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TMI Blog1976 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... n of these amounts. It transpires that initially the petitioner-company received a notice from the Tax Recovery Officer stating that a sum of Rs. 75,653 was due against the petitioner. Petitioner made representations against this notice alleging that certain amounts already paid by him had not been credited and that the sum demanded was not correct. In spite of these representations a sale proclamation was drawn up for sale of certain properties of the company for recovery of an amount of Rs. 75,653 together with interest. The sale took place on that date and the highest bid received was Rs. 65,000. As the bid appeared to be low as compared to the reserve price fixed for the property by the department, the sale does not appear to have been confirmed. A fresh sale was held on 3rd July, 1972, but as none appeared to bid, it was postponed and a fresh proclamation of sale was issued on the 6th July, 1972, fixing the date of the sale for the 17th August, 1972. The sale was again postponed on orders of the Additional Commissioner of Income-tax, Kanpur. It is not necessary to refer to certain other facts showing how the tax arrears which were claimed to be Rs. 75,653 were toned down to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a perusal of the records produced before us, it is clear that this amount represented not only the damand against the petitioner-company but also of the managing director. Question is whether in these circumstances the sale is valid. The relevant provisions for the purposes of the present controversy are sections 222(1) and 224 as also Schedule 2 of the Income-tax Act, 1961. We will extract the relevant part of section 222(1) and then refer to the other provisions : " 222. Certificate to Tax Recovery Officer.---(1) When an assessee is in default or is deemed to be in default in making a payment of tax, the Income-tax Officer may forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the assessee ; and the Tax Recovery Officer on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein by one or more of the modes mentioned below, in accordance with the rules laid down in the Second Schedule--- (a) attachment and sale of the assessee's movable property ; (b) attachment and sale of the assessee's immovable porperty ; (c) arrest of the assessee and his detention in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oclamation is to be drawn up and the defaulter can in those proceedings draw the attention of the Tax Recovery Officer to the encumbrances, charges, claims or liabilities attaching to the said properties or any portion thereof. Under rule 53 the property to be sold, revenue assessed thereon, the amounts for the of recovery which sale is ordered and any other thing which the Tax Recovery Officer thinks is material for a purchaser to know, ini order to judge the nature and value of the property are to be mentioned. Rule 56 makes it incumbent to hold the sale by public auction. On the auction taking place the auction purchaser is to deposit 25 per cent. of the purchase money and in default thereof the property can be put to resale. Rule 60 provides for applications to set aside the sale of immovable property on deposit. Rule 61, the interpretation of which has been the subject-matter of some controversy, may be extracted " 61. Application to set aside sale of immovable property on ground of non-service of notice or irregularity.---Where immovable property has been sold in execution of a certificate, the Income-tax Officer, the defaulter, or any person whose interests are affected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was held that the amount sought to be recovered in pursuance of the prohibitory order was in excess of the liability of the assessee, and this being so, the order was void and the mere fact that some amount was due against the assessee could not validate the order. A similar view was taken by the Mysore High Court in B. A. Sriramiah Income-tax Officer, Kolar following the decision of the Madras High Court in the case of S. Santhosa Nadar. In V. K. Kannan v. Collector of North Arcot the certificate that was sent by the Income-tax Officer as also the amount for which the property was attached and sold was in excess of the tax liability. The sale and certificate were both set aside on the same line of reasoning as in S. Santosha Nadar's case. A similar view was taken in the case of Collector of North Arcot v. V. K. Kannan. Mr. Deokinandan appearing on behalf of the department, however, contended that these decisions are not applicable as the tax is being recovered in accordance with the provisions of the Second Schedule of the Income-tax Act, 1961. We have given careful thought to this contention, but are of the view that even under the new Act and the Second Schedule, propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of rule 53. It has, however, been contended by Sri Deokinandan, counsel for the department, that the objection now taken by the petitioner can be taken by him under rule 9 of the Second Schedule or under rule 61 and that inasmuch as no prejudice has been caused to the assessee, inasmuch as it has not been shown that any substantial injury has been caused, the sale should not be set aside on the mere ground that the properties of the petitioner have been sold also for arrears due against the managing director. In the present case, the petitioner had filed objections bringing this fact to the notice of the Income-tax Officer, but that was rejected by him on the ground that the petitioner had not deposited the amount due against him in execution of the certificate. The view that he took was based on rule 61(b) of the Rules in the Second Schedule. Under this rule, a sale of immovable property can be set aside on the ground that notice was not served on the defaulter as also on the ground of material irregularity in publishing or conducting the sale, and only after the assessee-defaulter deposits the arrears, i.e., which are mentioned in the sale proclamation. Now, in so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that mere non-specification of certain particulars in a sale proclamation do not make the sale void. The present is not a case of non-specification of the particulars required but properties of the assessee being sold in disregard of the provisions of the Act and the Second Schedule. Counsel for the auction purchaser urged that he has acquired an indefeasible title under rules 63 and 65 of the Rules in the Second Schedule, as the sale has been confirmed and the sale certificate has been issued. This argument would have been valid in case the various steps leading up to the sale were valid. We have already held that the entire procedure beginning from the issue of the sale proclamation to the confirmation of the sale were invalid, and are without jurisdiction on account of the properties of the petitioner being put to sale for arrears which were not due against him. Reliance by counsel for the auction purchaser on the decision of the Supreme Court in the case of Janak Raj v. Gurdial Singh is also misplaced for, in that case, the judgment-debtor had not challenged the sale and sought to impugn it only after the decree passed against him had been set aside. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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