2018 (10) TMI 71 - HC - Income Tax

Invalidity of Auction Notice Due to Exceeding Limitation Period under Income Tax Act

The court held that the auction notice dated 18.11.2004 was invalid due to exceeding the three-year limitation period under Rule 68B of the Income Tax ... Recovery of dues - attachment of property - Period of limitation - Restraining respondents from proceeding to sell the attached agricultural land by auction - notice for auction barred by limitation because of Rule 68B of Second Schedule of Income Tax Act, 1961 - Held that:- The steps are initiated by department in present matter on 18.11.2004 i.e. after expiry of period of three years but before expiry of period of four years. The judgment of Apex Court in S.V. GOPALA RAO & ORS. [2017 (9) TMI 589 - SUPREME COURT] which endorses reasoning of Andhra Pradesh High Court on lack of authority in CBDT to increase the period from three years to four years. The incompetent authority, therefore, cannot prejudice legal rights of petitioner flowing from statutory provisions or eclipse the same in any manner. Notice dated 18.11.2004 is, therefore, beyond period of three years and, therefore, hit by Rule 68B( 1). Similarly, Advocate Parchure has attempted to urge that notice dated 18.11.2004 impugned before this Court is a resale. Again material on record does not show that it is a resale. In this situation, we find the notice dated 18.11.2004 unsustainable. It is accordingly quashed and set aside. Consequently, in view of mandate of Rule 68B(4), attachment of properties which formed subject matter of said notice dated 18.11.2004 is also set aside. Issues involved:1. Validity of notice for auction dated 18.11.2004 based on the limitation period under Rule 68B of the Second Schedule of the Income Tax Act, 1961.Detailed Analysis:The petitioner, a Hindu Undivided Family (HUF), challenged the auction notice dated 18.11.2004, claiming it was time-barred due to Rule 68B of the Income Tax Act. The petitioner argued that the period of limitation was three years until 01.03.1996, when it was extended to four years by the Central Board of Direct Taxes (CBDT). However, a judgment by the Andhra Pradesh High Court in 2004 invalidated the CBDT's power to make such an amendment. The petitioner contended that the period should be calculated from 01.04.2001 when the Supreme Court dismissed the Special Leave Petition (SLP), making the auction notice beyond the three-year limitation.The respondents argued that a judgment involving a co-partner had applied a four-year limitation period, even from 01.04.2001, as per Supreme Court rulings. They also highlighted that the SLP dismissal date in 2004 extended the limitation period to four years, making the auction notice valid. Additionally, they pointed out that the notice was for resale, subject to a four-year limitation period as per Rule 68B(1) proviso due to the outstanding tax amount exceeding two crores.The petitioner further referred to Rule 68B(4) to argue that the auction not being conducted within the stipulated time rendered the attachment action invalid. The court noted that there was no evidence of revenue efforts for auction between 16.01.2001 and 18.11.2004, indicating it was not a resale but an initial auction.The court considered the Andhra Pradesh High Court's ruling that CBDT lacked the authority to extend the limitation period to four years, a decision upheld by the Supreme Court in 2017. It emphasized that the period of limitation remained three years as per legislative provisions. The court rejected arguments for a four-year limitation period until 2017, stating that an incompetent authority could not alter statutory provisions.The court distinguished previous judgments involving co-partners, clarifying that they did not address the specific issue of the three-year legislative limitation versus the CBDT's four-year period. It concluded that the auction notice dated 18.11.2004 was beyond the three-year limitation and thus invalid under Rule 68B(1).The court dismissed claims that the notice was for resale, as there was no evidence supporting this assertion. Consequently, the court quashed the notice and set aside the property attachment, allowing the respondents to pursue legal recovery avenues. The petition was allowed with no costs incurred.