9911796707
TMI Blog2011 (9) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Limited, which is the borrower of 1st respondent Bank Bank of India, is one of the assessee in default, and is liable to pay huge outstanding demand of more than ₹ 27 crores to the petitioner Department for the assessment year 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, 1997-98, 1998-99 under the Income Tax Act, 1961. 5. The 1st respondent Bank of India initiated recovery proceeding against the 2nd respondent borrower for recovery of secured debts. The petitioner Tax Recovery Officer, Godhra, in the meantime, has issued demand notice to the 2nd respondent, which has failed to pay huge income tax dues, and consequently the petitioner - Department passed an order of attachment of immoveable property on 7/18 October 2002, and attached the immoveable property. The warrant of attachment of moveable or immoveable property under Rule 20 of the 2nd Schedule was issued on 26th December 2002, thereby, the moveable assets of the 2nd respondent were also attached. 6. Similarly, one M/s. Shreyas Equipment Limited failed to pay the outstanding tax demand. The petitioner - Department passed an order of attachment of immoveable property on 18th October 2002. Panchmana was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, Debt Recovery Tribunal II, Ahmedabad in R.P. No.980. In view of the objection raised by the Sales Tax Department of the State, Income Tax Department and Gujarat Industrial Corporation Limited and their claims, the intending bidders withdrew themselves from the public auction. 13. On 12th July 2007, the Recovery Officer, Debt Recovery Tribunal II, Ahmedabad, directed that till the objections of Income Tax Department, Sales Tax Department of the State and Gujarat Industrial Corporation Limited are decided, sale of moveable and immoveable assets will not take place; only after such decision, the auction sale may proceed. After hearing the parties, by order dated 9th may 2008, the Recovery Officer, Debt Recovery Tribunal II, Ahmedabad, rejected the objections raised by the Income Tax Department and decided to recover the dues of the Bank of India first, and observed that after such recovery, if any amount remains as balance, the dues of the Income Tax Department, Sales Tax Department and others can be paid. 14. Against the said order, the petitioner - Department filed appeal u/Sec.30 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The petitioner - Department also passed an order of attachment of the very same immoveable property of 2nd respondent company on 22nd September 2003 for recovery of arrears of tax for the assessment year 1995-96 and assessment year 1997-98, which was duly served on the 2nd respondent. A panchnama was also drawn showing attachment of the immoveable property of the 2nd respondent situated at G.I.D.C., Kalol. Proclamation of sale was made by the petitioner Department on 23rd February 2004 in respect of attached immoveable property of the 2nd respondent fixing the sale attachment of the property as described therein. A public notice was also issued by the petitioner Department on 4th March 2004 in the local daily (Sandesh), Panchmahal Publication, Dahod Edition, in respect of sale of attached assets and properties of the 2nd respondent and other defaulters. Pursuant to the public notice for auction for attached properties, the Bank of Baroda by letter dated 5th March 2004 requested the petitioner Department not to dispose of the assets of the 2nd respondent for the reasons mentioned in the said letter. 22. According to the petitioner, it lodged claim of recovery of tax arrears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant facts are required to be noticed in the case of both the assessee 2nd respondents of each case vis- -vis the mortgage created in favour of the 1st respondent Bank of each case. 30. In S.C.A. No.13196 of 2008, the income tax proceeding relates to assessment year 1992-93 onwards initiated against the assessee 2nd respondent M/s. Somani Cement Company Limited. The petitioner has not made it clear as to since which date income tax proceeding is pending against the 2nd respondent assessee, i.e. prior to 25th October 1994 or thereafter. Registered Folio No. 163, which relates to creation of charge by 2nd respondent in favour of Bank of India, shows that the Board of Directors of the Company on 25th October 1994 handed over and deposited the title deeds of the land in question with the Bank of India. Therein, moveable and immoveable properties of borrower werementioned, which are situated in village Kharsalia via Vijalpur, Survey Nos. 350/1, 350/4, 350/5 and 350/6 of Mouje Jitpura, Taluka Godhra, District Panchmahals. In the said mortgage deed, it was specifically mentioned by the 2nd respondent that no proceeding for recovery of tax are pending against the 2nd respondent c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled returns as per the returns of income tax for the assessment years 1990-91, 199192, 1992-93, 1993-94, 1994-95 for all successful years with the concerned assessing officer, when it was a partnership firm. It is only when the 2nd respondent was made a Company under the Companies Act, 1956, from 21 February 1995 the arrears of tax were not paid for the assessment years 1995-96 and assessment year 1997-98. Thus, it is evident that the income tax proceeding was initiated by the petitioner Income Tax Department much after the mortgage made by 2nd respondent in favour of the Bank (on 1st June 1989). 34. It is a settled law that the State will have priority over the unsecured creditor in recovery of its dues. One may raise the question whether State can claim priority over the debts of the Bank, which have been secured by the borrower by creating mortgage. 35. A charge is a wider term, which also includes mortgage. A mortgagor can mortgage the property with the mortgager s interest in the property with a Bank or financial institution, which becomes a secured creditor within the meaning of Sec.2(ze) of the Securitization and Reconstruction of Financial Assets and Enforcement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. 40. Similar issue fell for consideration before the Madhya Pradesh High Court in the case of State of Madhya Pradesh vs. Abhaykumar reported in (1992) 86 Sales Tax Cases 88, wherein almost similar provision i.e. Sec.33-A of the Madhya Pradesh General Sales Tax Act,1958 fell for consideration. The Indore Bench of the Madhya Pradesh High Court held that the transfer was for a valuable consideration and it was without notice of the pendency of the proceeding under the Sales-tax Act, and therefore, the transfer falls under the exception created by the proviso to Section 33-A of the said Act. Similar was the view expressed by a Division Bench of the Madhya Pradesh High Court (Gwalior Bench) in the case of Pooranchand Ved Prakash v. The State of Madhya Pradesh reported in (1973) XXXI Sales Tax Cases 170. 41. Sec.281 of the Income Tax Act also fell for consideration before the Division Bench of this Court in the case of Tax Recovery Officer v. Industrial Financial Corporation of India in Special Civil Application No. 3786 of 2010 with another case wherein by judgment dated 22nd June 2011, this Court taking into consideration the facts that the transfer of property was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
