K T THOMAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner in Original Petition No. 2413 of 1987 [see K.T. Thomas vs. CIT and Anr. (1988) 71 CTR (Ker) 175 : (1988) 173 ITR 283 (Ker) : TC52R.865] is the appellant. That petition was filed for the issuance of a writ of certiorari or other writ or direction to quash Exts. P- 4, P-7 and P-10 and also for the issuance of a writ of mandamus directing the first respondent, the CIT, to issue a certificate under s. 230A of the IT Act for the sale of the property owned by the petitioner. By Ext. P-4 order, the TRO, Calicut, came to the conclusion that the petitioner violated the provisions contained in rule 73(1)(a) and (b) of Sch. II to the IT Act and, accordingly, ordered his detention in civil prison. By Ext. P-7 order, the CIT (A) dismissed the appeal filed by the petitioner against Ex. P-4 order. By Ext. P-10, the TRO informed the petitioner that proclamation for sale of his property will be settled on 25th March, 1987. The learned single Judge, after an elaborate survey of the entire facts and circumstances, came to the conclusion that the respondents were justified in finding that there has been a dishonest transfer of the property and that the petitioner had also concealed details of his property from the Department. Consequently, Exts P-4 and P-7 orders were sustained. Regarding Ext. P-10 notice, it was observed that if the petitioner had got any objection relating to Ext. P-10 notice on merits, he can raise those objections before the TRO. In the above view, the original petition was dismissed by judgment dt. 28th April, 1987. Hence, this appeal.

(2.) THE short facts in relation to the dispute involved in the case are as follows : The petitioner was an assessee under the IT Act and WT Act up to 1970-71 and 1977-78, respectively. The arrears of tax due as per the assessments made against him as on 30th Nov., 1986, amounted to Rs. 7,87,784. Certificates for realisation of that amount were issued. Those certificates were issued beginning from 21st March, 1981, and ending with 30th March, 1985. The petitioner owned two properties in Calicut known by the names, "Bright House" and "Kara South Bungalow". These properties were equitably mortgaged to the Chartered Bank. The bank instituted OS No. 84 of 1981 before the Subordinate Judge's Court, Calicut, and obtained a decree charged on the property. The decree liability was got assigned to one Smt. Jolly Thomas, one of the directors of Malabar Produce and Rubber Company. The petitioner negotiated with Smt. Jolly Thomas for the sale of Bright House. An agreement to sell the property was executed. Later, in October, 1984, a registered lease was executed and Smt. Jolly Thomas was put in possession of the property in pursuance thereof. The petitioner then received a sum of Rs. 3,00,000 from the lessee. He opened a new bank account with the Catholic Syrian Bank, Cherutty Road Branch, Calicut, and got the said amount deposited in it. Thereafter, he withdrew the entire amount for paying two of his alleged creditors, namely, Don Bosco Enterprises and Ittyavira. The receipt of the amount, the opening of the account with the Catholic Syrian Bank and the withdrawal of the amount for paying the two alleged creditors were kept secret from the IT authorities. On 20th March, 1985, the petitioner informed the CIT that his property, Bright House, is being sold for Rs. 5,00,000, that he would be able to pay the Department Rs. 1.5 lakhs out of the sale consideration and that he may be issued a certificate under s. 230A of the IT Act. On enquiry by the ITO, Calicut, it was revealed that the sale consideration was not Rs. 5,00,000 as contended by the petitioner, but it was Rs. 9.75 lakhs. The petitioner then explained that Rs. 4,60,000 was due to the purchaser, Smt. Jolly Thomas, that Rs. 3,00,000 have to be paid to his relatives in discharge of earlier loans, that he would require Rs. 1,01,000 for meeting other expenses and that the balance for payment of arrears to the Department will be Rs. 1.14 lakhs. He further stated before the officer that the second item of property has been acquired by the State and that the entire amount of compensation is available for discharging the liablility towards the income-tax dues and wealth- tax dues. The ITO, on an enquiry, found that the entire compensation amount is not available for discharging the income-tax liabilities because the property was subject to other liabilities. Under these circumstances, the certificate under s. 230A was not issued. Then the petitioner approached this Court by filing OP No. 4293 of 1986 for the issuance of a writ of mandamus directing the respondents to issue the certificate. This Court, by judgment dt. 10th June, 1986, disposed of the original petition with a direction to the CIT to pass a final order on the petitioner's application within one month from that day. By order dt. 24th June, 1986, the CIT refused to issue the certificate unless the petitioner paid the entire amount due as arrears of tax. That order was challenged before this Court in OP No. 4877 of 1986. This Court, by judgment dt. 30th Sept., 1986, directed the CIT to reconsider the issue and observed :

(3.) THE petitioner applied for the certificate under s. 230A of the IT Act on 20th March, 1985. He had registered a lease deed in respect of his property, Bright House, in favour of Smt. Jolly Thomas in October, 1984. In pursuance of that lease deed, Smt. Jolly Thomas was put in possession of the property. The agreement to sell the property referred to earlier was also executed even earlier. The petitioner received Rs. 3,00,000 from Smt. Jolly Thomas. These facts were kept concealed. The three lakhs rupees received by the petitioner were, according to him, used for discharging the liabilities due to Don Bosco Enterprises, Trichur, and to one Sri K. J. Ittyavira. The so-called debts due to the abovementioned Don Bosco Enterprises and Sri K. J. Ittyavira are not evidenced by any document. From Ext. P-5 representation given by the petitioner to the TRO, it is seen that loan from Don Bosco was taken in June, 1984, and that the liability towards Sri K. J. Ittyavira is not borne out by any document.