High Court Of Karnataka
A. Gopala Naidu vs. Tax Recovery Officer
Sections 222, 226(3), SCH. II, Rule 48
M. Rama Jots, J.
Writ Petitions Nos. 14982 & 14983 of 1982
10th June, 1987
Hanumantha Rao, for the Petitioner : K. Srinivasan, for the Respondents.
RAMA JOIS, J.:
The petitioner has presented these petitions praying for a declaration to the effect that the IT Department must be deemed to have collected the entire rent due to the petitioner in respect of premises belonging to him from his tenant in view of the prohibitory order issued by the Department and also praying for quashing the order issued by the TRO attaching two immovable properties belonging to the petitioner.
The facts of the case, in brief, are as follows. The father of the petitioner was an income-tax assessee. As on May 21, 1978, it appears, he was due to the Department in a sum of Rs. 17,509. A non-residential building belonging to the petitioner situate at Subhedar Chatram Road, Bangalore, had been let out to one Hayavadana Rao on a monthly rent of Rs. 1,650 . A prohibitory order was issued by the TRO on May 15, 1978 (vide annexure A), under r. 26(1)(iii) of the Second Schedule to the IT Act, 1961. By that order, the said Hayavadana Rao was prohibited from paying monthly rent to the petitioner and he was also requested to remit the rent of Rs. 1,650 per month payable to the petitioner, to the Department instead, until further orders.
On January 6, 1982, the TRO issued two orders (vide annexures ” B ” and ” C “) under r. 48 of the Second Schedule to the IT Act, 1961, attaching two buildings belonging to the petitioner, namely, Sujatha Theatre at Ramachandrapuram, Bangalore, and No. 25-26, Victory Mansion, 1st Main Road, Seshadripuram, Bangalore, on the ground that a sum of Rs. 95,059 was due from the petitioner to the Department in respect of three certificates dated March 20, 1980, March 31, 1980, and November 28, 1981. Thereafter, the petitioner has presented these petitions.
The contention of the petitioner is that as the Department has prohibited the tenant from paying monthly rent to the petitioner and also requested the tenant to remit the said amount to the Department, whether the Department collected the rents or not, there should be a declaration to the effect that the Department must be deemed to have collected the entire amount of rent till then, as no further order had been issued by the TRO vacating the said order and there should be a further direction directing the TRO to adjust Rs. 17,296 towards the amount due from the petitioner to the Department.
Sri K. Srinivasan, learned standing counsel for the IT Department, submitted that Sri Hayavadana Rao did not remit any rent payable by him either to the petitioner or to the Department and, therefore, there could be no declaration that the Department had collected the rents. Even, under the impugned orders, he submitted that the tenant was only requested to remit the rent and there was no legal compulsion on the part of the tenant to remit the rent to the Department. He further submitted that it might be that the order was outside the purview of r. 26 of the Second Schedule to the IT Act, 1961, and it was for the petitioner to have taken prompt action either seeking for vacating the said order or questioning the legality of the order itself insofar as it prohibited the tenant from paying future rent to the petitioner. Neither under the provisions of the IT Act, 1961 (” the Act” for short), nor the rules framed thereunder, has any power been conferred on the TRO to prevent a tenant from paying the future rent to his landlord and to compel him to remit the rent to the Department till the amount due to the Department from the landlord was satisfied and, in default, to take coercive action for recovering the rent from the tenant to whom the prohibitory order was issued. If the Department had the power to make and enforce such an order and it had prevented a person like the petitioner from collecting the rent due to him from his tenant, there would have been a basis for the petitioner to make a prayer before this Court for a declaration that the Department must be deemed to have collected the amount or for a direction to collect the rent from the tenant and adjust it towards the tax due and make over the excess to the petitioner. As can be seen from annexure A, the notice has been issued under r. 26(1)(iii) and in the prescribed form. Rule 26 reads: 26. “Debts and shares, etc..-(1) In the case ofâ (a) a debt not secured by a negotiable instrument, (b) a share in a Corporation, or (c) other movable property not in the possession of the defaulter except property deposited in, or in the custody of, any Court, the attachment shall be made by a written order prohibiting, (i) in the case of the debtâthe creditor from recovering the debt and the debtor from making payment thereof until the further order of the TRO; (ii) in the case of the shareâthe person in whose name the share may be standing from transferring the same or receiving any dividend thereon ; (iii) in the case of the other movable property (except as aforesaid)â the person in possession of the same from giving it over to the defaulter”.
7. As can be seen from the above rule, under cl. (iii) of sub- rule (1) of r. 26, the notice was beyond the purview of the rule in so far it directed the tenant not to pay the future rent to the petitioner. Nothing prevented the petitioner from questioning the legality of the notices immediately after they were issued on the ground that, in exercise of the powers conferred under r. 26(1)(iii), the TRO had no power to issue the said notices. The rule empowers the officer to prevent payment of amounts/rent in the hands of a third party which has become due for payment but does not empower him to make any order regarding future rent. Further, it may also be seen from cl. (iii) of r. 26(1) that it only provides that if payment is made as directed in the notice to the TRO, it has to be treated as payment to the party who was entitled to receive the same. The rule, therefore, gives a choice to the defaulter to whom a prohibitory order is issued, either to retain the money or immovable property with him or to hand over the same to the TRO. In view of this discretion available to the person to whom a prohibitory order is issued, there was no obligation on the part of Hayavadana Rao to hand over the money to the Department, though he could have done so and claimed discharge in respect of his liability to pay the rents to the petitioner. Obviously, for this reason, in the impugned order, over and above the prescribed form, the words ” until further orders ” were added. What had actually transpired is that in view of the discretion given in r. 26(1)(iii), the said tenant did not remit the rent to the Department and, further, in view of the prohibitory order, he did not also pay it to the petitioner. In this situation, the appropriate course for the petitioner was to question the legality of the notices impugned within a reasonable time and/or also to take action against Hayavadana Rao for non- payment of rent. Whatever that may be, the fact remains that when the Department has come forward stating that it had not collected any amount from Hayavadana Rao, there could be no declaration that they must be deemed to have collected the amount unless any statutory provision was shown on the basis of which such a declaration could have been made. No such provision is brought to my notice. Therefore, insofar as the relief claimed in respect of annexure A is concerned, it must fail. Of course, this would be without any prejudice to the legal action that the petitioner may take against the tenant for non-payment of rent.
8. As far as notices, annexures B and C, are concerned, the contention of the petitioner is that when the total amount due to the Department was only Rs. 95,059, two properties which are of very high value were attached. He submitted that in view of the amount of tax due, attachment in respect of only one was sufficient and the Department was not justified in attaching two properties in respect of the amount due to the Department. In support of this contention, learned counsel relied on r. 34 which provides that the attachment by seizure shall not be excessive, in that, the property attached should be as nearly as may be equal to the amount specified in the notice. As pointed out by learned counsel for the Department, the said rule applies only for seizure of movable properties and not for attachment of immovable property. The rule which is applicable is r. 48. The said rule reads: ” 48. Attachment.âAttachment of the immovable property of the defaulter shall be made by an order prohibiting the defaulter from transferring or charging the property in anyway and prohibiting all persons from taking any benefit under such transfer or charge. “
9. This rule empowers the TRO to attach any property. The rule does not provide that the value of the property attached cannot be far more than the tax due. The main object of attachment is to make the defaulter pay the tax due to the Department and get the property released. If the value of the immovable property is very high and the tax due to the Department is very small, the defaulter can always pay the amount due and get the attachment released. Further, if, according to the petitioner, there was no necessity to attach two properties, the appropriate course open to the petitioner was to make an application before the TRO praying for the raising of attachment in respect of one of the properties by satisfying the officer that attachment of one property would cover the tax due to the Department. In the circumstances, I find no substance in any of the contentions raised.
Learned counsel for the petitioner also contended that the arrest notice which was the main cause for presenting these petitions was unwarranted. Learned counsel for the Department submitted that the Department was not interested in executing the impugned arrest notice. The statement so made is placed on record.
In the result, I make the following order: The writ petitions are dismissed.
[Citation : 169 ITR 417]