9911796707
TMI Blog1988 (8) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... he filing of the petition. Surinder Nath Kapoor is one of the partners of M/s. Krishna Kapoor Co. consisting of the following four partners (1) Shri Shiv Dayal Kapoor (since deceased). (2) Shri Surinder Nath Kapoor. (3) Shri Ram Nath Kapoor. (4) Shri Narender Nath Kapoor. Partners Nos. 2, 3 and 4 are the sons of Shiv Dayal Kapoor, since deceased. There is another firm, M/s Indo-Kashmir Carpets Handicrafts. It is the sister concern of M/s Krishna Kapoor Co. and constituted with the said Shiv Dayal Kapoor, since deceased, and his daughters-in-law. Both the firms are assessees under the Income-tax Act, 1961, hereinafter referred to as the Act . On December 12, 1984, the Inspecting Assistant Commissioner (Astt.), Range-11, Amritsar, passed a garnishee order under section 226(3)(x) of the Act, holding M/s. Krishna Kapoor Co. a defaulter to the extent of ₹ 8,56,377 on the allegation that the said sum was due by M/s. Krishna Kapoor Co. to the assessee, M/s. Indo-Kashmir Carpets Handicrafts. The garnishee order was thereafter put into execution and the property of M/s. Krishna Kapoor Co. was put up for sale by the Tax Recovery Officer-I, Jaipur, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendency of the said application for clarification, the petitioner, Raja Properties, the auction-purchaser, filed the said petition for direction praying for recalling the order dated October 12, 1987, of this court and the dismissal of the special leave petition. It may be stated at this stage that this court took the view that its order dated October 12, 1987, was quite clear and did not require any clarification whatsoever. The court reiterated that by virtue of that order, the sale stood set aside. Upon receipt by the Commissioner of Income-tax, Jaipur, of a contempt notice issued by this court, the appeals, which had been filed by Surinder Nath Kapoor, were all disposed of by him on February 4, 1988, in the light of the order of this court setting aside the sale. It was contended by the petitioner auction-purchaser, in support of its application for direction, that the auction-sale having been confirmed on March 14, 1986, the same could not be set aside. During the hearing of the petition of the auction-purchaser, there was a dispute as to the amount for which the auction sale was held. It was urged on behalf of the firm, M/s. Krishna Kapoor Co., that it did not owe a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), Range-II, Amritsar, under section 226(3)(x) of the Act. This fact, which has been clearly stated in the report of the Enquiry Officer, has not been denied before us by the Revenue. The basis of passing the garnishee order dated December 10, 1984, was, as pointed out by the Enquiry Officer in his report, a copy of a statement of accounts filed by M/s. Indo-Kashmir Carpets Handicrafts and a letter dated September 27, 1984, written by two of its partners to the Assessing Officer, inter alia, stating that M/s. Krishna Kapoor Co. was indebted to M/s. Indo-Kashmir Carpets Handicrafts to the tune of ₹ 8 lakhs. In this connection, it is significant to notice that the Inspecting Assistant Commissioner (Assessment), Range-II, Amritsar, then holding the post of Deputy Commissioner of Income-tax (Central), Range-II, Ludhiana, in his letter addressed to the Enquiry Officer stated, inter alia, that on the basis of the balance-sheet available on the assessment records filed after the garnishee order was passed, no amount was payable to M/s. Indo-Kashmir Carpets Handicrafts by M/s. Krishna Kapoor Co. as on March 31, 1982. A copy of the letter is annexure-VII to the report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, yet be issued a garnishee order for ₹ 8,56,377,55. It has been observed by the Enquiry Officer that it was due to the carelessness of the officer concerned that he did not issue the show cause notice for the sum of ₹ 8,56,377.55 for which a garnishee order was issued and such carelessness, in our opinion, is unpardonable. Moreover, as stated already, there is no satisfactory evidence before the Inspecting Assistant Commissioner (Assessment), Range-II, Amritsar, that a sum of ₹ 8,56,377.55 was due by the firm, Krishna Kapoor Co., to M/s. Indo-Kashmir Carpets Handicrafts, inasmuch as the Enquiry Officer himself has been unable to come to a finding in respect of that amount. Thus, without giving the firm, Krishna Kapoor Co., an opportunity of showing cause in respect of the sum of ₹ 8,56,377.55 under section 226(3) of the Act, a garnishee order in respect of that amount was passed under section 226(3)(x) and a very valuable property of the firm was put up to auction and sold to the petitioner. The contention of the petitioner auction-purchaser as well as of the Revenue is that the petitioner, being a third party auction-purchaser, the sale could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to make repayment in pursuance thereof to the Income-tax Officer, he shall be deemed to be an assessee in default in respect of the amount specified in the notice. The amount that was specified in the notice was ₹ 2,86,450. The firm, M/s. Krishna Kapoor Co., did not deny on oath that the said sum demanded or any part thereof was due by them to Indo-Kashmir Carpets Handicrafts. So, in view of clause (x), M/s. Krishna Kapoor Co. shall be deemed to be an assessee in default in respect of the said sum of ₹ 2,86,450 as specified in the notice and not for any other amount. The Income-tax Officer, however, put up the property to sale for ₹ 8,56,377.55 which was not at all specified in the garnishee notice. In other words, the garnishee order was for a fictitious sum of ₹ 8,56,377.55 inasmuch as it was not mentioned in the notice under section 226(3) of the Act. There can be no doubt that when an order is made for the payment of a fictitious sum without giving any opportunity to a person against whom the order is made, to show-cause against the passing of such an order for the said sum, the order is a nullity. In other words, in the eye of law, it will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, 1987, which has already been extracted above, showing that a representation on behalf of the said Surinder Nath Kapoor, had been made to this court that the income-tax dues of the firm, Krishna Kapoor Co., to the extent of ₹ 3,38,146 had already been paid to the Department, when, admittedly, on the day the said order was passed, it was not paid, but on the next day. It is pointed out by the learned Additional Solicitor-General that by making a false representation to this court, the firm and/or its partner, Surinder Nath Kapoor, got an order setting aside the sale. In the circumstances, it is submitted that the order setting aside the sale should be recalled. We are unable to accept the contention. It has already been held by us that the sale is a nullity and even though there was some misrepresentation on the part of the firm, it is difficult for us to recall the order setting aside the sale which is null and void. We are, however, of the view that, in view of the conduct of the firm and/or its said partner, they should share along with the Revenue a part of the compensation that may be allowed to the auction-purchaser. It has already been noticed that a sum of & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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