High Court Of Calcutta
Electro Zavod (India) (P) Ltd. & Ors. vs. CIT & ORS.
Sections 281, 281B,
Kalyan Jyoti Sengupta, J.
Writ Petn. No. 996 of 2002
13th May, 2005
Counsel Appeared
A.K. Mitra with J.P. Khaitan, for the Petitioners : S.K. Kapoor, for the Respondents
JUDGMENT
Kalyan Jyoti Sengupta, J. :
By this application the petitioners have basically challenged orders of attachment dt. 30th May, 1997 and 2nd Nov., 1999. The former one is provisional order of attachment under s. 281B of the IT Act, 1961 (hereinafter referred to as “the said Act”). While doing so the petitioner has also challenged an order dt. 12th Oct., 2001, passed by the CIT, Central II, Calcutta, in purported compliance with the orders dt. 7th Aug., 2000 and 22nd Aug., 2001, passed in the previous writ petition being numbered 1456 of 1997. The facts of the case, which lead to filing of the instant application, are stated hereunder.
2. The first petitioner entered into an agreement dt. 29th April, 1997, with respondent No. 9 for purchase of two flats on the first and second floors of the premises No. P-360/2, Keyatala Road, Kolkata, covering approximately an area of 3,500 sq. ft. and half of the ground floor including common facilities, etc., (hereinafter referred to as “the said property”), on the terms and conditions contained in the said agreement at a consideration of Rs. 21,50,500. At the time of signing of the said agreement the first petitioner duly paid the entire consideration of the said property and possession of the same was handed over on 7th May, 1997 by respondent No. 9.
The petitioner after having entered into an agreement as above and taken possession, engaged security agency to look after the said property. At the time of handing over of possession of the said property, flooring, fixing of sanitary items, doors and windows, paintings and colouring were yet to be done, although the basic construction was otherwise completed. In spite as aforesaid since respondent No. 9 did not take any step to complete the work or execute deed of conveyance in favour of the petitioner, the petitioner was compelled to file a suit being numbered 94 of 1997 in the Court of the learned 9th District Civil Judge, Senior Division, Alipore, for specific performance of the contract, confirmation of possession, decree for costs of unfinished works and for perpetual injunction. The petitioner after service by advertising in the newspaper finished the entire work on the said property at its own costs. On 2nd June, 1997, the petitioner could find a provisional order of attachment dt. 30th May, 1997, issued by respondent No. 4 under s. 281B of the said Act affixed on the said premises. The petitioner immediately thereafter informed respondent No. 4 that it had purchased the said property and was in possession of the same. Respondent No. 4 was also requested by the petitioner to vacate the provisional attachment order in respect of the said property. Respondent No. 4 heard the petitioner, however, the provisional order of attachment was not vacated. As such the petitioner came to this Court by filing a writ petition as mentioned above challenging the aforesaid order of provisional attachment. It appears the provisional order of attachment was extended from time-to-time, however, none of such order of extension was communicated. The writ petition as above was disposed of by an order dt. 7th Aug., 2001, by the Hon’ble Justice P.C. Ghose by directing respondent No. 1 to decide the matter in accordance with law while permitting the petitioner to file a fresh representation for the said purpose. All points were kept open to be decided by respondent No. 1. His Lordship was however pleased to direct to maintain status quo until the matter was decided by respondent No. 1. The representation made by the petitioner was considered and heard pursuant to the aforesaid order. The order dt. 7th Aug., 2001, was also clarified and/or modified subsequently by another order dt. 22nd Aug., 2001. The representation was rejected and it was held by the CIT in the impugned order that since the ownership of the said property in question has not been transferred by executing a registered deed of conveyance, respondent No. 9 cannot be said to have ceased to be the owner and the petitioner has not acquired any title in the property. It was further observed by the CIT that the petitioner had not taken possession of the same and this was found upon inspection by the competent official of the Revenue who has submitted a report.
3. Mr. A.K. Mitra, learned senior counsel appearing with Mr. J.P. Khaitan, the learned advocate in support of the writ petitioners contends that all the orders, namely, provisional order of attachment dt. 30th May, 1997, order of extension passed by the concerned officials and approved by the CIT, final attachment order and lastly order dt. 12th Oct., 2001, are bad in law as the same were passed on erroneous application of the law. He submits that under the provision of s. 27, cl. (iiia) of the said Act the petitioner has become the owner of the aforesaid flats in question. All the conditions for becoming deemed owner mentioned in cl. (iiia) of the said section have been fulfilled as the petitioner has entered into an agreement for purchase followed by payment of entire consideration money and possession thereof. The aforesaid clause has been inserted in s. 27 of the said Act by the Finance Act, 1987 w.e.f. 1st April, 1988. Therefore, he submits in view of the aforesaid position of law, the pronouncement of the Supreme Court rendered in the case of Late Nawab Sir Mir Osman Ali Khan vs. CWT (1986) 57 CTR (SC) 89 : (1986) 162 ITR 888 (SC) is of no relevance nor appropriate. It is true in this decision of the Supreme Court, in a wealth-tax case it was held if there is no registered conveyance in favour of a person pursuant to a partly performed contract he was not the owner. Therefore, the legal finding of the CIT basing on the above decision of the Supreme Court, that the petitioner is not the owner for the purpose of the IT Act is patently wrong. He has also assailed the fact finding of the CIT contending that the petitioner has not been in possession, is patently erroneous in view of the overwhelming evidence and undisputed fact, namely, the agreement of handing over possession and other documents relating to possession of the petitioner. The very basis of the fact findings of the CIT with regard to possession is not tenable in the eye of law as the purported reports of the Revenue officials were prepared behind the back of the petitioner and without giving any chance of hearing or to rebut the material used against the petitioner. As such the impugned order is otherwise bad in law for it was passed in violation of the principles of natural justice. He urges contending that the order of attachment is excessive considering the claim of the Revenue of Rs. 11,89,093 as such entire building and premises ought not have been attached. The value of the petitioner’s portion is Rs. 2,16,000. Therefore, the portion of the property which was not sold to the petitioner, could have satisfied the alleged dues of the Revenue. He further contends that the CIT has no jurisdiction to declare any transfer made by the assessee in favour of the third party is void under s. 281 of the said Act for the Revenue ought to have filed a suit under r. 11(6) to get the said declaration.
He further submits that the CIT has failed to show or disclose the nature of the proceedings during the pendency of which the transfer was effected. He further submits that as regards possession that it is not necessary, in order to establish possession, that one has to establish the fact of physical possession. In support of his contention he has relied on the text of Halsbury’s Laws of England, 4th Edn., Vol. 35, p. 732. While replying to the argument as to maintainability of the writ petition he contends that since it is a question of breach of principles of natural justice and the erroneous application of law this Court as a matter of course will entertain the writ petition.
4. Mr. S.K. Kapoor, learned Addl. Solicitor General, opposes this application contending that this writ petition is not maintainable as the issues involve disputed questions of fact and this has been observed by the Hon’ble Mr. Justice P.C. Ghose in his Lordship’s order dt. 7th Aug., 2001. These findings and observation of his Lordship have not been challenged as such the same are binding. No additional material has been placed before this Court other than what was placed at the time of dismissal of the previous writ petition on 7th Aug., 2001. His Lordship was very categorical that the petitioner would have to file a suit to establish its title to the property. In any event pursuant to his Lordship’s direction and order the CIT disposed of the representation made by the writ petitioner after giving full hearing. The impugned order contains full discussion and reasoning to reject the claim and contention of the petitioner. Exhaustive mechanism has been provided for the remedy in the relevant rules, as such the petitioner should resort to the same. These findings and order can be examined either by the civil Court or by the mechanism provided in the rules. The fact finding as regards possession of the petitioner cannot be decided and examined by the writ Court conveniently. Moreover, the CIT has decided on the strength of the Supreme Court decision that the writ petitioner has not become the owner of the portion of the property as claimed. The writ Court as a matter of policy or prudence if not rule does not entertain any dispute, which had not suffered from any illegality and perversity. Admittedly, the writ petitioner was heard, the question of violation of principles of natural justice does not arise. The materials, namely, inspection reports were supplied to the writ petitioner before the hearing took place to controvert the same. Accordingly, it cannot be said that the impugned order has been passed without any material. He concludes with the prayer for dismissal of the instant writ application. I have heard the respective contentions of learned counsel and gone through the impugned order which is the subject- matter of basic challenge in this writ petition. The controversy between the parties in this matter hinges on one fundamental point as to whether going by the provisions of the said Act the transfer of the said property being a portion and half of the premises is complete in favour of the writ petitioner or not. Admittedly, the claim of the Revenue is against respondent No. 9. Undisputedly there has been no execution of conveyance in respect of the property in favour of the writ petitioner. The CIT has rejected the objection of the writ petitioner principally on the following points : (i) The petitioner has not become the owner of the property under the law and this factum of agreement for sale coupled with payment of consideration money and so-called possession themselves are not enough to hold transfer of ownership in favour of the petitioner. (ii) He found that the writ petitioner has not been in possession to get advantage of the provisions of s. 2(47), ss. 22 and 32 of the said Act. He has also found that the electric supply line, corporation records, still stand in the name of respondent No. 9. He has held that even if it is treated as a transfer then such transfer is invalid and illegal by reason of the provision of s. 281 of the said Act. Before I examine the impugned order and also order of attachment, I feel it expedient to decide the question of entertainability of the writ petition on the plea of disputed question of fact and also existence of alternative remedy. The principles and guidelines for entertaining the writ petition are already authoritatively laid down by the Hon’ble Supreme Court as well as this Court, following these guidelines I am of the opinion that it is for the writ Court to examine in its wisdom whether the nature of disputes involved in the writ petition are such as can conveniently be decided in a writ jurisdiction or not. Obviously the writ Court will not entertain the writ petition canvassing a dispute that can appropriately be raised in a civil suit involving elaborate witness action, nor will the writ Court take the role of the appeal Court.
Mr. Kapoor contends that in view of the observation of Justice Ghose recorded in his Lordship’s order in the previous writ petition, the matter really involves disputed question of fact. As regards title to the property, no material has been placed before this Court to examine the same. If only the first order of Justice Ghose is read then Mr. Kapoor is right in his contention and this Court would not have decided this matter, but the subsequent order of his Lordship dt. 7th Aug., 2001, has deleted the relevant portion mentioned in the earlier order dt. 7th Aug., 2001. His Lordship’s own language mentioned in the first mentioned order is reproduced here : “In the fifth line of the first paragraph the words ‘orders have’ to be inserted in place and instead of the words ‘order has’ and the words ‘under s. 281B of the IT Act’ and the words ‘and the matter must be adjudicated……. Court of law in respect thereof’ and the last word ‘passed’ in the same paragraph to be deleted………….” Accordingly, I hold as rightly contended by Mr. Mitra that the effect of the order of Justice Ghose, dt. 7th Aug., 2001, on this question will not operate as res judicata. Of course this Court has to see as to whether the writ petition is otherwise entertainable within the parameters of the law laid down by the Hon’ble apex Court as well as this Court as observed above.
9. I have examined the affidavit in opposition of the Revenue to ascertain what are the facts claimed to be disputed. From the affidavit in opposition I find the Revenue has admitted that the agreement for sale of the property has been entered into, payment of consideration having been made. But the dispute is sought to be raised as to the claim of possession on the strength of the inspection report produced by the Department to decide the question of possession but did not examine nor consider the contents of the agreement itself and correspondence exchanged between the writ petitioner and respondent No. 9. The adjudication without consideration of these materials and upon exclusive reliance on the Department’s documents, in my view, is not in consonance with recognised procedure of justice delivery system. It is the basic principle of law that an arbiter must take note of and address the contention, materials and the evidence produced by both the contending parties. Here the issue of possession has been decided without considering the materials placed and produced by the writ petitioner. Thus, the basis of the findings on the issue of possession is not judicially acceptable because physical possession of the property in question is not solely determinative in a case of this nature. I find there is substance in the argument of Mr. Mitra that possession of the property can be presumed from such an act and action of the parties as the nature of the property admits. The real test of possession is an intention of possessing together with that amount of occupation or control of the entire subject-matter of which it is practically capable and which is sufficient for practical purposes to exclude the stranger from interfering. This proposition of law is supported and based on Halsbury’s Laws of England, 4 Edn., Vol. 35 (Re : issue), (para 1211). The above text has also been approved and accepted by the Hon’ble Supreme Court in a case reported in B. Gangadhar vs. B.R. Rajalingam (1995) 5 SCC 238, in para 5 (p. 240): “…. Halsbury’s Laws of England, 4th Edn., Vol. 35, in para 1214 at p. 735, the word ‘possession’ is used in various contexts and phrases, for example, in the phrase ‘actual possession’ or ‘to take possession’ or ‘interest in possession’ or ‘estate in possession’ or ‘entitled in possession’. In para 1211 at p. 732, legal possession has been stated that possession may mean that possession which is recognised and protected as such by law. Legal possession is ordinarily associated with de facto possession; but legal possession may exist without de facto possession, and de facto possession is not always regarded as possession in law. A person who, although having no de facto possession, is deemed to have possession in law, is sometimes said to have constructive possession.”
10. I think possession is not always conclusively proved in all respects by the corporation record and the records of the electric supply agency. These documents give rise to presumption of possession, however, this presumption is always rebuttable. The petitioner has produced before the officer necessary documents evidencing the factum of handing over possession, namely, the agreement and other letters, and the correctness of the contents of these documents has not been denied and disputed by any of the respondents. I, therefore, conclude that there exist unimpeachable documents to prove the factum of possession of the petitioner. For decision on this issue it will not be inappropriate for the writ Court to examine the findings of the CIT. The CIT has decided that respondent No. 9 has not ceased to be the owner to maintain the order of attachment under s. 281B of the said Act. The words mentioned in s. 281B of the said Act “any property belonging to the assessee” are significant and the same cannot be synonymous with the ownership. The CIT has borrowed the language of the definition having the same wording, mentioned in the WT Act. He has held that the definitions are the same as such he relied on the decision of the Supreme Court rendered in the case of Late Nawab Sir Mir Osman Ali Khan vs. CWT (supra). In my view the definition in the WT Act, has to be understood and considered in the context of the legal and actual ownership meaning thereby title to the property for the assessment of the wealth. This definition though the words employed therein are similar and identical, cannot be brought in assistance to solve the problem of the IT Act. The words “belonging to” mentioned in s. 281B have to be read and understood in the context of the definition of “transfer” provided elsewhere in the said Act itself.
11. The definition of the word “transfer” as provided in s. 2(47) of the aforesaid Act provides as follows : “(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882 (4 of 1882)…………” This definition has been incorporated into the aforesaid Act by the Finance Act, 1987 w.e.f. 1st April, 1988. The subject transaction took place in or about 24th April, 1997, but the above judgment dealing with the WT Act relied on by the Revenue was rendered on 21st Oct., 1986. In view of the expressed provision of the transfer in the statute, the above judgment is of no assistance. The CIT has overlooked this relevant and appropriate aspect, this ought to have been taken into consideration. Again the definition of “house and property” has been given in s. 27 of the said Act for the purpose of ss. 22 to 26 this has been provided amongst others as follows : “(iiia) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in s. 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof.”
In view of almost identically the same definitions for two different purposes, I think that the ordinary meaning of transfer under the Transfer of Property Act, 1882 read with the Registration Act, 1908, is to be understood in a liberal sense for the purpose of the IT Act. I am of the opinion in the absence of compliance with the provision of the Transfer of Property Act and the Registration Act this transaction cannot be invalid. It appears to me if the definition of “owner” mentioned in s. 27(iiia) of the said Act is considered then the petitioner has become the owner of the said property and all its rights and obligations under ss. 22 to 26 of the said Act are attached to this property. If for the purpose of s. 281B of the said Act this transaction is not held to be transfer then s. 27(iiia) of the said Act is rendered nugatory. This absurd situation is never intended by the legislature. What the legislature did not intend, cannot be thought of by the creature of legislation (CIT). The CIT seems to have been guided by, and proceeded with the ordinary laws of transfer, namely, the Transfer of Property Act, 1882 read with the Registration Act, 1908.
The Supreme Court had occasion to deal with and discuss the applicability of the definition as given in s. 27 of the said Act in the case of CIT vs. Podar Cement (P) Ltd. Etc. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC), as appropriately drawn my attention by Mr. Mitra in this case while considering the good number of earlier decisions of the Supreme Court and High Courts. Their Lordships in the same judgment dealt with the implication of the aforesaid judgment of the apex Court rendered in the said WT Act Late Nawab Sir Mir Osman Ali Khan vs. CWT (supra). Their Lordships observed that the language mentioned in the relevant section of the WT Act was different from that of the IT Act. It was further observed in this judgment that s. 53A debars a transferor from exercising the rights of an owner after he has received full consideration and handed over possession under the contract. The transferor in a case where he has executed the document and received consideration and even handed over possession of the property, cannot exercise any right of an owner. Their Lordships further held that the above meaning in the IT Act is clarificatory and, therefore, retrospective in operation.
14. In the case of Mysore Minerals Ltd. vs. CIT (1999) 156 CTR (SC) 1 : (1999) 239 ITR 775 (SC), the apex Court relying on the aforesaid decision of the same Court rendered in Podar Cement (P) Ltd. case (supra) held that a person who had taken possession and made payment of the consideration was the owner for grant of depreciation allowance though he had not obtained the deed of conveyance. I think it would be apposite to quote the relevant portion of the observation of Justice Lahoti (as his Lordship then was) who spoke for the Bench at p. 780 : “In our opinion, the term ‘owned’ as occurring in s. 32(1) of the IT Act, 1961, must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, 1882, the Registration Act, 1908, etc. ‘Building owned by the assessee’ the expression as occurring in s. 32(1) of the IT Act means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of laws such as the Transfer of Property Act and the Registration Act, etc., but nevertheless is entitled to hold the property to the exclusion of all others.”
15. In view of the aforesaid authoritative pronouncement of the law I am inclined to accept the contention of Mr. Mitra that for the purpose of the IT Act the writ petitioner has become the owner, to put it differently respondent No. 9 ceased to be the owner on and from 7th May, 1997, when everything for transfer of the property excepting the execution and registration of conveyance was completed. Admittedly, alleged dues are recoverable from respondent No. 9. Under the IT Act the dues of the Revenue do not form charge on the property and this can only be recovered under method and mode as provided under the IT Act and the Rules framed thereunder. Therefore, I hold that on the date of passing the provisional order of attachment the property in question did not belong to the assessee and on that date there was no interest because such interest has already been passed on to the writ petitioner. I think Mr. Mitra is right in his contention that the IT authorities cannot give declaration under s. 281 of the said Act, for the declaration relating to title can only be given by the civil Court and other forum under law. Mr. Mitra has very appropriately complained that even assuming the Revenue official has jurisdiction then such a decision is rendered in violation of the principles of natural justice as the writ petitioner was not given any opportunity to establish his defence which might be available under the section itself, particularly when a civil suit between the petitioner and respondent No. 9 is pending. I am of the opinion that the provisions of s. 281 afford ground and situation when declaration in relation to the property can be given and this is rather a right of getting declaration created under the statute in favour of the Revenue. Therefore, I hold that these findings and decision of the CIT are without jurisdiction and the same are not sustainable. Moreover, this finding of the CIT is contradictory to and inconsistent with his stand, for on the one hand he has held that the above transaction is not a transfer and on the other hand in order to apply the provisions of s. 281 of the said Act, the same has been accepted to be transfer. Under the law one can take alternative plea but there are limitations to entertaining such plea, if it is found the alternative plea is conflicting with the primary one, then no conclusion can be reached, such an alternative plea cannot be allowed to be taken. Therefore, I cannot uphold the findings and decision of the CIT.
16. Mr. Kapoor says that the findings and the order of the CIT should be ignored by me as the order passed by the CIT though pursuant to the order of this Hon’ble Court, is without jurisdiction as he cannot decide this matter at the first instance for these questions are to be decided by the TRO under the provisions of r. 9 of the Second Schedule r/w r. 11 of the same Schedule. The argument advanced by him is true in a legal sense but if I set aside this matter on this ground alone, then the debate and controversy remain, and in that case I am to send back this matter before the TRO as suggested by Mr. Kapoor. If this course of action is taken then in essence the petitioner would be asked to exhaust his alternative remedy. I have decided not to compel the petitioner to resort to this remedy for the reasons as already recorded by me. It cannot be said that the CIT lacks jurisdiction inherently because he has jurisdiction under r. 89 to review any order passed under the aforesaid Second Schedule. Thus, the decisions cited by Mr. Kapoor reported in Isha Beevi vs. TRO 1975 CTR (SC) 300 : (1975) 101 ITR 449 (SC) and Prudential Cooperative Urban Bank Ltd. vs. Dy. CIT (2001) 169 CTR (AP) 212 : (2001) 250 ITR 121 (AP), respectively, have no manner of application in this case. Similarly the decisions cited by Mr. Kapoor rendered in A.R. Antulay vs. R.S. Nayak (1988) 2 SCC 602 and Satya Prakash vs. State of U.P. (2000) 9 SCC 421 are of no assistance. In the case of A.R. Antulay vs. R.S. Nayak (supra), a majority of seven Judges held in substance, that the apex Court cannot confer jurisdiction upon any Court in derogation of the statute. Here the writ Court as superior authority has to decide the matter in preference to the authority of first instance. The plea of res judicata as raised by Mr. Kapoor is also not applicable in this case for Justice Ghose did not decide anything nor any issue was raised. Moreover, the observation of Justice Ghose of disputed questions of fact made in the earlier order has been deleted by the subsequent order.
17. Accordingly, I hold the order of attachment relating to the portion of the property claimed and held by the petitioner is not sustainable under the law and the same is set aside. The writ petition is thus allowed. No order as to costs.
[Citation : 278 ITR 187]
