 2019 was thus, hit by the period of limitation prescribed under such Rule. By virtue of sub-rule (4) of Rule 68B therefore, upon completion of the period of limitation, the attachment would be deemed to have been vacated. The auction sale, therefore, could not have been carried out. In the judgment in the case of Sanjay Khetan 2003 (12) TMI 42 - ALLAHABAD HIGH COURT , of course, the Allahabad High Court has observed that Rule 68B of the IInd Schedule would not apply to the certificates issued prior to 1.6.1992. To this extent, we are unable to persuade ourselves to follow the same line. Sub-rule (3) of Rule 68B makes it clear that the limitation prescribed under sub-rule (1) would apply also to past instances, with necessary modification provided therein which we have already discussed earlier. The consent given by the petitioner to sale the properties will not prevent her from pursuing their petition. Firstly, it was not an unconditional consent. In her letter dated 23.1.2019, she had raised the issue of owner charging of interest and or no-due certificate issued in the past. Her consent was thus subject to these objections. Further, the question of limitation would go to the root of the matter. If the auction was barred by limitation, the Department was prevented by law from carrying out the same. Under these circumstances, we are of the opinion that by virtue of Rule 68B of the IInd Schedule, the impugned sale proclamation is barred by limitation. The same must be quashed.

Issues Involved:
1. Challenge to the sale proclamation dated 21.1.2019 issued by the Tax Recovery Officer, Mumbai.
2. Notice dated 23.1.2019 issued by the Income Tax Department advertising public auction.
3. Seizure and non-accounting of jewelry by the Department.
4. Non-accounting of rent collected from tenanted properties.
5. Lack of break-up of outstanding tax dues.
6. Issuance of a 'no due certificate' by the Department on 23.3.1984.
7. Sale proclamation being barred by the period of limitation prescribed in Rule 68B of the Second Schedule to the Income Tax Act, 1961.

Detailed Analysis:

1. Challenge to the Sale Proclamation and Auction Notice:
The petitioner contested the sale proclamation dated 21.1.2019 and the auction notice dated 23.1.2019. The properties in question belonged to the petitioner's grandparents, who had significant tax dues. The petitioner, as a legal heir, claimed her share in the properties and challenged the sale on several grounds, including the seizure of jewelry, non-accounting of rent, lack of break-up of dues, and the issuance of a 'no due certificate'.

2. Seizure and Non-Accounting of Jewelry:
The petitioner argued that the Department had seized jewelry of the deceased assesses, which remained unaccounted for. This issue was raised as one of the grounds to challenge the sale proclamation.

3. Non-Accounting of Rent Collected from Tenanted Properties:
The petitioner also claimed that the rent collected from the tenanted properties by the Department since the attachment was not accounted for. This was another ground for challenging the sale proclamation.

4. Lack of Break-Up of Outstanding Tax Dues:
The petitioner contended that the Department had not provided a break-up of the outstanding tax dues, making it impossible for the heirs to verify the exact amount owed. This lack of transparency was a significant issue in the petition.

5. Issuance of 'No Due Certificate':
The petitioner highlighted that the Department had issued a 'no due certificate' on 23.3.1984, implying that there were no outstanding tax dues at that time. This certificate was used to argue against the current tax demands and the subsequent sale proclamation.

6. Sale Proclamation Barred by Limitation (Rule 68B):
The core issue revolved around Rule 68B of the Second Schedule to the Income Tax Act, 1961, which prescribes a three-year limitation period for the sale of immovable property from the end of the financial year in which the tax demand order becomes conclusive. The properties were attached in 1997, and the sale proclamation was issued in 2019, well beyond the prescribed limitation period. The court examined this rule extensively and concluded that the sale proclamation was indeed barred by limitation.

Court's Findings:
- The court focused primarily on the issue of limitation under Rule 68B, determining that the sale proclamation issued in 2019 was time-barred.
- The court did not delve into other grievances raised by the petitioner, leaving them open for future consideration if necessary.
- The court emphasized that the limitation period under Rule 68B was rigid and mandatory, and any sale conducted beyond this period would be illegal and void.
- The court referenced several precedents, including decisions from the Bombay High Court and Madras High Court, which supported the interpretation that the sale proclamation was barred by limitation.

Conclusion:
The court quashed the impugned sale proclamation dated 21.1.2019 and set aside the attachment of the immovable properties. The writ petition was allowed, and the Department's action to auction the properties was deemed invalid due to the expiration of the limitation period prescribed under Rule 68B.

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