9911796707
TMI Blog2006 (10) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ober 30, 1992, reduced the demand by partly allowing the appeals. The demand, vide notice dated March 29, 1993, against the petitioner stood as follows after the order of the first appellate authority: ----------------------------------------- Sl. No. Assessment year Amount (Rs.) ----------------------------------------- 1. 1980-81 9,280 2. 1981-82 1,20,131 3. 1982-83 2,23,616 4. 1983-84 2,49,628 5. 1984-85 2,94,504 6. 1985-86 3,94,108 7. 1986-87 3,66,051 8. 1987-88 21,01,465 ------------- Total 37,58,783 ----------------------------------------- Being still dissatisfied with the orders of the first appellate authority, the matter was taken up in second appeal by the petitioner before the Income-tax Appellate Tribunal. During the pendency of appeals, the Department initiated recovery proceedings against the petitioner to recover the outstanding dues. In pursuance thereof a warrant of attachment of immovable property was issued by respondent No. 1 on August 23, 1993, showing the outstanding demand of Rs. 38,64,000 having failed to pay the aforesaid demand. The Department proceeded further in the matter to recover the outstanding dues and the recovery certificate for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication in the form of objection challenging the validity of the auction dated March 19, 1997, was filed by the petitioner on March 22, 1997, before respondent No. 1 on the ground that the shop in question was sold "at lower market price is not valid while the assessee had filed the objection time to time regarding the valuation the reserve price fixed by you and the position of registration". It was stated that the builder had not yet executed a sale deed in respect of the disputed shop in favour 0f the assessee/petitioner. The reminder dated March 31, 1997, was given by the, petitioner with the request to decide the objection dated March 22, 1997, filed as annexure 6. The Tax Recovery Officer, vide order dated July 2, 1997, rejected the objections, copy of the said order is filed as annexure 8 to the writ petition. The appeal filed against the said order of the Tax Recovery Officer before the Commissioner of Income-tax (Appeals) was initially as not maintainable, but subsequently, on the directions dated February 25, 2002, of the High Court in Writ Petition No. 190 of 2000 (Subash Chandra Goyal v. TRO [2002] 255 ITR 289 (All)) decided the appeal of the petitioner on the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve price was not fixed in the light of the objections raised by the petitioner. (2) Secondly, the sale proclamation was issued on January 27, 1997, showing the outstanding liability of the petitioner towards income-tax for the assessment years 1980-81 to 1987-88 at Rs. 38,64,201 plus interest under section 220(2) of the Income-tax Act. The Tribunal by the order dated March 5, 1997, annulled the assessment orders for the assessment years 1980-81 to 1986-87 as no fresh sale proclamation was issued, the impugned sale is liable to be set aside. (3) Thirdly, that the amount of Rs. 16,55,000 was seized by the Department in the search on February 25, 1987, and this amount should have been credited to the outstanding dues of the petitioner and the Department has wrongly made adjustment of the said cash seized against the other demands of the petitioner and his family members. In reply, learned standing counsel for the Department and learned counsel for respondent No. 3 supported the auction sale in question by placing reliance on the orders passed by the Tax Recovery Officer and the Commissioner of Income-tax-2. Taking first point first, it may be noted here that the said point has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted. Then, it was urged that the entire sale proceedings is null and void as no fresh sale proclamation was issued by the Tax Recovery Officer so as to give effect the order passed by the Income-tax Tribunal for the assessment years 1980-81 to 1986-87. Before examining the said issue it is desirable to recapitulate the correct factual position. It is evident that the petitioner all the time raised a single grievance that the reserve price of the shop in question was not correctly fixed. The objection dated March 22, 1997, already referred to above, and the reminders (annexures 5 and 6) do show only this much that the reserve price was not correctly fixed. Even in the written submission (annexure 7 to the writ petition, filed before the Tax Recovery Officer, dated May 28, 1997, the petitioner did raise the plea that a fresh sale proclamation be issued. It is important to note that even the Tax Recovery Officer in paragraph 3 of his order dated July 2, 1997, has stated that the petitioner raised only one grievance and that is with regard to the reserve price of the immovable property. An endorsement by the petitioner with regard to this is on the order sheet vide entry date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the day of auction. Demand notices were served for the assessment years 1987-88, 1990-91 to 1992-93 on the petitioner and he failed to comply with the demand notices, is not disputed by the petitioner. The Department is right in its submission that there was no variation/modification in the demand of the aforesaid assessment years (1987-88, 1990-91 to 1992-93) and demand notices were indisputably served on the petitioner, there was no illegality in conducting the auction sale on March 19, 1997, for the recovery of the aforesaid dues against the petitioner. In the counter-affidavit it has also been mentioned that the public at large was informed through the newspaper dated March 19, 1997, with respect of the aforesaid outstanding demands against the petitioner to which there is no specific denial in the rejoinder affidavit. From the above discussion the following factual position emerges. (1) The sale proclamation was issued for the recovery of Rs. 38,64,000 vide annexure 2. (2) The demands for the assessment years 1980-81 to 1986-87 were set aside by the Income-tax Appellate Tribunal, but the demand amounting to Rs. 21,01,465 in respect of the assessment year 1987-88 remained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account, this court is of the view that this would not in any way affect the auction held on March 19, 1997. The grounds of setting aside the sale of immovable property are limited one and have been statutorily recognised under rule 61 of the Second Schedule to the Income-tax Act. Learned senior counsel could not show anything as to how the petitioner has sustained substantial injury or there was any material irregularity in publishing and conducting sale. The next case relied upon is Sultan Leather Finishers P. Ltd. v. Asst. CIT [1991] 191 ITR 179, wherein this court has held that recovery proceedings cannot be taken in a case when the assessee had already moved an application for rectification under section 154 of the Income-tax Act. The said case was decided in a different set of facts. The recovery proceedings were initiated during the pendency of application for rectification of mistake filed under section 154 of the Income-tax Act. In this fact situation the court felt that the authority concerned should dispose of the said rectification application first within the specified time and directed the Tax Recovery Officer not to proceed with the recovery as against the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the legal position as then existed was different. The Income-tax Officer without giving effect to the appellate order reducing the demand, initiated the proceedings for recovery of the demand. The mistake thus was in the certificate issued by him. It was held that instead of the withdrawal of the certificate after sale under sub-section (4) of section 225 could not remove the infirmity in the sale, which took place on a recovery certificate for the arrears, which did not exist in fact. The factual aspect of the above case does not have even remotely any semblance with the case of the petitioner as the sale proclamation when it was issued in any way does not mention the incorrect income-tax dues. It is not even the case of the petitioner that a sum of Rs. 38,64,000 under section 220(2) of the Income-tax Act as shown in the proclamation of sale annexure 2 was not outstanding on the day of sale of proclamation. The total length and breadth of the argument of the petitioner is that as a result of subsequent development, i.e., the appeals for the assessment years 1980-81 to 1986-87 having been allowed by the order dated March 5, 1997, the demand remained to the tune of Rs. 21 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Income-tax Act and as a consequence thereof the demand is reduced, but the order is the subject-matter of further proceedings under the Act. Section 225(3) as it stands with effect from April 1, 1989, concerns a situation where a certificate has been drawn up and subsequently the amount of the outstanding demand is reduced as a result of appeal or other proceedings under the Act. In such circumstances the Tax Recovery Officer shall when the order which has been the subject-matter of such appeal or the proceedings has become final and conclusive, amend the certificate or cancel it, as a case may be. The case of Mannoo Lal Kedar Nath (HUF) [1988] 172 ITR 612 (All) was not concerned with the contents of proclamation of sale. The proclamation has to be drawn in accordance with rule 53 of the Second Schedule to the Income-tax Act, which lays down that it shall specify, as fairly and as accurately as possible: (a) the property to be sold; (b) the revenue, if any, assessed upon the property or in part thereof; (c) the amount for the recovery of which sale is ordered; (cc) the reserve price, if any, below which the property may not be sold; and (d) any other thing which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no demand or no demand existed at all before confirmation of sale. It held that in such circumstances the sale cannot be confirmed. The facts in the case in hand do show that a huge demand much more than the auction price was in existence, even on the date of confirmation of sale and subsequent thereto. Moreover, the ratio laid down in the present case should be understood in the context of section 225(3) as it stood at the relevant point of time, i.e., prior to its amendment on April 1, 1989. This is another aspect of the case. It is now the matter of history that the apex court in ITO v. Seghu Buchiah Setty [1964] 52 ITR 538; AIR 1964 SC 1473, with reference to the Indian Income-tax Act, 1922, held that on the Income-tax Officer's order being revised in appeal, the default based on it and all consequential proceedings must be taken to have been superseded and fresh proceedings have to be started to realise the dues as found by the revised order. Law was amended by the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, retrospectively. The apex court in Union of India v. Jardine Henderson Ltd. [1979] 118 ITR 112, considered the Taxatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the dues were enhanced or reduced in any appeal or proceeding.' 22. In Gopi Chand v. Union of India [1976] 102 ITR 707, a learned single judge of the Punjab and Haryana High Court, after quoting the provisions of sections 3 and 5 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, has observed as below: 'It is apparent that the Validating Act was enacted to counter the effect of the Supreme Court judgment referred to above and all recovery proceedings taken before its enactment were validated.' 23. In the present case, it appears to us that learned counsel for the petitioners had advanced the argument regarding fresh notice of demand in pursuance of the order of the Appellate Assistant Commissioner whereby the tax dues were reduced from Rs. 8 lakhs odd to Rs. 2 lakhs odd on the basis of the observations made in ITO v. Seghu Buchiah Setty [1964] 52 ITR 538 (SC). The aforesaid ruling had considered the provisions of the Indian Income-tax Act, 1922, whereas the proceedings giving rise to the present writ petitions are under the provisions of the new Act of 1961 and the proceedings were initiated much after the enforcement of the Taxation Laws (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the authorities that on the date of sale proclamation or on the date of confirmation of sale there was no outstanding demand of income-tax against him. The present writ petition arises out of an order passed by the Commissioner of Income-tax (Appeals) in connection with the confirmation of auction sale. The scope of the said enquiry in the petition is as to whether the sale should be confirmed or not. It cannot be widened by raising fresh and new pleas not raised by the petitioner before the Tax Recovery Officer prior to the date of actual auction sale or even within 30 days, thereafter the actual sale. In this connection, it may be noted that in the counter-affidavit the Department has set out the disbursement of Rs. 16,55,000 the cash seized in the search and has categorically stated that such disbursements were made on the request of learned counsel for the petitioner. The relevant portion from the order of the Commissioner of Income-tax is reproduced below: '10.1 In his contentions, the assessee has also claimed that an amount of Rs. 16,55,000 seized from his premises during income-tax search on February 25, 1987, ought to have been credited in his demands in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required by the Schedule or on the ground of material irregularity in publishing and conducting the sale. In the case in hand it is not the case of the petitioner that the notice was not served on him to pay arrears. At the most the cancellation of the sale has been sought on the ground of material irregularity in publishing or conducting the sale. The phrase "material irregularity in connection, with auction sale" has acquired a definite legal connotation. It does not include a mere irregularity. It means that only such degree of irregularity in publishing or conducting the sale, which has caused substantial injury to the defaulter. In other words, even if there was some irregularity in publishing or conducting the sale and thereby no substantial injury has been caused to the defaulter, the sale shall not be liable to be set aside, this is an acknowledged position of law. In the entire writ petition or objections filed before the authorities below there is any whisper as to how the petitioner has sustained substantial damages in conducting the sale or in confirming the auction sale even if there was some variance with regard to the actual demand against him. The case of the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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