2017 (6) TMI 300 - HC - Income Tax

Order passed by the Settlement Commission - conclusive test theory - Held that - Principal Commissioner dismissed the petitioner s appeal. We do not think that the view taken by the Principal Commissioner was either perverse or vitiated in law. It is a possible view of the matter. We equally agree with the Principal Commissioner when he faults the petitioner for having not disclosed the communication dated 30th January, 2017. The demand was computed on the basis of the petitioner s rectification application. The penalty under section 221 was also computed together with interest. In the affidavit in reply, the Principal Commissioner says in clearest terms that this letter intimates the final and revised demand for the block period 2003-04 to 2008-09. The final and conclusive demand is intimated by this letter, which includes the demand after giving the effect to the petitioner s rectification application and interest under section 220(2) and 245-D(6A) of the IT Act. This letter having been brought on record that the Department s action is justified, according to this Principal Commissioner. We see much force in this stand of the Revenue. On facts, we find that this is not a case which requires our interference in writ jurisdiction. This court s jurisdiction under Article 226 of the Constitution of India is both, extraordinary and discretionary. It is equitable as well. It should not be exercised so as to allow a defaulter like the petitioner to derive benefit or take advantage of his own wrong. We think that the writ petition deserves to be dismissed on this ground alone. In the present case, the facts are eloquent enough. They clearly spell out the position that in the order of the Settlement Commission, there was a request noted. That was a request made by the petitioner and for payment of the tax in installments. That request was granted and time was stipulated for payment by installments. All this is incorporated in the order of the Settlement Commission. It is the petitioner, who could not abide by the time limit and applied for extension. It is the petitioner, who proceeded on the footing that such an application for extension could have been filed and pressed. It is in these circumstances that the petitioner cannot now raise a technical plea. That too by relying upon the period prescribed by Rule 68B(1). That rule itself and as clarified above, does not end with the words after the expiry of three years from the end of financial year , but states further that demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive . In any event, the word conclusive itself has to be understood in the context. It means bring or come to an end . In Advanced Law Lexicon, 3rd Edition Reprint 2007, this word is understood as final, finishing, ending. The word conclusive means the closing, settling or finally arranging of a treaty, contract, deed etc. It is in that sense the word has been understood and must be, therefore, given that meaning. In these circumstances, we do not think that the view taken is in any way perverse or contrary to law. Writ petition dismissed.

Issues Involved:
1. Quashing and setting aside the sale of a residential bungalow attached by the Income Tax Department.
2. Whether the order of the Settlement Commission is final and conclusive.
3. Applicability of Rule 68B of the Second Schedule of the Income Tax Act, 1961 regarding the limitation period for the sale of attached property.
4. Impleadment of the highest bidder in the auction as a necessary party to the writ petition.
5. Whether the petitioner has defaulted in payment of tax dues and the consequences thereof.

Detailed Analysis:

1. Quashing and Setting Aside the Sale of the Residential Bungalow:
The petitioner sought to quash the sale of his residential bungalow, which was attached by the Income Tax Department due to unpaid tax liabilities. The petitioner argued that the sale was illegal and beyond the permissible period under Rule 68B of the Second Schedule of the Income Tax Act, 1961. The petitioner contended that the order of the Settlement Commission dated 1st December 2011, which determined the tax dues, had become final and conclusive, and the sale was conducted after the expiry of the limitation period.

2. Finality and Conclusiveness of the Settlement Commission’s Order:
The petitioner argued that the order of the Settlement Commission dated 1st December 2011 was final and conclusive under Section 245-I of the Income Tax Act. The petitioner contended that non-payment of tax dues due to financial difficulties does not affect the conclusiveness of the Settlement Commission’s order. The respondents, however, argued that the order was not conclusive as the petitioner failed to comply with the conditions of payment in installments. The Principal Commissioner of Income Tax held that the order of the Settlement Commission becomes conclusive only upon fulfillment of the conditions, which the petitioner failed to meet.

3. Applicability of Rule 68B of the Second Schedule of the Income Tax Act:
Rule 68B prescribes a time limit of three years for the sale of attached immovable properties from the end of the financial year in which the order giving rise to the demand becomes conclusive. The petitioner argued that the sale conducted in 2017 was beyond this period. The respondents contended that the period of limitation was extended due to the petitioner’s own requests for extension of time and pending proceedings before the Settlement Commission. The Principal Commissioner held that the order of the Settlement Commission was not conclusive due to the petitioner’s continuing default, and thus, the limitation period had not expired.

4. Impleadment of the Highest Bidder in the Auction:
The highest bidder in the auction, Deccan Homes Pvt. Ltd., sought to be impleaded as a necessary party to the writ petition, arguing that it had a vital interest in the outcome as it had paid a substantial amount towards the purchase of the property. The court allowed the highest bidder to intervene and oppose the writ petition, noting that the bidder’s rights and contentions were directly affected by the petition.

5. Petitioner’s Default in Payment of Tax Dues:
The petitioner admitted to financial difficulties and requested extensions for payment of tax dues. The respondents argued that the petitioner was a defaulter who failed to comply with the payment schedule, leading to the attachment and sale of the property. The Principal Commissioner noted that the petitioner’s default was continuous and that the order of the Settlement Commission was not conclusive due to non-compliance with the conditions of payment in installments.

Conclusion:
The court dismissed the writ petition, holding that the petitioner’s failure to comply with the conditions of the Settlement Commission’s order rendered the order non-conclusive. The court found that the sale of the attached property was justified and within the permissible period, considering the petitioner’s requests for extensions and pending proceedings. The court also allowed the highest bidder to intervene, recognizing its interest in the outcome of the petition. The petitioner’s arguments based on Rule 68B and the finality of the Settlement Commission’s order were rejected, and the court upheld the actions of the Income Tax Department.

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