Sri Premananda Trust vs Deputy Commissioner of Income Tax and Others

K. Mohan Ram, J.—By consent of learned Counsel on either side, the writ petition itself is taken up for final disposal.

The brief facts that are necessary for the disposal of the above writ petition are set out below:

In respect of the fourth respondent-assessee, the block assessment order for the assessment years 1985-86 to 1995-96 was passed on December 29, 1995. On appeal, the Commissioner of Income Tax (Appeals) by his order dated February 27, 1998, set aside the assessment orders and remanded the case with observations. The fourth respondent filed a Writ Petition No. 17641 of 1999 contending that the assessing authority should not pursue with the assessment without giving an opportunity of hearing to the petitioner herein and the writ petition was disposed of on November 2, 1999, with a direction to the Assessing Officer to give a reasonable opportunity of hearing before passing the final orders. Pursuant thereto, after giving a reasonable opportunity of hearing to the petitioner, the Assessing Officer passed an assessment order on March 29, 2000. The revision filed by the fourth respondent against that order was dismissed on March 12, 2003. Against the order dated March 12, 2003, the fourth respondent filed Writ Petitions Nos. 15527 to 15537 of 2003, pending the same, conditional stay was granted on October 16, 2003, on condition of the writ petitioner paying 50 per cent. of the tax arrears and furnishing a bank guarantee for remaining 50 per cent. of the tax arrears. Since both the conditions were not complied with, the stay got vacated automatically on November 12, 2003. Thereafter, writ appeals were filed with petitions to condone the delay but the same were not pursued by the fourth respondent.

3 The demand raised pursuant to the assessment order dated March 29, 2000, is sought to be realised by the auction sale which is impugned in the above writ petition. The impugned proceedings are challenged on the following grounds:

(i) Rule 52(1) of Part III of the Second Schedule to the Income Tax Act, 1961 (hereinafter referred to as "the Rules"), provides for an order to be made by the Tax Recovery Officer directing that any immovable property shall be sold and such an order can be passed only after the issue of proper notice and after giving an opportunity of hearing to all parties concerned but no such order has been made by the Tax Recovery Officer and neither the petitioner-trust nor the fourth respondent have received any such order.

(ii) The proclamation of sale has been issued in respect of the properties belonging to the petitioner-trust to recover the alleged tax dues of the fourth respondent and hence recovery proceedings against the said property are totally without jurisdiction.

(iii) The petitioner claims ownership of the properties which are sought to be sold and has made a claim under Rule 11(1) of the Rules. The petitioner''s claim has not been adjudicated by the third respondent before an order is passed under Rule 52(1) of the Rules or the proclamation issued under Rule 52(2) of the Rules, notice has not been issued of the proposed sale nor was the proposed sale or attachment intimated to the petitioner-trust and till the application filed under Rule 11 of the Rules is adjudicated the properties cannot be sold.

(iv) Since the period of three years from the end of the financial year in which the order was passed by the court expired on March 31, 2006, the immovable properties cannot be sold under Part III of the Second Schedule as the present proceedings are barred by limitation.

A detailed counter-affidavit has been filed by respondents Nos. 1 to 3. In 4 the counter-affidavit the details of the various proceedings initiated under the Income Tax Act against the fourth respondent herein and various writ petitions filed by the fourth respondent, etc., have been set out in detail. It is stated that the assessment order passed against the fourth respondent has attained the finality and to realise the tax arrears only the impugned auction sale has been initiated. It is further stated that when the auction for sale of the property belonging to the fourth respondent for recovery of the tax dues was fixed on March 29, 2006, the petitioner herein represented by Damayanthi Mathaji filed Writ Petition No. 2765 of 2006 and an order of interim injunction was granted by this Court on March 23, 2006, but the same was vacated on June 21, 2006. Thereafter, the petitioner represented by Ms. K. Sivathi filed a miscellaneous petition on July 13, 2006, to set-aside the order vacating the interim injunction. While so when the auction was to take place on December 12, 2006, the present writ petition has been filed in the last minute. Respondents Nos. 1 to 3 have further stated that on the principles of res judicata the present writ petition is not maintainable and the above writ petition is a collusive action of the fourth respondent and the writ petitioner.

The contention of the petitioner that the impugned proceedings is barred by limitation is contested and it is stated that after excluding the period of stay between March 23, 2006 and June 21, 2006, since the balance number of days is less than 180 days, it stands extended for a further period of 180 days from June 21, 2006, which ends on December 18, 2006 and therefore auction notified on December 12, 2006, is well within the period of limitation prescribed under the statute.

In the counter-affidavit, the respondents have further stated that the petitioner filed an application under Rule 11 of the Rules only on November 28, 2006 and on November 29, 2006, itself the date of hearing was fixed for December 1, 2006, to give an opportunity of personal hearing but the petitioner sent a telegram seeking for an adjournment. The request for adjournment was accepted and the hearing was fixed for December 7, 2006. In the hearing, on December 7, 2006, the petitioner was represented by its counsel and the orders were passed on December 8, 2006. In the meantime the above writ petition has been filed. According to respondents Nos. 1 to 3, the writ petition has been filed only to delay the recovery proceedings.

Heard Mr. V. Ramachandran learned senior counsel for the petitioner and Mr. N. Muralikumaran learned senior standing counsel for the Income Tax for respondents Nos. 1 to 3. Since no relief is sought for against the fourth respondent, service of notice on him is dispensed with.

Mr. N. Muralikumaran learned senior standing counsel for the Income Tax Department raised a preliminary objection regarding the locus standi of the petitioner to file the above writ petition. Learned senior standing counsel submitted that by the impugned proceedings the properties of the fourth respondent alone are sought to be auctioned and if any objection can be taken to the auction sale, it can be taken only by the fourth respondent and according to him the petitioner is not the owner of the properties sought to be auctioned. He further submitted that by an order dated December 8, 2006, the application filed by the petitioner under Rule 11 of the Rules has been rejected by the third respondent herein and if the petitioner is aggrieved by that, it is open to the petitioner to institute a suit in a civil court to establish the right which it claims over the properties in dispute. Learned senior standing counsel further submitted that the question of title to the properties sought to be auctioned cannot be decided in the above writ petition. He further submitted that all the grounds pressed into service by the petitioner to challenge the impugned notice are available only to the fourth respondent-assessee, against whose properties the impugned proceedings have been issued but not available to the petitioner herein. Learned senior standing counsel by drawing the attention of this Court to the order dated December 8, 2006, passed by the third respondent in the application filed by the petitioner under Rule 11 of the Rules submitted that none of the properties which are sought to be auctioned stands in the name of the petitioner and the properties standing in the name of the petitioner-trust have not been listed for sale on December 12, 2006 and as such, according to learned senior standing counsel, the petitioner by no stretch of imagination can be termed as an aggrieved person and so the petitioner has no locus standi to file the above writ petition.

Countering the abovesaid preliminary objections raised by learned senior standing counsel, learned senior counsel for the petitioner by placing reliance on a decision of the Supreme Court reported in The Tax Recovery Officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade (Dead) Through Mrs. Shobha Ravindra Nemiwant, submitted that the order of the third respondent dated December 8, 2006, passed in the application filed by the petitioner under Rule 11 is bad in law and he relied upon the following passage from the abovesaid decision:

The Tax Recovery Officer, therefore, has to examine who is in possession of the property and in what capacity. He can only attach property in the possession of the assessee in his own right, or in the possession of a tenant or a third party on behalf of/for the benefit of the assessee. He cannot declare any transfer made by the assessee in favour of a third party as void. If the Department finds that a property of the assessee is transferred by him to a third party with the intention to defraud the Revenue, it will have to file a suit under Rule 11(6) to have the transfer declared void u/s 281.

Learned senior counsel for the petitioner submitted that decrees have been obtained in its favour by the petitioner in the suits instituted by it in the competent civil courts and the validity of those decrees cannot be gone into by the third respondent and the order dated December 8, 2006, passed by the third respondent is directly against the principles laid down by the apex court in the abovesaid decision. Learned senior counsel reiterated the grounds raised in the writ petition and made elaborate submissions.

In the light of the view I am taking in this case and for the reasons stated herein below all those submissions made by learned senior counsel for the petitioner are not being dealt with.

Admittedly, the order dated December 8, 2006, passed by the third respondent under Rule 11 of the Rules is not the subject-matter of challenge in this writ petition. As and when the order of the third respondent dated December 8, 2006, is challenged in a manner known to law before the appropriate forum, it is open to the petitioner to rely upon the ratio laid down in The Tax Recovery Officer II, Sadar, Nagpur Vs. Gangadhar Vishwanath Ranade (Dead) Through Mrs. Shobha Ravindra Nemiwant, and assail the validity of the order. In the considered view of this Court for deciding the validity of the impugned proceedings the said decision is not of any help to the petitioner.

At this juncture, it is pertinent to point out that in the affidavit filed in support of the above writ petition itself in ground - (i) it is contended as follows:

Since the petitioner came to know about the proclamation of sale, the petitioner filed an application under Rule 11. Till the said application is adjudicated after giving the petitioner an opportunity of being heard, no sale can be conducted of the said property.

Therefore, when it is the case of the petitioner itself that, after the adjudication of the application filed by the petitioner under Rule 11 of the Rules the sale of the properties can be conducted and when admittedly the application has been adjudicated and orders have been passed on December 8, 2006, there could not be any objection on the part of the petitioner for the impugned sale. As rightly contended by learned senior standing counsel for the Income Tax Department the only course open to the petitioner is to avail of the remedy provided for under Rule 11(6) of the Rules i.e., to institute a suit in a civil court to establish the petitioner''s right over the properties in question. Further, as pointed out by learned senior standing counsel, in the order dated December 8, 2006, the third respondent has observed that none of the properties which is sought to be auctioned stands in the name of the petitioner and the properties standing in the name of the petitioner-trust have not been listed for sale on December 12, 2006 and therefore as rightly contended by learned senior standing counsel the petitioner cannot be termed as an aggrieved person and therefore the petitioner has no locus standi to file the above writ petition challenging the impugned proceedings and on that ground itself the above writ petition is liable to be dismissed. Further it has to be pointed out that even assuming that there are defects or procedural irregularities in issuing the impugned proceedings as sought to be made out by learned senior counsel such contention can be raised only by the assessee-the fourth respondent herein and not the petitioner.

In the affidavit, in paragraph 27, it is stated as follows:

These properties form part of the ashram and are used in the performance of charitable objects of the petitioner trust. The property houses a large number of destitutes and poor people including a larger number of children who are studying in the school run by the ashram. The destitutes and poor people occupying the premises include a number of refugees. They have no other place if they are expelled from the said premises. The property in question is not held for any profit purpose nor with any profit motive. It would create a major law and order problem and will become a human tragedy if the properties are sold and the occupants are forced to leave the premises.

Learned senior counsel for the petitioner submitted that if the auction is held pursuant to the impugned proceedings and the properties are sold about 2,000 inmates in the ashram will be affected and they will put to untold hardship and misery. Learned senior counsel further submitted that most of the inmates of the ashram are destitutes.

The said submission of learned senior counsel requires sympathetic consideration. As the claim of the petitioner over the properties in question has been rejected by the third respondent by the order dated December 8, 2006 and against that order remedy is available to the petitioner under Rule 11(6) of the Rules it is just and proper to pass the following direction, viz., that if the properties notified for auction sale have been sold on December 12, 2006, the confirmation of the same shall be deferred for a period of six weeks from today, so that the petitioner can seek appropriate remedy before the appropriate forum under Rule 11(6) of the Rules.

With the above directions, the writ petition is dismissed. No costs. Consequently the connected miscellaneous petition is closed.