Property attachment and sale notice set aside as seven-year limitation period under Rule 68B exceeded

HC held that the sale notice dated 27.03.2019 and property attachment were barred by limitation under Rule 68B of Schedule II of the Income Tax Act, 1961. The rule prescribes a seven-year limit for sale of attached immovable property from the end of the financial year when the tax demand order became conclusive. Since the original order became conclusive in 2010 and the attachment was made in 2018, it exceeded the limitation period. The court set aside the sale notice and vacated the property attachment, ruling that upon expiry of the limitation period, the attachment is deemed vacated under Sub-Rule IV of Rule 68B.

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Issues Involved:
1. Legality and validity of the impugned sale notice dated 27.03.2019.
2. Validity of the attachment order dated 20.12.2018 under Rule 68B of Schedule II of the Income Tax Act, 1961.

Summary:

1. Legality and Validity of the Impugned Sale Notice:

By filing this writ petition, the petitioner has challenged the legality and validity of the impugned sale notice dated 27.03.2019. The petitioner contends that the sale notice is barred under Rule 68B of Schedule II of the Income Tax Act, 1961, which provides a three-year limitation period (now seven years, amended in 2019) 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 has become conclusive. The petitioner argues that since the order became conclusive in 2010, the sale notice issued in 2019 is barred by limitation.

Mr. R. Dubey, learned counsel for the petitioner, submits that the impugned orders have been issued after the lapse of three years and thus are barred by Rule 68B (1) of Schedule II of the Income Tax Act, 1961. He supports his submission with decisions from the High Court of Judicature at Madras and the High Court of Bombay.

Dr. B.N. Gogoi, learned Standing Counsel for the Income Tax Department, concedes that the impugned order is indeed barred under Rule 68B (1) but argues that the authorities should have the liberty to take recourse to other provisions of the Act for recovery of dues.

The court concludes that the impugned sale notice dated 27.03.2019 is barred by limitation as prescribed in Rule 68B of Schedule II of the Income Tax Act, 1961. Consequently, the notice of proclamation of sale is set aside.

2. Validity of the Attachment Order:

The petitioner also challenges the attachment order dated 20.12.2018, arguing that it is barred by Rule 68B of Schedule II of the Income Tax Act, 1961. The court notes that Rule 68B provides that no sale of immovable property shall be made after the expiry of seven years (earlier three years) from the end of the financial year in which the order giving rise to a demand has become conclusive. The court finds that the attachment order dated 20.12.2018 and the notice of proclamation of sale issued on 27.03.2019 are beyond the limitation period and thus invalid.

By virtue of Sub-Rule (IV) of Rule 68B, upon completion of the period of limitation, the attachment is deemed to have been vacated. Therefore, the court sets aside the attachment order over the immovable property of the petitioner.

Conclusion:

The court concludes that the impugned notice of proclamation of sale is barred by limitation and sets it aside. Consequently, the attachment over the immovable property of the petitioner is also set aside. However, the respondent authorities are granted liberty to proceed for recovery of the dues against the petitioner as permissible under the provisions of the Act and Rules.

Disposition:

The Writ Petition stands allowed and disposed of with no order as to cost.

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