Wp(C)/27566/2008 Of Amaravathy Somasundaram v. The Chief Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR MONDAY, THE 13TH DAY OF OCTOBER 2014/21ST ASWINA, 1936 WP(C).NO. 27566 OF 2008 (F) ---------------------------- PETITIONER(S): ---------------- AMARAVATHY SOMASUNDARAM(EXPIRED) W/O. SOMASUNDARAM, KASAVA VILASOM BUNGLOW, KILIKOLLOOR KOLLAM. *LEGAL HEIR OF DECEASED PETITIONER: SOMASUNDARAM, KASAVA VILASOM BUNGLOW, KILIKOLLOOR KOLLAM. (*LEGAL HEIR OF DECEASED PETITIONER IS IMPLEADED AS PER ORDER DATED01.09.2011 IN I.A.NO.13710/11) BY ADVS.SRI.ANIL D. NAIR SMT.S.HEMALATHA RESPONDENT(S): -------------- 1. THE CHIEF COMMISSIONER OF INCOME TAX CR BUILDINGS, I.S. PRESS ROAD, ERNAKULAM KOCHI - 682 018. 2. THE TAX RECOVERY OFFICER, TRICHUR 3. SMT. V.H.KUNHIPATHU, W/O. LATE T.A. MOIDIEEN, THINDICKAL HOUSE, EDATHURUTHY TRICHUR, DISTRICT. R3 BY ADV. SRI.SREELAL N.WARRIER R3 BY ADV. SRI.B.RAGHUNANDANAN R3 BY ADV. SRI.THYPARAMBIL THOMAS THOMAS R1-2 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAXBY GOVERNMENT PLEADER SMT.LILLY K.T THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13-10-2014,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).NO. 27566 OF 2008 (F) APPENDIX PETITIONER'S EXHIBITS: EXT.P1: TRUE COPY OF THE NOTICE NO.1(T)/90-91 16.05.1990 ISSUED BY THE 2NDRESPONDENT. EXT.P1(A): TRUE COPY OF THE NOTICE NO.3(T)/90-91 DATED 16.05.1990 ISSUED BYTHE 2ND RESPONDENT. EXT.P1(B): TRUE COPY OF THE NOTICE NO.3(T)/90-91 DATED 16.05.1990 ISSUED BYTHE 2ND RESPONDENT. EXT.P2: TRUE COPY OF THE ORDER NO.TRI/T/90 DATED 03.08.1990 PASSED BY THE2ND RESPONDENT EXT.P3: TRUE COPY OF THE ATTACHMENT ORDER DATED 24.11.94 IN FORMNO.ITCP16 ISSUED BY THE 2ND RESPONDENT EXT.P4: TRUE COPY OF THE NOTICE OF SALE PROCLAMATION TR NO.7(T)2/90-91DATED 26.12.1994 ISSUED BY THE 2ND RESPONDENT EXT.P5: TRUE COPY OF THE AUCTION NOTICE DATED 10.01.1995 ISSUED BY THE2ND RESPONDENT IN FORM NO ITC13 EXT.P6: TRUE COPY OF THE REPRESENTATION DATED 07.02.1995 SUBMITTED BYTHE PETITIONER BEFORE THE 1ST RESPONDENT EXT.P7:TRUE COPY OF THE LETTER DATED 09.02.1995 ISSUED BY THE 1STRESPONDENT EXT.P8:TRUE COPY OF THE RECEIPT DATED 09.02.1995 ISSUED BY THE TAXRECOVERY OFFICER, QUILON EXT.P9:TRUE COPY OF THE LETTER DATED 01.03.1995 ISSUED BY THE TAXRECOVERY OFFICER, QUILON EXT.P10:TRUE COPY OF THE LETTER DATED 23.03.1995 OF THE 2ND RESPONDENT EXT.P11:TRUE COPY OF THE NOTICE DATED 24.03.1995 ISSUED BY THE 2NDRESPONDENT IN ITCP17 EXT.P12:TRUE COPY OF THE DETAILED REPRESENTATION DATED 29.03.95SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT WP(C).NO. 27566 OF 2008 (F) EXT.P13:TRUE COPY OF THE AUCTION NOTIFICATION DATED 07.04.1995 EXT.P13(A):TRUE COPY OF THE ADVERTISEMENT FOR AUCTION DATED 01.051995APPEARED IN THE MALAYALA MANORAMA DAILY DATED 05.05.1995 EXT.P14:TRUE COPY OF THE JUDGMENT DATED 18.02.2005 IN O.P.7180/1995 THISHON'BLE COURT EXT.P15:TRUE COPY OF THE LETTER DATED 31.03.1995 OF THE 2ND RESPONDENT EXT.P16:TRUE COPY OF THE REPRESENTATION DATED 12.04.2005 SUBMITTED BYTHE PETITIONER BEFORE THE 2ND RESPONDENT EXT.P17:TRUE COPY OF THE WRITTEN STATEMENT FILED BY THE COUNSEL FORTHE INCOME TAX DEPARTMENT IN W.A.895/2005 DATED 11.042005 EXT.P18:TRUE COPY OF THE APPEAL DATED 02.05.05 FILED BY THE PETITIONERBEFORE THE 1ST RESPONDENT EXT.P19:TRUE COPY OF THE ORDER OF SALE CONFIRMATION IN FORM ITCP 18DATED 29.03.2005 EXT.P19(A):TRUE COPY OF THE SALE CERTIFICATE IN FORM NO.ITCP 20 DATED30.03.2005 ISSUED BY 2ND RESPONDENT EXT.P20:TRUE COPY OF THE STAY PETITION DATED 10.05.2005 FILED BY THEPETITIONER BEFORE THE 1ST RESPONDENT EXT.P21:TRUE COPY OF THE ARGUMENTS NOTES GIVEN ON 12.08.2005 EXT.P21(A):TRUE COPY OF THE ADDL.ARGUMENTS NOTES DATED 08.05.2008 EXT.P22:TRUE COPY OF THE ORDER PASSED BY THE 1ST RESPONDENT DATED14.05.2008 EXT.P17:TRUE COPY OF THE WRITTEN STATEMENT FILED BY THE COUNSEL FORTHE INCOME TAX DEPARTMENT IN W.A.895/2005 DATED 11.042005 EXT.P18:TRUE COPY OF THE APPEAL DATED 02.05.05 FILED BY THE PETITIONERBEFORE THE 1ST RESPONDENT EXT.P19:TRUE COPY OF THE ORDER OF SALE CONFIRMATION IN FORM ITCP 18DATED 29.03.2005 EXT.P19(A):TRUE COPY OF THE SALE CERTIFICATE IN FORM NO.ITCP 20 DATED30.03.2005 ISSUED BY 2ND RESPONDENT EXT.P20:TRUE COPY OF THE STAY PETITION DATED 10.05.2005 FILED BY THEPETITIONER BEFORE THE 1ST RESPONDENT EXT.P21:TRUE COPY OF THE ARGUMENTS NOTES GIVEN ON 12.08.2005 EXT.P21(A):TRUE COPY OF THE ADDL.ARGUMENTS NOTES DATED 08.05.2008 EXT.P22:TRUE COPY OF THE ORDER PASSED BY THE 1ST RESPONDENT DATED14.05.2008 RESPONDENTS' EXHIBITS:NIL //TRUE COPY// P A TO JUDGE A.K.JAYASANKARAN NAMBIAR, J. ............................................................. W.P.(C).No.27566 of 2008.............................................................Dated this the 13[th ] day of October, 2014 J U D G M E N T The challenge in the writ petition is against Ext.P22 order ofthe Chief Commissioner of Income Tax, Kochi, in an appeal filedunder Rule 86 of the II[nd] Schedule to the Income Tax Act, 1961.The brief facts leading to Ext.P22 order are as follows: 2. In respect of arrears of income tax on account of theindividual assessment completed on the petitioner, as also inrespect of arrears of tax of the private company, of which thepetitioner was a Director, the Tax Recovery Officer made aproclamation for auction of 5.25 Acres of land in Thrissur districtbelonging to the petitioner. The reserve price of the property wasfixed as Rs.15,75,000/-. The petitioner moved for stay of recoveryproceedings and the auction was kept in abeyance subject topayment of Rs.4 lakhs by 13.02.1995. It is submitted that thepetitioner paid the said amount. Thereafter, the Tax RecoveryOfficer took up the matter with the Chief Commissioner of IncomeTax and sought permission from him for going ahead with the sale.On getting the said permission, the Tax Recovery Officer intimatedthe petitioner of the fact that he was proposing to go ahead with the sale. Although the petitioner requested for deferment of thesale by a month, the said request was not granted and aproclamation dated 01.05.1995 was issued for conducting theauction on 12.05.1995 in respect of 4 Acres and 91 Cents of landafter fixing a reserve price of Rs.14,73,000/-. The facts in the writpetition disclose that the auction took place on the said date andwas confirmed in favour of one T.A.Moideen who bid the propertyfor Rs.15,11,000/- and deposited a sum of Rs.,3,77,750/-. 3. The petitioner being aggrieved by the action of the TaxRecovery Officer moved this Court through O.P.No.7180 of 1995where he obtained an interim order dated 12.05.1995 stayingfurther proceedings of the Tax Recovery Officer. It is the case ofthe Department that a copy of the stay order was not received byTax Recovery Officer and that it was under those circumstancesthat the sale proceeded, as per the proclamation, on 12.05.1995. Itwould appear that later, the original petition itself was dismissed asinfructuous. Thereafter, the petitioner preferred a writ appealwhich was dismissed as withdrawn after reserving the right of thepetitioner to avail the statutory remedies open to him to challengethe proceedings of the Tax Recovery Officer. Apparently, in themeanwhile, the petitioner sold her interest in the property toanother person namely, K.Moideen. As already noted, the Tax Recovery Officer continued with the sale proceedings and onfinding that T.A.Moideen, who was the person in whose favour thesale was confirmed, had since died, he contacted the legal heirs ofthe said T.A.Moideen and, on their remitting the balance amounts,confirmed the sale in their favour by issuing the necessary salecertificates as well. The petitioner, thereafter, filed an applicationdated 15.04.2005 before the Tax Recovery Officer for setting asidethe sale in terms of Rule 56 of the II[nd] Schedule to the Income TaxAct, 1961. There was apparently no order passed by the TaxRecovery Officer on the said application. This prompted thepetitioner to prefer an appeal to the Chief Commissioner of IncomeTax in terms of Rule 86 of the II[nd] Schedule to the Income Tax Act,to quash the sales certificate issued by the Tax Recovery Officerunder Rule 65 and to set aside the auction of the immovableproperty itself. Ext.P22 is the order that is passed by the ChiefCommissioner of Income Tax and it is this order that is impugned inthis writ petition. 4. The grounds of challenge against Ext.P22 are mainly thatthe Chief Commissioner did not consider the primary contention ofthe petitioner, with regard to propriety of the Tax Recovery Officerin conducting the auction of the property in question on12.05.1995, when there was admittedly an order of stay passed in O.P.No.7180 of 1995. In the impugned order of the ChiefCommissioner, he refers to the contention of the Department thatthe stay order was not received by them prior to the date of theauction. The other contention raised by the petitioner is withregard to the incorrectness of the amounts shown as arrears for thepurposes of conducting the sale of the property. It is the case ofthe petitioner that the property that was worth more than Rs. 18lakhs was ultimately sold for approximately Rs.14 lakhs. It is alsopointed out that the Chief Commissioner erred in not consideringthe contention of the petitioner with regard to the permissibility ofa challenge against the order confirming the sale, even without achallenge being mounted against the sale order of the tax recoveryofficer. Reliance is placed by the petitioner on the decision of theAllahabad High Court inSubash Chandra Goyal v. Tax RecoveryOfficer and Others (2002 Vol. 255 ITR 289). 5. A statement has been filed on behalf of the respondentswherein the sequence of events leading to the sale of the propertiesby the Tax Recovery Officer, as also the confirmation of the saleand the issuance of the sale certificate, is narrated. It is alsopointed out that the petitioner, during the pendency of theproceedings, also sold her property to Mr.Moideen forRs.18,60,000/- as per document No.2152 dated 21.10.2002. 6. I have heard Sri.Anil.D.Nair, learned counsel appearing onbehalf of the petitioner, Sri.Jose Joseph, Standing counsel for theIncome Tax Department as also Sri.Sreelal N. Warrier, learnedcounsel appearing on behalf of the 3[rd] respondent. 5. A statement has been filed on behalf of the respondentswherein the sequence of events leading to the sale of the propertiesby the Tax Recovery Officer, as also the confirmation of the saleand the issuance of the sale certificate, is narrated. It is alsopointed out that the petitioner, during the pendency of theproceedings, also sold her property to Mr.Moideen forRs.18,60,000/- as per document No.2152 dated 21.10.2002. 6. I have heard Sri.Anil.D.Nair, learned counsel appearing onbehalf of the petitioner, Sri.Jose Joseph, Standing counsel for theIncome Tax Department as also Sri.Sreelal N. Warrier, learnedcounsel appearing on behalf of the 3[rd] respondent. 7. On a consideration of the facts and circumstances of thecase as also the submissions made across the Bar, I find that inExt.P22 order, that is impugned in this writ petition, the ChiefCommissioner of Income Tax essentially finds against the petitioneron two counts. First, it is found that the petitioner had not takenany action in terms of Rules 60 and 61 of the Second Schedule tothe Income Tax Act, for the purposes of setting aside the sale ofimmovable property by the Tax Recovery Officer. It is also foundthat, insofar as no steps were taken by the petitioner in terms ofRules 60 and 61, the confirmation of sale in terms of Rule 63 wasautomatic. The Chief Commissioner then proceeds to hold that inthe absence of taking any steps under Rules 60 and 61, there wasno scope for preferring an appeal against an order passed in termsof Rule 63 confirming the sale. The second point that is foundagainst the petitioner is that, during the pendency of theproceedings, the petitioner had sold her interest over the propertyin question to one Mr.Moideen and hence it was not open to the petitioner to continue to prosecute the appeal under Rule 86 of theSecond Schedule to the Income Tax Act. 8. As regards the first issue, no doubt, the petitioner wouldplace reliance on the decision of the Allahabad Court in Subash -Chandra Goyal v. Tax Recovery Officer and Others [2002 Vol. 255 ITR 289],where the court finds that an appeal would lieagainst an order of the Tax Recovery Officer confirming the sale.The said decision proceeds on the basis that, for the purposes ofRule 86, an appeal would lie from any original order passed by theTax Recovery officer, which is not in the nature of an order that isconclusive, and, therefore, an order by the Tax Recovery Officerconfirming the sale, not being one that is made conclusive underSecond Schedule to the Income Tax Act, the order would be anappealable order for the purposes of Rule 86. In this case, howeverI note that, as per the scheme of the Second Schedule to theIncome Tax Act, which deals with the procedure to be followed bythe Income Tax authority for recovery of tax due from an assesseein default, the procedure that is contemplated provides anopportunity to a person aggrieved by the order of the Tax RecoveryOfficer effecting a sale of the property, to prefer an application toset aside the sale on the grounds specified therein. Theseapplications can be preferred in terms of Rules 60 and 61. The act of confirmation of sale by the Tax Recovery Officer is in terms ofRule 63 of the Second Schedule. Rule 63 makes it clear that theorder of confirmation of sale can be made by the Tax RecoveryOfficer only in a situation where no application is made for settingaside the sale or where an application is made but disallowed bythe Tax Recovery Officer. In my view, taking into consideration thestatutory scheme in the Second Schedule to the Income Tax Act,when an order of sale is passed by the Tax Recovery Officer, aperson aggrieved by that order cannot bypass the requirements inthe Schedule, by not preferring an application to set aside the saleand then opting to challenge the order passed under Rule 63,confirming the sale. To allow a person to do so, would do violenceto the procedural scheme contemplated in the Second Schedule. Inthat view of the matter, I see no reason to interfere with thefindings of the Chief Commissioner of Income Tax on themaintainability of an appeal, against the order confirming the salein this case. I also find merit, in the findings of the ChiefCommissioner of Income Tax in Ext.P22 order which hold thepetitioner as not being a person interested, for the purposes ofmaintaining the appeal, since the petitioner had during thependency of the proceedings alienated her rights over the propertyin favour of another person. Having sold her interest over theproperty to a third person, the petitioner effectively lost her right to maintain a challenge against the actions of the Department in anappeal preferred under Rule 86 of the Second Schedule. Thus, inany view of the matter, I find Ext.P22 order of the ChiefCommissioner of Income Tax legally unassailable. The challengeagainst the said order therefore fails, and the writ petition isaccordingly dismissed. A.K.JAYASANKARAN NAMBIAR JUDGE mns