Kerala H.C : Assessee had already sold her interest over property to a third person, she effectively lost her right to maintain a challenge against actions of department in an appeal preferred under rule 86 of Second Schedule

High Court Of Kerala

Amaravathy Somasundaram Vs. CCIT

Section : 222

A.K. Jayasankaran Nambiar, J.

W.P. (C) No.27566 Of 2008 (F)

October 13, 2014

JUDGMENT

1. The challenge in the writ petition is against exhibit P22 order of the Chief Commissioner of Income-tax, Kochi, in an appeal filed under rule 86 of the Second Schedule to the Income-tax Act, 1961. The brief facts leading to exhibit P22 order are as follows :

2. In respect of arrears of income-tax on account of the individual assessment completed on the petitioner, as also in respect of arrears of tax of the private company, of which the petitioner was a director, the Tax Recovery Officer made a proclamation for auction of 5.25 acres of land in Thrissur district belonging to the petitioner. The reserve price of the property was fixed as Rs. 15,75,000. The petitioner moved for stay of recovery proceedings and the auction was kept in abeyance subject to payment of Rs. 4 lakhs by February 13, 1995. It is submitted that the petitioner paid the said amount. Thereafter, the Tax Recovery Officer took up the matter with the Chief Commissioner of Income-tax and sought permission from him for going ahead with the sale. On getting the said permission, the Tax Recovery Officer intimated the petitioner of the fact that he was proposing to go ahead with the sale. Although the petitioner requested for deferment of the sale by a month, the said request was not granted and a proclamation dated May 1, 1995, was issued for conducting the auction on May 12, 1995, in respect of 4 acres and 91 cents of land after fixing a reserve price of Rs. 14,73,000. The facts in the writ petition disclose that the auction took place on the said date and was confirmed in favour of one T. A. Moideen who bid the property for Rs. 15,11,000 and deposited a sum of Rs. 3,77,750.

3. The petitioner being aggrieved by the action of the Tax Recovery Officer moved this court through O. P. No. 7180 of 1995 where he obtained an interim order dated May 12, 1995, staying further proceedings of the Tax Recovery Officer. It is the case of the Department that a copy of the stay order was not received by the Tax Recovery Officer and that it was under those circumstances that the sale proceeded, as per the proclamation, on May 12, 1995. It would appear that later, the original petition itself was dismissed as infructuous. Thereafter, the petitioner preferred a writ appeal which was dismissed as withdrawn after reserving the right of the petitioner to avail of the statutory remedies open to her to challenge the proceedings of the Tax Recovery Officer. Apparently, in the meanwhile, the petitioner sold her interest in the property to another person namely, K. Moideen. As already noted, the Tax Recovery Officer continued with the sale proceedings and on finding that T. A. Moideen, who was the person in whose favour the sale was confirmed, had since died, he contacted the legal heirs of the said T. A. Moideen and, on their remitting the balance amounts, confirmed the sale in their favour by issuing the necessary sale certificates as well. The petitioner, thereafter, filed an application dated April 15, 2005, before the Tax Recovery Officer for setting aside the sale in terms of rule 56 of the Second Schedule to the Income-tax Act, 1961. There was apparently no order passed by the Tax Recovery Officer on the said application. This prompted the petitioner to prefer an appeal to the Chief Commissioner of Income-tax in terms of rule 86 of the Second Schedule to the Income-tax Act to quash the sale certificate issued by the Tax Recovery Officer under rule 65 and to set aside the auction of the immovable property itself. Exhibit P22 is the order that is passed by the Chief Commissioner of Income-tax and it is this order that is impugned in this writ petition.

4. The grounds of challenge against exhibit P22 are mainly that the Chief Commissioner did not consider the primary contention of the petitioner with regard to propriety of the Tax Recovery Officer in conducting the auction of the property in question on May 12, 1995, when there was admittedly an order of stay passed in O. P. No. 7180 of 1995. In the impugned order of the Chief Commissioner, he refers to the contention of the Department that the stay order was not received by them prior to the date of the auction. The other contention raised by the petitioner is with regard to the incorrectness of the amounts shown as arrears for the purposes of conducting the sale of the property. It is the case of the petitioner that the property that was worth more than Rs. 18 lakhs was ultimately sold for approximately Rs. 14 lakhs. It is also pointed out that the Chief Commissioner erred in not considering the contention of the petitioner with regard to the permissibility of a challenge against the order confirming the sale, even without a challenge being mounted against the sale order of the Tax Recovery Officer. Reliance is placed by the petitioner on the decision of the Allahabad High Court in Subash Chandra Goyal v. TRO [2002] 255 ITR 289/122 Taxman 95 (All.).

5. A statement has been filed on behalf of the respondents wherein the sequence of events leading to the sale of the properties by the Tax Recovery Officer, as also the confirmation of the sale and the issuance of the sale certificate, is narrated. It is also pointed out that the petitioner, during the pendency of the proceedings, also sold her property to Mr. Moideen for Rs. 18,60,000 as per document No. 2152, dated October 21, 2002.

6. I have heard Sri Anil D. Nair, learned counsel appearing on behalf of the petitioner, Sri Jose Joseph, standing counsel for the Income Tax Department as also Sri Sreelal N. Warrier, learned counsel appearing on behalf of the third respondent.

7. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I find that in exhibit P22 order, that is impugned in this writ petition, the Chief Commissioner of Income-tax essentially finds against the petitioner on two counts. First, it is found that the petitioner had not taken any action in terms of rules 60 and 61 of the Second Schedule to the Income-tax Act, for the purposes of setting aside the sale of immovable property by the Tax Recovery Officer. It is also found that, in so far as no steps were taken by the petitioner in terms of rules 60 and 61, the confirmation of sale in terms of rule 63 was automatic. The Chief Commissioner then proceeds to hold that in the absence of taking any steps under rules 60 and 61, there was no scope for preferring an appeal against an order passed in terms of rule 63 confirming the sale. The second point that is found against the petitioner is that, during the pendency of the proceedings, the petitioner had sold her interest over the property in question to one Mr. Moideen and, hence, it was not open to the petitioner to continue to prosecute the appeal under rule 86 of the Second Schedule to the Income-tax Act.

8. As regards the first issue, no doubt, the petitioner would place reliance on the decision of the Allahabad Court in Subash Chandra Goyal (supra), where the court finds that an appeal would lie against an order of the Tax Recovery Officer confirming the sale. The said decision proceeds on the basis that, for the purposes of rule 86, an appeal would lie from any original order passed by the Tax Recovery Officer, which is not in the nature of an order that is conclusive, and, therefore, an order by the Tax Recovery Officer confirming the sale, not being one that is made conclusive under the Second Schedule to the Income-tax Act, the order would be an appealable order for the purposes of rule 86. In this case, however, I note that, as per the scheme of the Second Schedule to the Income-tax Act, which deals with the procedure to be followed by the income-tax authority for recovery of tax due from an assessee in default, the procedure that is contemplated provides an opportunity to a person aggrieved by the order of the Tax Recovery Officer effecting a sale of the property, to prefer an application to set aside the sale on the grounds specified therein. These applications can be preferred in terms of rules 60 and 61. The act of confirmation of sale by the Tax Recovery Officer is in terms of rule 63 of the Second Schedule. Rule 63 makes it clear that the order of confirmation of sale can be made by the Tax Recovery Officer only in a situation where no application is made for setting aside the sale or where an application is made but disallowed by the Tax Recovery Officer. In my view, taking into consideration the statutory scheme in the Second Schedule to the Income-tax Act, when an order of sale is passed by the Tax Recovery Officer, a person aggrieved by that order cannot bypass the requirements in the Schedule, by not preferring an application to set aside the sale and then opting to challenge the order passed under rule 63, confirming the sale. To allow a person to do so, would do violence to the procedural scheme contemplated in the Second Schedule. In that view of the matter, I see no reason to interfere with the findings of the Chief Commissioner of Income-tax on the maintainability of an appeal, against the order confirming the sale in this case. I also find merit, in the findings of the Chief Commissioner of Income-tax in exhibit P22 order which hold the petitioner as not being a person interested, for the purposes of maintaining the appeal since the petitioner had during the pendency of the proceedings alienated her rights over the property in favour of another person. Having sold her interest over the property to a third person, the petitioner effectively lost her right to maintain a challenge against the actions of the Department in an appeal preferred under rule 86 of the Second Schedule. Thus, in any view of the matter, I find exhibit P22 order of the Chief Commissioner of Income-tax legally unassailable. The challenge against the said order, therefore, fails, and the writ petition is accordingly dismissed.

[Citation : 369 ITR 601]