S.V. Gopala Rao and Others vs Commissioner of Income Tax and Others

Bilal Nazki, J.—Heard learned counsel for both the parties and perused the record.

The controversy is very short and mostly the material facts are not at dispute. The petitioners challenge a sale on the ground that the sale was effected beyond time. The dates which are material, as stated above, are not in dispute. The order became final somewhere in 1991-92 and according to Rule 68B of the Income Tax Act, 1961 (for short "the Act"), the order had to be deemed to have come into force from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum had been attached had become conclusive. As such, the time would start running from March 31, 1993, since Rule 68B of the Act itself was incorporated by the Finance Act, 1992, with effect from June 1, 1992. Therefore, June 1, 1992, was taken as a date for reference. The assessment, in the present case, has been completed before June 1, 1992. In between, the Department tried to auction the property but cancelled the auction because the price procured in such auction was not acceptable to the Department. Therefore, the Department claimed one year''s further time in accordance with the proviso to Sub-rule (1) of Rule 68B of the Act. The matter was also pending in the High Court and almost for a period of five years the High Court continued the stay. Therefore, senior counsel appearing for the respondents submits that the time during which the stay of the High Court remained operative has to be excluded. He also contends that one year''s further time has to be granted because in one of the auctions, the property was not sold. He further contends that there has been amendment to Rule 68B of the Act, vide Notification No. 9995 dated March 1, 1996 (see State of Tamil Nadu Vs. Harrisons Malayalam Ltd., ), by which the period of three years mentioned in Rule 68B of the Act has been extended to four years. Therefore, the auction, which was conducted on February 19, 2003, was within time, as the order had become conclusive by the deeming provision in Rule 68B(3) of the Act by March 31, 1993.

Learned counsel for the petitioners does not dispute this factual position but he contends that the so called amendment to Rule 68B by Notification No. 9995 (see State of Tamil Nadu Vs. Harrisons Malayalam Ltd., ), could not be given effect to as it was ultra vires. He submits that Rule 68B itself was inserted by the Finance Act, 1992, by an Act of Parliament. An Act of Parliament could not be amended by any authority whatsoever much less by the Board under its powers u/s 119 of the Act.

Senior counsel appearing for the respondents, on the other hand, submits that under Rule 94 of the Act, the Board has power to issue circulars for removing difficulties.

We fail to understand what difficulty was removed by the Board by amending a provision which had been enacted by Parliament. Even otherwise, we have not seen any power u/s 119 of the Act, which gives any power to the Board to issue such notifications. Therefore, in our view, Rule 68B(1) of the Act as on today lays down the period of three years alone and the notification referred to by the respondents has no effect at all. Therefore, clearly the sale was carried out beyond time and as such is set aside.

The writ petition is allowed. However, the respondents shall have liberty to take steps for recovery, if permissible in law. No order as to costs.

That rule nisi has been made absolute as above.