TaxTMI 
TaxTMI 
TaxTMI 
2008 (8) TMI 199
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.... Tax Department auctioned the schedule premises on 17.3.2005 pursuant to a proclamation of sale dated 7.2.2005. After the auction, the department attempted to transfer physical possession to the bidder even before the issuance of sale certificate. Immediately, the appellant filed a writ petition in WP No. 10094 of 2005, and an order was passed by this Court on 28.3.2005 restraining the department from interfering with the plaintiff's possession of the property for a minimum period of 30 days from the date of service of order dated 17.3.2005. The said order was subsequently modified on 8.4.2005 to the effect that the department should not interfere with the plaintiff's possession for a minimum period of 30 days from the confirmation of the sale. The confirmation of sale has been made by a certificate of sale dated 4.5.2005 issued by the department. While the matter stood thus, the defendants have made a hasty attempt to grab physical possession of the property. Under the circumstances, the appellant filed the above suit for a permanent injunction restraining the defendants from interfering with the plaintiff's possession and enjoyment of the property. (b) The department has issued ....
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....ed with the respondent department on the subject and the department has addressed a letter to the appellant on 4.1.2005; that the department made a publication without mentioning that the property was under the occupation of the appellant as tenant; that on 11.3.2005, the appellant objected to the proposed sale emphasising that their possession and right of occupancy through their letter and pointed out the defect in the proclamation and demanded rectification; that a reply was sent by the department on 14.3.2005 that the lease in favour of the appellant for 9 years from 1990 was after a Tax Recovery Officer notice dated 31.1.1990, and therefore the lease was invalid; that the said notice was not mentioned in the proclamation of sale; that despite the objections raised by the appellant and even without rectifying the defects, auction was held on 17.3.2005; and that the defendants in the suit were declared as successful bidders. 6. Added further the learned Counsel that the first defendant was a Film Director and the second defendant is his wife being a former actress; that both were aware of the fact that the theatre was in possession of the appellant; that they themselves have wi....
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....r and the sale certificate, the respondent deliberately added a mention about a purported Recovery Certificate No.256/91-92 dated 31.1.1990 with a mala fide view to fill up the lacuna in the proceedings of the department though such certificate was not mentioned in the proclamation of sale giving rise to a real apprehension that the said certificate was made up and produced with ulterior motive; that a copy of the sale certificate was affixed on the wall of the theatre premises by the staff of the Income Tax Department and by beat of "Tom Tom"; that they declared that the interest of the landlord defaulter was transferred to the purchaser as provided in Rule 40; that a letter was addressed by the advocates of the defendants to the respondent department seeking to set aside the auction sale and demanding the refund of the sale consideration and further referred to the department's order dated 29.4.2005 rejecting their request; that in the same letter, the defendants have also requested the department to obtain vacant possession from them under Rule 39; that pursuant to the same, the department wrote a letter to the appellant demanding that the appellant should vacate the theatre by ....
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....Application Nos.2883 and 2884 of 2005 and O.A.No.692 of 2005 for restoration of the possession of the theatre; that an application was also filed in WPMP No.25189 of 2005 for restoration of possession; that on 22.8.2005 this Court passed a common order in both the applications in the suit and in the writ petition ordering restoration of possession to the appellant and reviving the interim injunction originally granted in O.A.No.543 of 2005 and WPMP No.19093 of 2005 until further orders; that it is pertinent to point out that the Court was convinced that the appellant was in possession of the property as a tenant of the lessor and hence their possession was to be protected; that though it was forcibly taken by the defendants with the aid of the Income Tax Department and police, the Court has passed an order for restoration of possession; and that pursuant to the order, the possession was delivered back to the appellant on 23.5.2005. 9. It is the further submission of the learned Counsel that after hearing the Counsel, the Court passed a common order in the above applications directing the respondent department to hear the appellant as well as the defendants on 22.9.2005 and pass or....
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.... that the materials including the proclamation, would clearly indicate that symbolic delivery was done following Rule 40 of the Income Tax (Certificate Proceedings) Rules,; that after doing so, the department cannot be allowed to say that for the instant case, Rule 40 is not applicable and Rule 39 alone has to be applied; that in order to suit the convenience of the department, the same was done after the auction purchasers came with a request to cancel the auction sale and also with a further request that the actual possession has got to be handed over by proceeding under Rule 39; and that all would go to show that the department had hand in glove with the auction purchaser. 11. Added further the learned Counsel that the appellant has sought for a permanent injunction to restrain the defendants auction purchasers from interfering with the possession except by due process of law; that the appellant has produced all the lease deeds which have come into existence even before the proceedings initiated by the department, and in such circumstances, the auction purchasers pursuant to the sale, would become the lessors and they must proceed against the appellant/tenant; that if they were....
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....oth oral and documentary to prove the contrary and thus, the order of the learned Single Judge in dismissing the writ petition was in violation of the principles of natural justice; and that the observations made by the learned Single Judge assailing the validity of the lease deeds were unsustainable on facts and have been made contrary to the available records. 13. The learned counsel appearing for the appellant, in support of his contentions, has relied on the following decisions: (a) Dev Raj Dogra v. Gyan Chand Jain, AIR 1981 SC 981; (b) Sancheti Leasing Co. Ltd. v. ITO [1998] Ind Law 570; [2002] 246 ITR 814 (Mad); (c) TRO v. Gangadhar Vishwanath Ranade [1998] 234 ITR 188; [1998] 6 SCC 658 (d) A. Stephen Samuel v. Union of India [2003] 2 MLJ 220; [2004] 118 comp Cas 82 (Mad); (e) Manickam Pillai v. Rathnasamy Nadar AIR 1919 Mad 1186; (f) Biswabani Pvt. Ltd. v. Santosh Kumar Dutta [1980] 1 SCC 185; (g) Ramkumar Das v. Jagdish Chandra Deo, AIR (39) 1952 SC 23; and (h) Puran Chand and Co. v. Ganeshi Lal Tara Chand, AIR 2001 DELHI 175 14. Under the circumstances, the learned Counsel would submit that the judgment of the learned Single Judge has got to be set as....
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.... Rs.11.04 crores along with interest, was liable to pay Rs.19 crores. Pursuant to the certificate issued by the TRO on different dates, Rule 2 notice under Schedule II was issued on 27.2.1987, and the said property was attached on 30.9.1992. Following the same, the property was brought for auction sale by issuing a proclamation on 7.2.2005. The defendants in the suit who were the auction purchasers, when attempted to take possession, it was resisted by the appellant. The objections put forth by the defaulter were negatived and the property was actually auctioned on 7.3.2005. Following the said incident on 19.2.2005, the appellant filed W.P.No.10094 of 2005 on 21.3.2005 seeking for a writ of mandamus to restrain the respondent department from interfering with their possession of the property except as provided under Rule 40 of the Income Tax (Certificate of Proceedings) Rules, 1962. The said writ petition was disposed of by an order to the effect that the department should not interfere with the appellant's possession for a minimum period of 30 days commencing from 17.3.2005. A modification of the said order was sought for, and it was modified to the effect that the appellant'....
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....the respondents/defendants, the Tax Recovery Officer shall pass his orders as to the applicability of Rule 39 of the Income Tax (Certificate Proceedings) Rules, 1962 to the case of the applicant and such order shall be passed on or before 29.9.2005. Copy of the order may be furnished to the applicant as well as the respondents/defendants. The implementation of the said order shall await further order in these proceedings." 22. The very reading of the above part of the order would clearly indicate that the parties agreed that their respective contentions with regard to the possession and also the applicability of Rule 39 could be decided by the Tax Recovery Officer, and the said order after it was made, could be subjected to test in the writ petition itself. It was also made clear that the implementation of the said order should await the further orders in the proceedings. Accordingly, pursuant to the order, both the parties appeared and placed their materials which were perused by the Tax Recovery Officer which resulted in an order as follows: "From the above, it is clear that (i) GVFL has been in possession of the property as an entity representing the defaulter as the lease ar....
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....n public according to the customs of the country to withdraw, remove or open any lock or bolt or break open any door or do any other act necessary for putting the purchaser, or any person whom the purchaser may appoint to receive delivery on his behalf, in possession." 40. Delivery of immovable property in occupancy of tenant:- Where the immovable property sold is in the occupancy of a tenant or other person entitled to occupy the same and a certificate in respect thereof has been granted under Rule 65 of the principal rules, the Tax Recovery Officer shall, on the application of the purchaser, order delivery to be made by affixing a copy of the certificate of sale in some conspicuous place on he property, and proclaiming to the occupant by beat of drum or other customary mode, at some convenient place, that the interest of the defaulter has been transferred to the purchaser." 24. From the very reading of the above Rules, it would be quite clear that the actual delivery of property sold in auction by removing the obstructor can be done under Rule 39 if the property is under the occupancy of the defaulter or of some person on his behalf or of some person claiming under a title crea....
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....the Tax Recovery Officer could be tested by the Court in the proceedings, and also the implementation of the order would depend upon the result of the proceedings. In the instant case, the appellant cannot come forward with the plea to state that the Tax Recovery Officer has neither power nor jurisdiction to go into the question as to the nature of possession of the appellant and give a report. If that contention was accepted, the very purpose for which the matter was referred to the Tax Recovery Officer by consent of parties would be defeated. Hence the correctness of the order has got to be tested in the proceedings. 25. It is not in controversy that after the confirmation of the sale on 4.5.2005 and issuance of the sale certificate, the defendants made an attempt to take possession of the property. The plaintiff despite the auction sale in favour of the defendants and the confirmation of the sale, was resisting the delivery on the ground of tenancy. When such a resistance was made under the alleged tenancy, the Tax Recovery Officer under Rule 43 has to find out whether such a claim was made in good faith. Rule 43 of the Income Tax (Certificate Proceedings) Rules reads as follow....
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....r a period of 9 years, and the monthly rental was written as Rs.5,000/-. A sum of Rs.75 lakhs was shown as the security deposit. The said amount of deposit would carry interest at 10% per annum. The said lease deed was also signed by the husband and wife as lessor and lessee respectively. While the matter stood thus, the third lease deed a perpetual one, was entered into by the wife of Venkateswaran as lessee and one of the directors of the GVFL which was to the effect of rental free. All these lease deeds on their face, would clearly indicate that they were prepared and kept ready for some ulterior purpose probably as put forth by the department to defraud the claim of the department. (ii) Pursuant to the SFL's huge arrears of income tax from the year 1984-85, Rule 2 notices were issued for the first time on 27.2.1987. On service of Rule 2 notice, the defaulter became incompetent to deal with the property. It is quite clear under Rule 16 to Schedule II that after the service of Rule 2 notice if the defaulter has to deal with the property by way of mortgage, charge, lease or otherwise, he should get the prior permission of the Tax Recovery Officer. Since the arrears were not paid,....
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....the Tax Recovery Officer is not competent to adjudicate upon this issue. But, in the instant case, a necessity arose to refer the matter to Tax Recovery Officer pending the proceedings before this Court, to find out whether delivery of possession was to be effected under Rule 39 of Income Tax (Certificate Proceedings) Rules, and thus, he was called upon to exercise his jurisdiction as envisaged in the Rules to find out whether any resistance was made by the plaintiff in good faith. On such exercise, he has found that the resistance was not bona fide since the lease deeds relied on by the plaintiff to call itself as a lessee were against the order of attachment and made in violation of the undertaking and hence of no consequence. In such circumstances, at no stretch of imagination, it can be stated that the Tax Recovery Officer has acted without jurisdiction or exceeded jurisdiction. 31. The learned Counsel for the appellant took the Court to the proclamation of sale made by the department dated 7.2.2005, for the sale of the property and pointed out the schedule of property in the said proclamation was shown under the occupation of the appellant as tenant, and there were letter cor....
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.... bona fide. In order to resolve the question, a duty was cast upon the Tax Recovery Officer to look into the documents and take a decision and place before the Court which he has accordingly done. The learned Single Judge while issuing direction to the Tax Recovery Officer to find out the applicability of Rule 39, has also further pointed out that the order so made by the Tax Recovery Officer was to be tested by this Court and also the implementation of the said order should await the further orders in the proceedings. Accordingly, the learned Single Judge has elaborately discussed in the judgment both factual and legal positions in the writ petition and has found that there was no ground to set aside the order of the Tax Recovery Officer recording a finding that Rule 39 of the Income Tax (Certificate Proceedings) Rules would be applicable to the present facts of the case. 33. At this juncture, it is pertinent to point out that in the writ petition filed seeking the relief of certiorarified mandamus as mentioned above, the auction purchasers were not made as parties. As far as the suit for permanent injunction was concerned, the Income Tax Department was not made as a party. But, ....
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....the conclusion that Rule 39 of the Income Tax (Certificate Proceedings) Rules alone would apply, as per the undertaking, the appellant/plaintiff should come forward to hand over possession. But, they sought for time to prefer an appeal which, in the opinion of the learned Single Judge, should not be allowed. It is pertinent to point out that the learned Single Judge while ordering immediate delivery of possession, has also pointed out that if the plaintiff came out successful in the appeal, the plaintiff can very well invoke Section 144 of Civil Code Procedure for restoration of possession. Under the stated circumstances, this Court is unable to see any merit in the contention put forth by the appellant's side. 37. It could be seen from the Income Tax (Certificate Proceedings) Rules that after an order was passed by the Tax Recovery Officer that there was bonafide resistance or obstruction when delivery was sought for, the course open to the party aggrieved is to file a suit. But, in the case on hand, the suit was filed even before the orders were passed. The writ petition was also filed not challenging the order of the Tax Recovery Officer, but only a letter issued by the departm....