MOHAMMED NIYAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The pivotal question in this matter relates to the interpretation of clause (iii) of sub-rule (2) of Rule 68B of the Second Schedule to the Income Tax Act ("the Act") .

(2.) The facts relevant are the following: Large amounts were due from a company called Sreerama Cashews Private Limited in terms of their assessments under the Act for the years 1977-'78 and 1978-'79. Pursuant to the Recovery Certificates issued in this regard by the Assessing Officer, the Tax Recovery Officer served demand notices to the assessee in respect of the assessment years referred to above on 21.5.1982 and on 8.7.1983 respectively, directing the assessee to pay a total sum of Rs.45, 91, 888/- with interest. The assessee did not comply with the demands. Consequently, on 16.10.1985, an item of property measuring 05 acres owned by the assessee has been attached in terms of Rule 48 of the Second Schedule. Later, the attached property was brought for sale by the Tax Recovery Officer on 25.1987. In the meanwhile, 90 cents, out of the attached property was sold by the defaulter to the father of the petitioner by two separate sale deeds and 60 cents out of the remaining was sold to the petitioner. The said sale deeds were executed on 10.9.1985, 13.9.1985 and 10.10.1985 respectively. On coming to know of the proceedings for sale of the property, the petitioner along with his father preferred a claim petition invoking Rule 11 of the Second Schedule. The said claim petition was rejected by the Tax Recovery Officer as per Ext.P2 order on 24.1987, holding among others, that the attachment over the property relates back to the dates on which the notices to pay the arrears have been served on the defaulter and that the petitioner and his father had no right over the property on the dates on which demand notices were served on the defaulter. Consequent on the dismissal of the claim petition, the property was again brought for sale on 25.1987 and in the said proceedings, one N.H.Sherief had offered to purchase the property and remitted 25% of the sale consideration. In the meanwhile, the petitioner and his father challenged Ext.P2 order in O.S.No.32 of 1987 before the Subordinate Judge's Court, Kollam, invoking sub-rule (6) of Rule 11 of the Second Schedule and obtained an order restraining the Tax Recovery Officer from confirming the sale. The purchaser of the property did not pay the balance sale consideration in view of the said interim order. The suit was later dismissed on 24.1998. In the meanwhile, the father of the petitioner transferred the property purchased by him from the defaulter to the petitioner on 13.6.1991. Despite the said transfer, both the petitioner and his father together filed A.S. No.468 of 1998 before this Court, challenging the decision in the suit and the said appeal was dismissed by this Court on 10.9.201 Though the petitioner and his father filed R.P. No.678 of 2013 before this Court seeking review of the judgment in A.S. No.468 of 1998, the review petition was also dismissed by this Court on 9.10.2013.

(3.) It is seen that steps have been taken thereupon by the Tax Recovery Officer to confirm the sale by collecting the balance sale consideration from the auction purchaser. The petitioner then preferred W.P.(C) No.27423 of 2013 before this Court alleging that since the auction purchaser did not pay the balance sale consideration, despite there being no stay interdicting the confirmation of the sale for a considerably long period in between after the disposal of the suit, he is not entitled to obtain the conveyance of the property. It is specifically undertook by the petitioner in the said writ petition that if it is found that the auction purchaser is not entitled to obtain conveyance of the property, he is prepared to pay the entire tax arrears of the defaulter for saving the property purchased by him. By the time when the said writ petition was filed, the auction purchaser died. The legal representatives of the auction purchaser who were impleaded as respondents 5 to 8 in the writ petition resisted the writ petition contending that the balance sale consideration was not paid by their predecessor on account of the interim order passed in the suit interdicting confirmation of sale and that they are prepared to pay the balance sale consideration for the purpose of obtaining conveyance of the property. This Court held that the successors of the auction purchaser are not entitled to obtain conveyance of the property in the light of the provisions contained in Rule 58 of the Second Schedule and consequently disposed of the writ petition in terms of Ext.P5 judgment, permitting the petitioner to liquidate the tax arrears of the defaulter. It was, however, made clear by this Court that if the petitioner fails to liquidate the tax arrears of the defaulter, the Tax Recovery Officer will be at liberty to proceed against the property. Immediately thereupon, the Tax Recovery officer called upon the petitioner to pay the tax arrears of the defaulter. The petitioner then filed R.P.No.886 of 2016 seeking review of Ext.P5 judgment contending that what was agreed to be paid by him was the tax arrears of the defaulter, for the recovery of which the property was attached, and they are now being called upon to pay not only the said arrears, but also the arrears of the defaulter accrued after the attachment of the property. This Court dismissed the said review petition with certain clarifications, as per Ext.P5(a) order. Ext.P5 judgment, as clarified in Ext.P5(a) order, has been challenged by the petitioner in W.A. No.391 of 2017 and the said writ appeal was disposed of by this Court as per Ext.P6 judgment as follows: