Wp(C)/27423/2013 Of Mohammed Niyas v. The Income Tax Commissioner

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN THURSDAY, THE 11TH DAY OF AUGUST 2016/20TH SRAVANA, 1938 W.P(C).No.27423 of 2013(C) ------------------------------------- PETITIONER(S):-------------- MOHAMMED NIYAS, AGED 43 YEARS, S/O.LATE YAHIYA KOYA, NIAZ MANZIL, KANNIMELCHERRY, KILIKOLLOOR P.O., KOLLAM. BY ADVS.SRI.A.RAJASIMHAN SRI.K.NIRMALAN. RESPONDENT(S):- -------------- 1. THE INCOME TAX COMMISSIONER, AAYAAGHAR, KAUDIAR, THIRUVANANTHAPURAM. AAYAAGHAR, KAUDIAR, THIRUVANANTHAPURAM. 2. THE INCOME TAX OFFICER, CENTRAL CIRCLE INCOME TAX OFFICE, THIRUVANANTHAPURAM. 3. THE INCOME TAX RECOVERY OFFICER, INCOME TAX OFFICE, KALPANA PAYIKKADA ROAD, QUILON-1. 4. SMT.AMARAVATHY SOMA SUNDARAM PROPRIETRIX, SREERAMA CASHEW LTD., KOLLAM-4 . 5. HIND SHERIF, D/O.LATE SHAHUL HAMEED, ZAVAD MANZIL, 2ND MILE STONE, KANNIMEL, KILIKOLLOOR P.O., KOLLAM. 6. ZAVAD SHERIEF, S/O.LATE N.H.SERIEF, ZAVAD MANZIL, 2ND MILE STONE, KANNIMEL, KILIKOLLOOR P.O., KOLLAM. KANNIMEL, KILIKOLLOOR P.O., KOLLAM. 7. ANFAZ SHERIEF, S/O.LATE N.H.SHERIEF, ZAVAD MANZIL, 2ND MILE STONE, KANNIMEL, KILIKOLLOOR P.O., KOLLAM. KANNIMEL, KILIKOLLOOR P.O., KOLLAM. 8. FOUSIA ARSHAD, W/O.ARSHAD, KANNAKARA PUTHENVEEDU, KILIKOLLOOR P.O., KOLLAM. WP(C).No.27423 of 2013 (C) ADDITIONAL RESPONDENTS 9 AND 10 IMPLEADED: --------------------------------------------- ADDL.9.K.SOMASUNDARAM, KESAVAVILASOM BUNGLOW,KIDANGIL LANE, RAJADHANI NAGAR-39, KIDANGIL LANE, RAJADHANI NAGAR-39, MANGAD, KILIKOLLOOR, KOLLAM DIST., PIN - 691 004. ADDL.10.S.VENUGOPAL, KESAVAVILASOM BUNGLOW,KIDANGIL LANE, RAJADHANI NAGAR-39, MANGAD, KILIKOLLOOR.KIDANGIL LANE, RAJADHANI NAGAR-39, MANGAD, KILIKOLLOOR. [ADDITIONAL RESPONDENTS 9 AND 10 ARE IMPLEADED AS PER ORDERON I.A.NO.15710 OF 2013 DATED 11.08.2016]ON I.A.NO.15710 OF 2013 DATED 11.08.2016] R1 TO R3 STANDING COUNSEL FOR GOVT. OF INDIA (TAXES)SRI.JOSE JOSEPH. R5 TO R8 BY ADV. SRI.JACOB SEBASTIAN. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11-08-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.27423 of 2013 (C) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS:-------------------------- EXT.P1: TRUE COPY OF DOCUMENT NO.3181/1985 DATED 10.10.1985 OF THE SRO KOLLAM.SRO KOLLAM. EXT.P2: TRUE COPY OF THE SETTLEMENT DEED NO.1783/1991 DATED 13.06.1991 OF THE SRO KOLLAM.DATED 13.06.1991 OF THE SRO KOLLAM. EXT.P3: TRUE COPY OF JUDGMENT DATED 10.09.2012 IN A.S.468/1998. EXT.P4: TRUE COPY OF REPRESENTATION DATED 30.10.2013 FILED BEFORE THE 1ST RESPONDENT.BEFORE THE 1ST RESPONDENT. EXT.P5:TRUE COPY OF THE CERTIFICATE DT.25.2.1987. EXT.P6:TRUE COPY OF THE AUCTION NOTICE DT.9.1.1987. EXT.P7:TRUE COPY OF THE PROCLAMATION OF SALE DT.2.1.1987. EXT.P8:TRUE COPY OF THE ORDER DT.24.2.1987. EXT.P9:TRUE COPY OF THE ORDER OF TRANSFER OF FACTORY LICENCEDATED 22.7.1985.DATED 22.7.1985. EXT.P10:TRUE COPY OF THE CERTIFICATE OF SALE DT.12.6.1998. EXT.P11:TRUE COPY OF THE IA ALONG ORDER IN O.S.NO.32 OF 1987OF SUB COURT, KOLLAM.'OF SUB COURT, KOLLAM.' EXT.P12:TRUE COPY OF THE JUDGMENT IN OS NO.32 OF 1987 OF SUB COURT, KOLLAM.SUB COURT, KOLLAM. RESPONDENT(S)' EXHIBITS:-------------------------- NIL. VKU/-[ TRUE COPY ] K. Vinod Chandran, J ---------------------------------------- W.P.(C) No.27423 of 2013-C ---------------------------------------- Dated this the 11[th] day of August, 2016 JUDGMENT The petitioner is title holder of 1 acre and 50 cents ofproperty, which originally belonged to the 4[th] respondent, who isnow no more and whose legal heirs are impleaded as additionalrespondents 9 and 10. The property along with some appurtenantland was sold in auction by the 3[rd] respondent and purchased byone N.H.Sherief, who is now deceased and was the father ofrespondents 6 to 8 and husband of 5[th] respondent. The petitioneris challenging the sale in favour of the predecessor-in-interest ofrespondents 5 to 8. RESPONDENT(S)' EXHIBITS:-------------------------- NIL. VKU/-[ TRUE COPY ] K. Vinod Chandran, J ---------------------------------------- W.P.(C) No.27423 of 2013-C ---------------------------------------- Dated this the 11[th] day of August, 2016 JUDGMENT The petitioner is title holder of 1 acre and 50 cents ofproperty, which originally belonged to the 4[th] respondent, who isnow no more and whose legal heirs are impleaded as additionalrespondents 9 and 10. The property along with some appurtenantland was sold in auction by the 3[rd] respondent and purchased byone N.H.Sherief, who is now deceased and was the father ofrespondents 6 to 8 and husband of 5[th] respondent. The petitioneris challenging the sale in favour of the predecessor-in-interest ofrespondents 5 to 8. 2. The specific ground raised is that, the auctionpurchaser failed to remit the balance consideration of sale despitethere being no stay order for a long period and, hence, under Rule58 of the Second Schedule to the Income Tax Act, 1961 [forbrevity “IT Act”] the auction purchaser has to be deemed to be adefaulter and the 25% amounts paid on the date of auction has tobe forfeited; thus dis-entitling the purchaser from obtaining the conveyance of the said property at this distance of time. It is alsoprayed that, on such action taken by the Income Tax authorities;deeming the auction purchaser to be a defaulter, the prescriptionunder Rule 58 is to proceed for a fresh auction for sale, whichneed not be resorted to, since the petitioner now undertakes topay the entire dues to the Income Tax Department with interest. 3. Respondents 5 to 8 contend that on the date ofauction itself the petitioner obtained an injunction against theconfirmation, which prevented the deposit of the balanceconsideration for a long time when the suit was pending beforethe trial Court. Subsequently, there was also an appeal filed andthen a review. By the time the dismissal of the review waseffected, the predecessor-in-interest of respondents 5 to 8, theoriginal auction purchaser, died on 01/07/2002. It was in suchcircumstance that the balance consideration could not be paid andas of now the respondents 5 to 8 are willing to pay the balanceconsideration to effect conveyance of the property, as bid inauction and affirmed in favour of their predecessor-in-interest. 4. For adjudication of the dispute, necessarily thefacts, over a long period of time, have to be looked into. Theoriginal defaulter under the IT Act was the 4[th] respondent. Thedefault was also with respect to the years 1977-78 and 1978-79.Notices of default were said to have been issued on 22/03/1982and 29/03/1983 respectively. There was also an attachment of2.05 acres of property standing in the name of the 4[th] respondentwith regard to the dues under the IT Act. The petitioner and hisfather purchased 60 and 90 cents respectively out of the totalextent of 2.05 acres, from the 4[th] respondent. The sale deed infavour of the petitioner is produced at Exhibit P1 dated 10/10/1985and the title deeds executed in favour of the petitioner's fatherwere on 10/09/1985 and 30/09/1985. The properties purchased bythe father stood conveyed to the petitioner by Exhibit P2 dated13/06/1991. 5. The petitioner, after the auction purchase, had fileda claim petition, which was rejected and in the claim petitionadmittedly the contention was that the 4[th] respondent had sold the property to the petitioner and his father, so as to satisfy the duesunder the IT Act. In such circumstance, the petitioner cannot claimto be a bona fide purchaser; nor can he claim that the statutorycharge under the IT Act would be effaced by reason of suchpurchase. Be that as it may, the contention raised is different,insofar as the purchase having not fructified and the purchaserbeing disabled from seeking for a conveyance at this belatedstage, especially on default in payment of balance saleconsideration. 5. The petitioner, after the auction purchase, had fileda claim petition, which was rejected and in the claim petitionadmittedly the contention was that the 4[th] respondent had sold the property to the petitioner and his father, so as to satisfy the duesunder the IT Act. In such circumstance, the petitioner cannot claimto be a bona fide purchaser; nor can he claim that the statutorycharge under the IT Act would be effaced by reason of suchpurchase. Be that as it may, the contention raised is different,insofar as the purchase having not fructified and the purchaserbeing disabled from seeking for a conveyance at this belatedstage, especially on default in payment of balance saleconsideration. 6. In this context, the sale proceedings and litigationsare to be looked at. Exhibit P6 is the sale notice issued by the 3[rd]respondent, which indicates the date of sale as 25/02/1987. On25/02/1987 the predecessor-in-interest of respondents 5 to 8successfully bid the properties in auction, as is indicated byExhibit P5 certificate dated 25/02/1987 itself. Admittedly, 25% ofthe amounts were paid and the balance had to be paid under Rule58 of Second Schedule to the IT Act within a period of fifteen daysfrom the certificate being issued. On the very date of sale, the petitioner, along with his father, filed O.S.No.32 of 1987 before theAdditional Sub Court, Kollam, in which an interim injunction wasprayed for, which was granted as per Exhibit P11. Exhibit P11,passed on 25/02/1987, reads as under; in its operative portion:“Heard. No objection. Confirmation of the sale isstayed till the disposal of I.A.424/87”. 7. It is admitted that the said order continued till thedisposal of the suit itself. The suit was dismissed by judgment anddecree dated 24/02/1998 [Exhibit P12 judgment]. The additional6[th] defendant arrayed in the suit was the predecessor-in-interest ofrespondents 5 to 8. The purchaser cannot feign ignorance of thedismissal of the suit. The petitioner is then said to have filed anappeal with 44 days delay before this Court, numbered asA.S.No.468 of 1998. Notice was ordered in the delay condonationapplication and the predecessor-in-interest of respondents 5 to 8was also issued with notice. There was no order of stay and thedelay itself was condoned on 07/02/2000, by which timeconsiderable time had elapsed and the additional 6[th] defendant in the suit, who is the purchaser of the property, did not care to remitthe balance consideration. The appeal was dismissed for defaulton 25/05/2011. Again a restoration petition was filed before thisCourt and after hearing the appeal itself, the same stooddismissed on 10/09/2012. A review petition filed, numbered asR.P.678 of 2013, also stood dismissed on 09/10/2013. Admittedly,till date neither the purchaser nor the legal heirs have cared todeposit the balance sale consideration. In such circumstance,Rule 58 of Schedule II of the IT Act comes into operation and thepredecessor-in-interest of respondents 5 to 8 would have to bedeemed to be a defaulter. The sale in favour of the predecessorin interest of the party respondents 5 to 8, would stand set aside.8. As rightly pointed out by the learned Counsel for thepetitioner, a re-auction would have to be conducted. In suchcircumstances, after adjusting the expenses for such re-auction,the respondents 5 to 8 should be returned with the balanceamount deposited, being 25% of the bid amount, as evidenced byExhibit P5, if not decided to be forfeited under Rule 58. 9. However, this is a case in which the petitioner hasbeen in possession of the property prior to the date of sale. Thepetitioner had, in fact, filed a claim petition at the relevant time,which was rejected as per Exhibit P8. The petitioner, admittedly,was in possession of the Cashew factory in the propertypurchased by him, as is seen from Exhibit P9; a licence issued inthe name of the petitioner's father on 22/07/1985. In suchcircumstance, equity demands that the petitioner be given achance to settle the entire dues under the IT Act created by the 4[th]respondent, which also occasioned the charge being created onthe property purchased by the petitioner. 10. The respondents 1 to 3 shall, hence, intimate theamounts due as on 10[th] November, 2016 with any interestaccruing to the dues and the petitioner shall be permitted to paythe said amounts within the said period; i.e., on or before10.11.2016. The intimation of computation of amounts withinterest shall be served on the petitioner within three weeks fromthe date of receipt of a certified copy of this judgment. If the petitioner makes the payment prior to 10/11/2016, deduction in theinterest shall also be made so as to compute the interest only tillthe date of payment. If such payment is made, attachment shallbe lifted. It is also directed that if amounts with respect to the dueshave already been received, the same shall be deducted; forwhich the petitioner relies on Exhibit P10. The petitioner then shallbe retained and reverted with unencumbered title of the propertycovered by Exhibits P1 and P2. The balance property covered byExhibit P 5 shall then be enjoyed by the legal heirs of the 4[th]respondent or their assignees. 11. In that circumstance, it would have to beconsidered as to whether the respondents 5 to 8 can be returnedwith the 25% amount deposited. That is a matter for which anappropriate application ca0n be made before the Income Taxauthorities; which would be considered in accordance with law,under Rule 58. 12. If the petitioner fails to deposit the amount asdirected hereinabove, then necessarily the Income Tax Department would be entitled to proceed for auction and sale ofthe properties, in which event any amounts remaining aftersatisfaction of the dues will be paid to the petitioner and the legalheirs or assignees of the 4[th] respondent, in proportion to theextent of their respective holding. The writ petition is allowed with the above directions.Parties are left to suffer their respective costs. vku/- Sd/- K.Vinod ChandranJudge. [ true copy ]