TaxTMI 
TaxTMI 
1996 (10) TMI 3
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.... property of the defaulter income-tax assessee from whom he is alleged to have agreed to purchase the said property and which property was sold in auction by the Income-tax Department in the execution of the certificate of recovery of income-tax issued against the defaulter, owner of the property. In order to answer this question the backdrop facts may be noted at the outset. One Y. S. Devendra Murthy who was the owner of the property auctioned by the Income-tax Department had committed default in payment of income-tax dues assessed against him for the relevant assessment years. The Tax Recovery Officer under the Income-tax Act issued notice to him on September 3, 1973, as per rule 2 of the Second Schedule to the Income-tax Act which deals with " Procedure for recovery of tax ". The said defaulter Shri Y. S. Devendra Murthy entered into an agreement dated November 20, 1982, with the common appellant to sell his property being agricultural land being Survey No. 20 and part of Survey No. 21 for Rs. 2,80,000 and received an advance of Rs. 1,62,000. The sale deed was to be executed by the said Shri Y. S. Devendra Murthy within eight months which time-limit was further extended by fi....
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....ated December 14, 1990, allowed the writ petition and quashed the orders dated April 20, 1988, passed by the Tax Recovery Officer and dated June 13, 1988, passed by the Tax Recovery Commissioner. The learned single judge held that the application moved by the appellant was maintainable under rule 60 and as he had in the meantime withdrawn the deposited amount he permitted the general power-of-attorney holder of Y. S. Devendra Murthy to make deposit within four weeks and directed the Tax Recovery Officer to deal with the matter in accordance with law. An amount of Rs. 4,45,783 was accordingly deposited with the Tax Recovery Officer. The aforesaid order of the learned single judge was challenged by the Tax Recovery Commissioner, Karnataka-II, Bangalore, and the Tax Recovery Officer by way of Writ Appeal No. 293 of 1991 while respondent No. 3 preferred Writ Appeal No. 721 of 1991 against the very judgment and order of the learned single judge as by the said order of the learned single judge, the auction sale in favour of respondent No. 3 was liable to be set aside if the remanded proceedings under rule 60 were successful. Both these writ appeals were heard together by a Division Bench....
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.... Tax Recovery Officer rejected the appellant's application he was already having the full title in this property as successor-in-interest of the defaulter. It was vehemently submitted that even assuming it is held that the defaulter through his power-of-attorney holder had not filed a separate application under rule 60 and had merely supported the application of the appellant even then as per the said rule the appellant had sufficient locus standi as he was interested in the property which was the subject-matter of the auction sale and that the Revenue was only concerned with its tax dues. Once the deposit fully met the said claim of the Revenue, it could not insist on such a technicality that the appellant's application was not maintainable qua the auction purchaser respondent No. 3 who did not get any better right by the auction in his favour which was liable to be set aside on payment of tax dues within thirty days of the auction by the defaulter or by any of his agents. In support of this contention strong reliance was placed on the decision of a learned single judge of the Kerala High Court in the case of M. Rajagopal v. Secretary, State Transport Authority [1978] 115 ....
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....l with the question posed for our consideration. Rule 60 of the rules in the Second Schedule to the Income-tax Act reads as under : " 60. (1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing,--- (a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of fifteen per cent. per annum calculated from the date of the proclamation of sale to the date when the deposit is made ; and (b) for payment to the purchaser, as penalty, a sum equal to five per cent. of the purchase money, but not less than one rupee. (2) Where a person makes an application under rule 61 for setting aside the sale of his immovable property, he shall not, unless he withdraws that application, be entitled to make or prosecute an application under this rule." It is no doubt true that the original defaulter Shri Y. S. Devendra Murthy whose property was put to auction had sufficient locus standi....
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....d auction on March 14, 1988, in respect of Survey No. 20/1.2.3 for the recovery of arrears due in respect of Shri Y. S. Devendra Murthy. Still there is time to pay the amount by the said Y. S. Devendra Murthy. As I am having right and interest over the property that has been auctioned I am ready and willing to pay the amount in full. To this effect, Shri Y. S. Surendra, the brother and the power-of-attorney holder of Shri Y. S. Devendra Murthy has authorised me to pay the amount. The said authorisation letter is enclosed herewith. Accordingly, I am prepared to pay the amount that your hon'ble authority is entitled to recover from Y. S. Devendra Murthy. The amount detailed below may kindly or accepted and the sale may kindly be set aside." In the prayer clause of the said application it has been stated that the above application is filed under rule 60 of the Second Schedule to the Income-tax Act, 1961, and the sale be set aside by accepting the amount deposited by him. It is, of course, true as contended by learned senior counsel Shri Rao for the appellant that along with this application he also annexed the authority letter given to him by the power-of-attorney holder of the....
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....hich would entitle him to get the auction sale set aside. In this connection, rule 16(2) on which strong reliance was placed by Shri Salve, is found clearly to have hit the said agreement in favour of the appellant. To recapitulate, notice under rule 2 of the Second Schedule to the Income-tax Act was issued to the defaulter on September 3, 1973. It may be that the attachment might have taken place years afterwards but on November 20, 1982, when the defaulter agreed to sell off his property to the appellant he totally bypassed the requirement of rule 16(1) which lays down that where a notice has been served on the defaulter under rule 2, the defaulter or his representative-in-interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any civil court issue any process against such property in execution of a decree for the payment of money. By entering into such an agreement to sell his property the defaulter had clearly committed breach of rule 16(1) and had bypassed the procedure laid down therein for getting permission of the Tax Recovery Officer. In this connectio....
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....urt in D. V. Satyanarayana v. TRO [1992] 197 ITR 407 has taken the view that a person who had obtained an agreement to sell which is hit by rule 16 of the Second Schedule to the Income-tax Act cannot make an application under rule 61 for setting aside the sale as a person holding interest in the property. On the scheme of the Rules aforesaid this view represents the correct legal position. On the same analogy such an agreement holder cannot equally apply under rule 60 in his own right to get such auction sale set aside. The decision of the learned single judge of the Kerala High Court in M. Rajagopal v. Secretary, State Transport Authority [1978] 115 ITR 364 heavily relied upon by learned senior counsel for the appellant is of no assistance to him for the simple reason that in that case, the court was not concerned with any attachment following the notice under rule 2 of the Second Schedule to the Income-tax Act. The court was concerned with the short question whether the Tax Recovery Officer could issue any notice to the transferee from the defaulter who had received notice under rule 2 and whether such a power flowed from rule 16, sub-rule (1). It is no doubt true that it has bee....