2022 (5) TMI 233 - HC - Income Tax

Recovery proceedings - attachment of property - auction notice on the strength of Rule 68B of the IInd Schedule to the Income Tax Act, 1961 - Case of the petitioner is that the property was attached on 17.02.2004 and therefore, the sale of the attached property should have been made within three years from the date specified in Rule 68b of the IInd schedule to the Act, whereas the impugned attachment order is dated 28.03.2014 in ITCP-13 - HELD THAT - The property which was sought to be attached is the property, which has come in the hands of the petitioner pursuant to a partition deed dated 23.10.2000. This was after the search on 07.07.1999. The tax that was demanded from the petitioner is for the block assessment period ie., from 08.07.1999 to 23.10.2000. Rule 4 of the IInd Schedule to the Income Tax Act, 1961 makes it clear one of the alternate method for recovering the tax. Apart from attaching the property and bringing the property for sale, the Department can also arrest the defaulters and detain such person in prison or appoint a Receiver for the management of the defaulter s property both movable and immovable property. The tax liability of the petitioner does not get effaced by efflux of time. The Department can attach the property under Rule 48 r/w Rule 60 and bring the same property for sale in terms of the provisions of the IInd schedule to the Income Tax Act, 1961. Even if Rule 68(b) contemplates no sale beyond the period of limitation specified therein ie., 3 years during the period when the impugned proclamation of sale was issued on 28.03.2014 in Form ITCP-13 does not mean that the Department cannot issue a fresh order of attachment of the property. There are also other methods available under the Rules for recovering the tax due together with interest. Therefore, while I am inclined to allow this writ petition in the light of the limitation prescribed in Rule 68(b) of the IInd schedule to the Income Tax Act, 1961, while giving liberty to the respondents to initiate proceedings to recover the tax due and the interest thereon from the petitioner in terms of the other provisions of the aforesaid Rules including a fresh proceeding for attaching the subject property. WP allowed.

Summary

Issues:
Challenge to auction notice based on Rule 68B of the Income Tax Act, 1961. Interpretation of the time limit for the sale of immovable property under Rule 68B. Validity of attachment order and subsequent auction notice. Application of the Vivad Se Vishwas Scheme, 2020. Authority of the Income Tax Department to recover tax through alternate methods.

Analysis:

1. Challenge to Auction Notice based on Rule 68B:
The petitioner challenged the auction notice dated 21.04.2014, citing Rule 68B of the Income Tax Act, 1961. The rule specifies a time limit for the sale of immovable property after the demand for tax recovery. The petitioner argued that the property was attached on 17.02.2004, and the sale should have been made within three years as per Rule 68B. However, the auction notice was issued on 28.03.2014, beyond the specified time frame.

2. Interpretation of Time Limit under Rule 68B:
The court noted the initial three-year limitation for property sale under Rule 68B, which was subsequently amended to seven years with a grace period of three years. The petitioner's case involved a block assessment order from 27.06.2011, demanding a sum of Rs.6,03,842. Despite paying a substantial amount, the petitioner was still liable for interest under Section 220(2) of the Income Tax Act, 1961.

3. Validity of Attachment Order and Auction Notice:
The court acknowledged the attachment of the property post a survey in 1999 and subsequent block assessment order. While the petitioner argued the sale should have occurred within the stipulated time frame, the court emphasized the Department's authority to recover tax through various methods, including attachment and sale of property.

4. Application of Vivad Se Vishwas Scheme, 2020:
The respondents highlighted the petitioner's opportunity to settle the case under the Vivad Se Vishwas Scheme, 2020, which the petitioner did not utilize. The court considered this aspect in the context of the petitioner's liability to pay interest and the Department's right to recover tax through legal means.

5. Authority of Income Tax Department for Tax Recovery:
The court clarified that even if the sale did not occur within the time limit specified by Rule 68B, the Department could issue a fresh attachment order and proceed with recovery through alternative methods as per the Income Tax Act, 1961. The judgment allowed the writ petition based on the limitation prescribed in Rule 68B but permitted the Department to initiate proceedings for tax recovery through other provisions of the Act.

In conclusion, the judgment upheld the petitioner's challenge based on the limitation under Rule 68B while affirming the Department's authority to recover tax through alternative methods. The decision provided clarity on the interpretation of the time limit for property sale in tax recovery cases and emphasized the Department's discretion in pursuing tax arrears.