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TMI Blog2008 (5) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1985-86 was alone enforced. 4. The agricultural lands owned by the partners of the appellant firm at Bodametlapalem had been attached and sold in public auction on 5.8.1996 after following the entire procedure laid down under second schedule to the Income Tax Act, 1961 (hereinafter referred to as "the 1961 Act"). Nine people participated in the public auction held on 5.8.1996. The sale was confirmed in favour of L. Krishna Prasad who offered the highest price. No procedural irregularity or illegality in public auction process was even alleged by the appellants. 5. A demand of Rs.7,84,072/- for the assessment year 1985-86 was initially raised against the appellant firm. By virtue of grant of partial relief in the appeal, the demand was reduced to Rs.4,65,174/- and as against the said amount, the appellant firm paid only Rs.4,34,927/- leaving a balance of Rs.30,247/-. In addition to this, there was demand of Rs.5,65,538/- raised by virtue of levy of penalty imposed under section 271(1)(c) of the 1961 Act for the said assessment year. The levy was confirmed in appeal by the Commissioner of Income Tax (Appeals). Further demands were also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that with reference to the assessment year 1985-86, the application for waiver of interest was pending before the authorities and further the stay application filed before the Commissioner was not disposed of. Even on that count also the sale conducted by the respondent-department on 5.8.1996 was illegal and unsustainable. 9. It was categorically mentioned on behalf of the respondent-department that the sale proceedings were initiated continued only with reference to arrears relating to the assessment year 1985-86. 10. The appellants contended that the High Court has failed to notice that the nature of the lands in the auction notice was wrongly mentioned as dry lands. In fact the said lands were a mango orchard and building structure and of much higher value. The auction ought to be vitiated on this ground alone. 11. Learned counsel for the appellants also submitted that the appellants have received the notice of demand as defaulters in their individual capacity and also as the partners of the firm, however, the respondent-department has failed to give notice of demand to the appellants qua their share in the partnership firm. They did not receive the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acious remedy by way of filing a petition under rules 60 and 61 of the Second Schedule to the 1961 Act. The appellant ought to have availed of the statutory remedy for ventilating its grievances instead of filing a petition before the High Court. 17. There is another very significant aspect of this case, which pertains to the rights of the bona fide purchaser for value. It was asserted that respondent no. 2 is a bona fide purchaser of the property for value. It was further stated that he had purchased the said property in a valid auction and he cannot be disturbed according to the settled legal position. 18. It is an established principle of law that in a third party auction purchaser's interest in the auctioned property continues to be protected notwithstanding that the underlying decree is subsequently set aside or otherwise. This principle has been stated and re-affirmed in a number of judicial pronouncements by the Privy Council and this court. Reliance has been placed on the following decisions. 19. The Privy Council in Nawab Zain-Ul-Abdin Khan v. Muhammad Asghar Ali Khan & others (188 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Padanathil Ruqmini Amma v. P. K. Abdulla (1996) 7 SCC 668, this court in para 11 observed as under: "11. In the present case, as the ex parte decree was set aside, the judgment-debtor was entitled to seek restitution of the property which had been sold in court auction in execution of the ex parte decree. There is no doubt that when the decree-holder himself is the auction-purchaser in a court auction sale held in execution of a decree which is subsequently set aside, restitution of the property can be ordered in favour of the judgment-debtor. The decree-holder auction-purchaser is bound to return the property. It is equally well settled that if at a court auction sale in execution of a decree, the properties are purchased by a bona fide purchaser who is a stranger to the court proceedings, the sale in his favour is protected and he cannot be asked to restitute the property to the judgment-debtor if the decree is set aside. The ratio behind this distinction between a sale to a decree-holder and a sale to a stranger is that the court, as a matter of policy, will protect honest outsider purchasers at sales held in the execution of its decrees, although the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X
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