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2013 (2) TMI 326 - HC - Income TaxAttachment of immovable property in respect of 25 flats - sale confirmed by Tax Recovery Officer - demands on account of tax for the recovery - petitioner undertook an housing project and as a consequence to the development of the project and the profit derived thereon, they sought the benefit of Section 80-IB(10) - Held that - The sale was held on 11.1.1980. No application was filed for setting aside the sale either by the assessee or by the auction purchaser or by anyone interested in the property. On expiry of 30 days from the date of the sale the Tax Recovery Officer could have passed an order confirming the sale. However, the Tax Recovery Officer was injuncted by the writ of civil court from confirming the sale. The interim order issued by the civil court ceased to operate on 12.1.1998 whereafter an order of confirmation was passed on 25.3.1998 by the Tax Recovery Officer ignoring, or unmindful of, the important event which had taken place in between. Before 25.3.1998, the demand against the assessee admittedly stood reduced to nil. This fact was in the notice of Income-tax Officer as well as the Commissioner of Income Tax. Attention of the Income-tax Officer as also the Tax Recovery Officer was also invited by the firm M/s. UPCC through its communication dated 22.11.1996. On 16.1.1997, assessee had specifically called upon the Income Tax Officer who had raised the demand against the assessee to confirm if all the recovery certificates issued against the assessee-firm had stood withdrawn or cancelled. In view of the facts within the knowledge of the department and the communications so made, the Tax Recovery Officer could not have confirmed the sale on 25.3.1998. Rule 56 casts an obligation on the Tax Recovery Officer to pass an order confirming the sale consciously and with due application of mind to the relevant facts relating to sale by public auction which is to be confirmed. Under Rule 63, confirmation of sale is not automatic. An order confirming the sale is contemplated to make the sale absolute. Ordinarily, in the absence of an application under Rule 60, 61 or 62 having been made, or having been rejected if made, on expiry of 30 days from the date of sale the Tax Recovery Officer shall pass an order confirming the sale. However, between the date of sale and the actual passing of the order confirming the sale if an event happens or a fact comes to the notice of the Tax Recovery Officer which goes to the root of the matter, the Tax Recovery Officer may refuse to pass an order confirming the sale. The fact that sale was being held for an assumed demand which is found to be fictitious or held to have not existed at all, in fact or in the eye of law, is one such event which would oblige the Tax Recovery Officer not to pass an order confirming the sale and rather annul the same. The High Court clearly fell in error in not allowing relief to the petitioner-appellant by setting aside the sale. As the order of the ITAT, which is the highest fact finding authority, held in favour of the petitioner assessee and that order has been given effect to as a consequence, the Tax Recovery Officer is bound to give effect of the order of the Assistant Commissioner who accepted the order of the Tribunal - the first respondent Tax Recovery Officer is directed to pass necessary orders, consequent to the proceedings of the ACIT, Circle XIV, accepting the order of the Tribunal. Taking note of the nil payment insofar as the assessee for all the assessment year, the Tax Recovery Officer has to release the property from attachment in terms of the order of the Tribunal and consequent order of the Assistant Commissioner, Circle XIV.
Issues Involved:
1. Legality of the attachment of immovable property. 2. Entitlement to the benefit under Section 80-IB of the Income Tax Act, 1961. 3. Validity of the demand notice issued by the assessing officer. 4. Obligation of the Tax Recovery Officer to lift the attachment following the appellate order. 5. Impact of the Income Tax Appellate Tribunal's decision on the tax liability. Issue-wise Detailed Analysis: 1. Legality of the attachment of immovable property: The petitioner filed Writ Petition Nos.22913 to 22915 of 2012 seeking a Writ of Certiorarified Mandamus to quash the order of attachment of immovable property dated 15.5.2012 for the assessment years 2006-07, 2008-09, and 2009-10. Similarly, Writ Petition No.24101 of 2012 was filed to quash the letter dated 22.8.2012 and to direct the first respondent to lift the order of attachment concerning 25 flats. The court consolidated all four writ petitions for final disposal. 2. Entitlement to the benefit under Section 80-IB of the Income Tax Act, 1961: The petitioner undertook a housing project and sought the benefit of Section 80-IB, specifically Sub Clause 10, which allows a deduction of 100% of the profits derived from such housing projects approved before 31st March 2008. The assessing officer disallowed this special deduction, raising a demand. However, on appeal, the Commissioner of Income Tax (Appeals) partially allowed the appeal, reducing the tax liability. 3. Validity of the demand notice issued by the assessing officer: The petitioner challenged the original demand notice, arguing that it should be revised according to the Commissioner of Income Tax (Appeals) order. The Income Tax Appellate Tribunal later allowed the petitioner's appeal entirely and dismissed the department's appeal, resulting in no tax liability for the petitioner. 4. Obligation of the Tax Recovery Officer to lift the attachment following the appellate order: Following the Tribunal's order, the Assistant Commissioner of Income Tax, Circle XIV, passed an order on 15.1.2013, giving effect to the Tribunal's decision, resulting in a nil tax liability. The petitioner argued that the Tax Recovery Officer should have communicated this to lift the attachment order since there was no outstanding tax liability. 5. Impact of the Income Tax Appellate Tribunal's decision on the tax liability: The Tribunal's decision in ITA Nos.1644 to 1647 and ITA Nos.1662 to 1665 for the assessment years 2006-07 to 2009-10 allowed the petitioner's appeals, making the tax liability nil. The Assistant Commissioner of Income Tax, Circle XIV, gave effect to this order, confirming the nil tax liability. The court referred to the Supreme Court's decision in Mohan Wahi vs. Commissioner of Income Tax, stating that if the demand is reduced to nil, the Tax Recovery Officer must cancel the certificate and cannot confirm the sale of attached property. Conclusion: The court directed the first respondent Tax Recovery Officer to pass necessary orders based on the Assistant Commissioner's proceedings, accepting the Tribunal's order. Consequently, the Tax Recovery Officer must release the property from attachment. The writ petitions were allowed, and no costs were imposed.
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