2022 (8) TMI 1137 - HC - Income Tax

Recovery proceedings - attachment orders for the rents from the property - deceased assessee appears to have divorced his wife - HELD THAT - The action taken by the Income Tax Department in this case is to secure its interest by attachment of rent. Prima facie, there is nothing untoward in this regard as admittedly, the petitioners are beneficiaries under the Will of the deceased assessee dated 07.06.2007, to the exclusion of R2 and R3. As per the provisions of Section 159 of the Income tax Act read with Section 2(11) of the CPC, the petitioners are LRs of the assessee as a legal representative connotes any person intermeddles with the estate of the deceased . Rule 86 of the Second Schedule provides that An appeal from any original order passed by the Tax Recovery Officer under this Schedule, not being an order which is conclusive, shall lie to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. (2) Every appeal under this rule must be presented within thirty days from the date of the order appealed against. (3) Pending the decision of any appeal, execution of the certificate may be stayed if the appellate authority so directs, but not otherwise. A query was put to Standing counsel as to whether an order of attachment would tantamount to an original order passed by the TRO under the schedule , and the stand of the revenue is that the impugned order in these Writ Petitions dated 22.11.2019 is very much amenable to appeal under Rule 86 of the Second Schedule. This is recorded. Thus, if at all the petitioners are aggrieved by the impugned attachment, they may well file an appeal before the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner /Commissioner in terms of Rule 86 of the second schedule. Sub-rule (3) also provides for interim relief pending appeal. Hence, seeing as the submissions of the petitioners turn on appreciation of several facts including the extent of the property and rental income attributable to the deceased assessee, it would be appropriate that such submissions are made before the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner /Commissioner by way of appeals under Rule 86 of the second schedule. The petitioners are thus relegated to statutory remedy and are permitted to file appeals and stay petitions if they desire, in terms of Rule 86(1) (3) of the Second Schedule. If filed as aforesaid, the appellate authority shall entertain the same and dispose the stay petitions within a period of two (2) weeks from date of receipt, after hearing the petitioners. The timelines as aforesaid shall be strictly implemented. The interim order that the petitioners have been enjoying in these Writ Petitions shall continue for a period of four (4) weeks from today or till disposal of the stay petitions, whichever is earlier.

Summary

Issues:
Challenge to order passed by Tax Recovery Officer under Section 226(3) of the Income Tax Act 1961 attaching rents from specific properties; Determination of legal heirs' liability for deceased assessee's outstanding demand; Interpretation of legal representative under Section 159 of the Act and Section 2(11) of the Code of Civil Procedure (CPC); Assessment of property ownership and rental income for tax recovery purposes; Applicability of Rule 86 of the Second Schedule for appeals against TRO orders.

Analysis:
The judgment involved a challenge by five sisters (petitioners) against an order by the Tax Recovery Officer (TRO) attaching rents from specific properties under Section 226(3) of the Income Tax Act 1961. The deceased assessee, their uncle, had passed away, and assessment proceedings were initiated against his legal heirs, Anitha and Praveen Kumar, who were impleaded but not served notice. The deceased had disavowed ties with his wife and children in his will, leading to a dispute regarding the legal heirs' liability for the outstanding demand.

The court analyzed the concept of legal representatives under Section 159 of the Act and Section 2(11) of the CPC, emphasizing that legal representatives are liable for the deceased's obligations as if they were alive. The petitioners claimed ownership of the property in question through a will, excluding other legal heirs. The court directed the petitioners to appeal under Rule 86 of the Second Schedule for relief against the TRO's attachment order, highlighting the statutory remedy available for challenging such decisions.

Additionally, the judgment highlighted the importance of determining the deceased assessee's share in the property and the rental income attributable to him for tax recovery purposes. The court acknowledged the petitioners' right to appeal and seek interim relief pending the appeal process, ensuring a fair opportunity to present their case before the appellate authority. The judgment concluded by permitting the petitioners to pursue appeals and stay petitions within specified timelines, maintaining the interim order until a decision on the stay petitions or four weeks from the judgment date.

In summary, the judgment addressed the petitioners' challenge against the TRO's attachment order, clarified the legal representatives' liability for the deceased assessee's obligations, and guided the petitioners to follow the statutory appeal process under Rule 86 of the Second Schedule for relief. The court emphasized the need for a comprehensive assessment of property ownership and rental income, ensuring a fair opportunity for the petitioners to present their case before the appellate authority within specified timelines.