K T THOMAS Vs. TAX RECOVERY OFFICER

JUDGEMENT

(1.) THE petitioner in O. P. No. 9041 of 1989 is the appellant. He was an assessee under the Indian Income-tax Act and Wealth-tax Act on the file of the Income-tax Officer, B-Ward, Circle-I, Calicut. He was in arrears of income-tax, wealth-tax and interest thereon amounting to Rs. 8,97,773. Recovery proceedings were initiated by the Tax Recovery Officer, Calicut. An item of immovable property belonging to the petitioner, viz., bank house property, was put to auction. THE property was sold for an amount of Rs. 12,01,000 at the auction conducted on February 7, 1989. THEre was a prior liability on the property in favour of the Chartered Bank and the Chartered Bank had obtained a decree on July 31, 1982, in 0. S. No. 84 of 1981 of the Sub-Court, Kozhikode. THE decree was later assigned in favour of one Jolly Thomas. THE charge created by the Chartered Bank on the property was not initially known to the Department. Jolly Thomas filed a petition requesting the Tax Recovery Officer to set aside the sale or in the alternative to pay her a sum of Rs. 8,07,327.14. But the request for setting aside the sale was rejected and the auction sale was confirmed on March 14, 1989.

(2.) JOLLY Thomas filed a petition in the Sub-Court, Calicut, as E. A. No. 262 of 1989 in 0. S. No. 84 of 1981 for a direction to the Tax Recovery Officer to deposit the entire sale proceeds in court. The court ordered that the Tax Recovery Officer would pay her the amount due as per the decree with interest as ordered by the Subordinate Judge. It was brought to the notice of the court by the Department that a sum of Rs. 4,09,673.80 was already in deposit in that court and that JOLLY Thomas had prior charge over that amount as that property was one of the two immovable properties given as security to the decree-holder.

(3.) AFTER hearing the parties, we are of the view that the appellant's contention cannot be accepted. Learned counsel for the appellant was correct in submitting that normally under Rule 8 of Schedule II, the Income-tax Officer has to return the excess amount after adjusting the amount due to the Department. But in a case where there is a first charge, it is the duty of the Department to adjust the amount realised under the auction towards that first charge. Even if there is a mistake in the sale proclamation, that cannot be taken advantage of by the appellant. The appellant also submitted that Jolly Thomas had a first charge over the property. Further; Jolly Thomas had made the petitioner and the Department as parties to the execution proceedings. It is in those proceedings that the order was made to deposit some amounts towards the liability. That order has not been challenged by the appellant.