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TMI Blog1988 (8) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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, on January 21, 1986, and was purchased by the petitioner, Raja Properties, for the sum of Rs. 37,81,000. The sale was confirmed on March 14 , 1986. The said Surinder Nath Kapoor made an application dated February 15, 1986, under rule 61 of the Second Schedule to the Act before the Tax Recovery Officer, Jaipur, praying for the setting aside of the sale of the property of M/s. Krishna Kapoor & Co. The said application was dismissed by the Tax Recovery Officer, Jaipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 any amount to Indo-Kashmir Carpets and Handicrafts and, therefore, the garnishee order in execution of which its property was sold was illegal. Further, it was urged that M/s. Krishna Kapoor & Co. was only liable to the extent of Rs. 3,38,146 to the Income-tax Department on account of its own income-tax dues which amount it had already deposited. The Revenue could not produce before this court any document showing the exact amount in respect of which M/s. Krishna Kapoor & Co. was reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shna Kapoor & Co. was indebted to M/s. Indo-Kashmir Carpets & Handicrafts to the tune of Rs. 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 Enquiry Officer. The Enquiry Officer observed in, his report as follows : " There is nothing on record to show that the Assessing Officer made any attempt to call for the balance-sheet and accounts of the firm. There is also nothing on record to show that the Assessing Officer tried to record the statements of any or of all the partners specially when the filing of the balance-sheet and the statement of accounts was being delayed intentionally or otherwise on the ground that there were disputes among the partners. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 be set aside after it was confirmed on March 14, 1986. On the other hand, it has been strenuously urged on behalf of the firm, Krishna Kapoor & Co., that as no show-cause notice was issued to it under section 226(3) of the Act in respect of the sum of Rs. 8,56,377-55, the garnishee order passed under section 226(3)(x) for that amount and the sale held in execution of such an order are null and void. Section 226(3)(x) provides for the issue of a notice on a garnishee. Section 226(3)(vi) provides as follows: " Section 226(3)(vi). Where a person to who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her amount. The Income-tax Officer, however, put up the property to sale for Rs. 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 Rs. 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 deemed that there was no existence of such an order and any step taken pursuant to or in enforcement of such an order will also be a nullity. It will be tantamount to selling a property in execution of a decree when the decree has no factual existence. In such a case also, the sale will be null and void. The garnishee order that was passed by the Inspecting Assistant Commissioner (Assessment), Range-II, Amritsar, for the sum of Rs. 8,56,377.55 is, therefore, null and void. In this connection, we may refer to a decision of the Privy Council in Baijnath Sahai v. Ramgut Singh [1896] 231 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 37,81,000 was deposited by the auction-purchaser. The auction-purchaser will be entitled to withdraw the said amount unconditionally. The Revenue shall see that the said amount is refunded to the auction-purchaser. Further, the auction-purchaser will be entitled to get interest on the said amount at the rate of fifteen per cent. per annum for a period of two years and half, during which the amount remained blocked, by way of compensation. The amount of interest calculated at the said rate for the said period comes to Rs. 14,17,875. Out of the said amount, the Revenue shall pay to the auction-purchaser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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