1968 (11) TMI 21 - HC - Income Tax

Petition under article 226 of the Constitution is directed against proceedings for the recovery of income-tax dues - validity of proceedings

Summary

Issues:
1. Validity of recovery proceedings under the Income-tax Act, 1961 in relation to the Zamindari Abolition Rules.
2. Compliance with the Second Schedule to the Income-tax Act, 1961 in the sale proceedings.
3. Authority of the Tahsildar to conduct the auction and accept bids.
4. Allegations of irregularities and undue haste in the auction process.

Analysis:
1. The petitioner challenged the recovery proceedings for income-tax dues, arguing that the Zamindari Abolition Rules were improperly invoked. The respondents admitted that the proceedings fell under the Income-tax Act, 1961, not the Zamindari Abolition Act. The court noted the discrepancy and considered whether the proceedings could be treated as under the Second Schedule to the Income-tax Act, 1961.

2. The court found discrepancies in the sale proceedings concerning compliance with the Second Schedule to the Income-tax Act, 1961. Rule 55 of the Second Schedule mandates a 30-day period post-proclamation before the sale of immovable property, which was violated in this case. Additionally, Rule 11 provides for investigation by the Tax Recovery Officer and the option to postpone a sale pending objections, which was not properly followed by the authorities.

3. The auction of the property was conducted by the Tahsildar, who lacked the authority of a Tax Recovery Officer as defined under the Income-tax Act, 1961. Despite no evidence of the Tahsildar being empowered as such, he accepted the highest bid at the auction. This raised concerns about the legality of the auction process and the acceptance of bids by an unauthorized officer.

4. The court noted irregularities and undue haste in the auction process, with the Collector reversing a decision to postpone the sale within a short timeframe. The hurried sale made it difficult to gather bidders, and the auction itself was conducted with questionable practices, such as the Tahsildar accepting bids. Due to these irregularities and procedural violations, the court quashed the auction sale and ordered the property to remain under attachment, allowing for fresh recovery proceedings to be conducted in accordance with the law.