9911796707
TMI Blog2000 (1) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on business in a partnership in the name of United Provinces Commercial Corporation Luxa, Varanasi. From 1960, it started facing labour trouble and ultimately its business collapsed on June 7, 1967, after which the firm became defunct and the partners left their ancestral home at Varanasi. The income-tax authorities went on completing the assessments of the firm and its partners and also levied penalties. This resulted in heavy demands. Thereafter recovery proceedings were initiated by the issue of recovery certificate and the aforesaid property was put to auction in 1979-80. The petitioner has stated that he filed his objection/submission through a letter dated December 24, 1979, but the Tax Recovery Officer ignored the same and proceeded ahead with the auction. It was in 1986-87 that the petitioner and his other partners came to know of the year-wise/section-wise assessments and penalties and demands against the firm and the partners took immediate steps and found that no notice of demand was served on the firm or the partners. The Income-tax Appellate Tribunal allowed their appeals by order dated December 11, 1987, a copy of which is annexure 1 to the writ petition. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held under Schedule II to the Income-tax Act after the expiry of three years from the end of the financial year in which the order giving rise to a demand of tax had become conclusive under the provisions of section 245-1 or in terms of the provisions of Chapter XX. It is thus claimed that the sale was barred by time. It is claimed that the aforesaid property belonged to four persons, namely, P. M. Wahi, S. M. Wahi, Ram Mohan Wahi and Krishna Mohan Wahi, as per will dated May 28, 1962, and that there were no liability against Ram Mohan Wahi and Krishna Mohan Wahi who had neither been assessed to tax nor were partners in the firm, United Provinces Commercial Corporation. It is claimed that Krishna Mohan Wahi had filed a suit for partition and injunction regarding his share in the property aforesaid and the said suit being Suit No. 398 of 1999 is pending in the Court of Civil judge (Senior Division), Varanasi, and by order dated April 9, 1999, the said court had restrained the defendants co-sharers in the property in question from transferring the property in question in favour of any person. Earlier another suit being Suit No. 1 of 1980 was filed by Smt. Padma Wahi, w/o the late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale letter was held up because of the civil court's stay order dated January 9, 1980, by which the confirmation of sale was stayed. The said stay order was granted on the application of Smt. Padma Wahi and the suit filed by her was ultimately dismissed. It is claimed that at the time of the auction of the property arrears of demand as mentioned in the recovery certificates Nos. 77, 78, 79, 80, 81 and 82 were outstanding and no objection was filed by the petitioner before the Tax Recovery Officer at the time of the auction proceedings or even thereafter and the validity of the auction was not challenged. It is claimed that no application either by the firm or by the two partners was filed under the Second Schedule to the Income-tax Act for reconsideration of the auction proceedings or for setting aside the auction sale dated January 11, 1980, and that no occasion arose on the part of the Tax Recovery Officer to reconsider the valid auction concluded on January 11, 1980. According to the respondents, the issue of the sale certificate was only a consequential action. It is admitted in the counter affidavit that as a result of the appellate orders, the demands covered by the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Income-tax Act is contained in the Second Schedule and one of the modes of recovery is by attachment and sale of the defaulter's immovable property. Rule 9 contained in the said Schedule bars a suit for setting aside a sale and provides that every question arising between the Tax Recovery Officer and the defaulter or their representatives, relating to the execution, discharge or satisfaction of a certificate or relating to the confirmation or setting aside by an order under this Act of a sale held in execution of such certificate, shall be determined, not by suit, but by order of the Tax Recovery Officer before whom such question arises. Then there are detailed provisions regarding attachment and sale of immovable property which are almost akin to the provision contained in Order 21 of the Code of Civil Procedure regarding sale of immovable property in execution of a decree. Rule 60 provides for setting aside of the sale on the defaulter paying up the dues along with an amount equal to five per cent. of the purchase money which is to be paid to the auction purchaser. Rule 61 provides for setting aside of a sale on the ground of non-service of notice or a material irregularity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of sale that was held on March 18, 1986, while the fact of reduction of the demand was intimated by the assessee to the Department in March, 1977. It was held that the sale for the amount that was not due was invalid. In this case too, unlike the present petitioner, the assessee had come to this court quite early. The facts of this case being materially different, it renders no support to the petitioner's contention. Reference was also made to M. L. John v. ITO [1983] 139 ITR 972 (All), in which it was held that where, notice of demand and copies of the assessment orders were not served on the assessee. the recovery proceedings were invalid. This too was a case in which no sale was held and the petitioner had approached this court as soon as notices of attachment were issued. No rights of any auction purchaser were, therefore, involved. Then reliance was placed on Behari Lal Ramcharan Kothi v. ITO [1973] 87 ITR 198 (All). In that case certain recovery certificates were issued for realisation of tax dues from the petitioner's firm. Later the Income-tax Officer informed the Tax Recovery Officer that the dues had either been paid off or written off and the recovery certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er held that the title of the purchaser related back to the date of sale and not to that of its confirmation. The Supreme Court also held that under the Code of Civil Procedure, the court is bound to confirm the sale when no application under rule 92 is made or when such application is made and is disallowed. Rule 63 of the Second Schedule is akin to Order 21, rule 92 of the Civil Procedure Code, rule 62 is akin to rule 91 of Order 21. Rule 61 is akin to Order 21, rule 90, and rule 60 is akin to Order 21, rule 89 Civil Procedure Code. Therefore, in our view, the ratio of Janak Raj's case, AIR 1967 SC 608, will apply with full force to sales under Schedule 11 to the Income-tax Act, 1961. The aforesaid principle was reaffirmed in Sardar Govindrao Mahadik v. Devi Sahai, AIR 1982 SC 989, in which the auction purchaser was the decree holder himself. The apex court held that where the decree is reversed after the sale and the auction purchaser is the decree holder himself, then the decree holder is not entitled to protection and the sale can be set aside. The Supreme Court, however, reaffirmed that if the auction purchaser is a stranger then the equity in favour of the stranger shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utter disadvantage of the judgment debtor who wins the battle and loses the war. Therefore, where the auction-purchaser is none other than the decree holder who by pointing out that there is no bidder at the auction, for a nominal sum purchases the property, to wit, in this case for a final decree for Rs. 500, Motilal purchased the property for Rs. 300, an atrocious situation, and yet by a technicality he wants to protect himself. To such an auction-purchaser who is not a stranger and who is none other than the decree holder, the court should not lend its assistance. The view which we are taking is not unknown and to some extent is will be borne out by the observations of this court in Janak Raj v. Gurdial Singh [1967] 2 SCR 77 at page 86, AIR 1967 SC 608 at page 618. This court made a pertinent observation which may be extracted : 'The policy of the Legislature seems to be that unless a stranger auction-purchaser is protected against the vicissitudes of the fortunes of the suit, sales in execution would not attract customers and it would be to the detriment of the interest of the borrower and the creditor alike if sales were allowed to be impugned merely because the decree was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as no demand notices were served. We may mention that the assessee knew that the recovery proceedings were going on and the property was proposed to be sold. The petitioner wrote a letter dated December 24, 1979, to the Tax Recovery Officer complaining of the sale on the grounds that the demands were arbitrary and ex parte and it was not his grievance in the said letter that the demand notices were not served. If no demand notices were served, it was the obligation of the assessee to raise this point before the Tax Recovery Officer and object to the proceedings. He did not do so and did not even file an objection after the sale was actually held. In case no notice of demand was served, the petitioner could have filed an objection under rule 61 of the Second Schedule, objecting to the same on the aforesaid grounds and if he had done so the Tax Recovery Officer would have passed appropriate orders but the petitioner never did so and, therefore, he cannot raise such a contention with success in the writ petition that has been filed after 18 years or more. Why the petitioner took the matter so lightly or why he did not bother at all about the sale is clear from what he stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the petitioner was that recovery certificates against the petitioner and United Provinces Commercial Corporation were compounded for sale of the aforesaid property and this was illegal. A firm is not a legal person and, therefore, its dues can be recovered by the attachment and sale of the properties belonging to the partners. In this case, the two brothers were co-owners of the disputed property and, therefore, combining the two sets of certificates together did not result in any irregularity that may vitiate a sale. Reliance was placed on Precision Instruments (Pvt.) Ltd. v. Union of India [1976] 104 ITR 723 (All), in which separate recovery certificates were issued against a limited company and its managing director and the Tax Recovery Officer issued a sale proclamation which included the amounts due both by the company and its managing director. This court held that this was illegal. In this case the petitioner was responsible for the tax assessed on him as an individual as well as for the tax assessed on the firm of which he was a partner. Therefore, the demands contained in the recovery certificates issued against the firm as well as the petitioner could be r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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