Limitation on tax recovery sale of attached immovable property bars continuation of attachment and encumbrance entry

Rule 68-B of the Second Schedule to the Income-tax Act bars sale of attached immovable property after three years from the end of the financial year in which the demand became final, subject only to the rule's specified exclusions. As no sale was undertaken within the prescribed limitation period and the Revenue's stated reasons for delay did not extend time, the attachment could not continue to subsist. The consequential encumbrance entry was therefore also liable to be removed, and the impugned attachment and encumbrance proceedings were quashed with a direction to delete the encumbrance.

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Issues: Whether the orders of attachment and the consequential encumbrance entry in respect of the petitioner's immovable property were liable to be quashed on the ground that no sale had been effected within the period prescribed under Rule 68-B of the Second Schedule to the Income-tax Act, 1961.

Analysis: The prescribed rule bars sale of attached immovable property after the expiry of three years from the end of the financial year in which the demand became final, subject to the exclusions contemplated by the rule. The admitted facts showed that the property was attached in 2003, no sale was taken up within the limitation period, and the grounds urged by the Revenue for delay did not extend the prescribed time. In these circumstances, the attachment could not survive, and the consequential encumbrance entry also had to be removed.

Conclusion: The impugned attachment orders and the consequential encumbrance proceedings were quashed, and the removal of the encumbrance entry was directed in favour of the petitioner.

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