KAPURCHAND SHRIMAL Vs. TAX RECOVERY OFFICER

JUDGEMENT

(1.) THIS writ appeal is directed against the judgment of our learned brother, Jaganmohan Reddy J., dismissing Writ Petition No. 1274 of 1965, filed by the appellant herein seeking to prohibit the respondents, viz., the TRO, the Joint Collector, Hyderabad, and the ITO, Central Circle, Hyderabad, from giving effect to the order of the first respondent, dt. 10th Aug., 1965, as confirmed by the Joint collector, Hyderabad, by his order, dt. 3rd Sept., 1965, to arrest and detain him in civil prison as a defaulter, under R. 73 of the IT Rules (hereinafter called "the Rules") in Schedule II to the IT Act (XLIII of 1961) (hereinafter called "the Act"). It will be appropriate to refer to the various averments and allegations made in the affidavits of the parties in so far as they are relevant for the determination of the contentions urged before us.

(2.) THE appellant was originally assessed for the year 1955-56 to a tax of Rs. 2,95,540.19 and for the year 1956-57 to Rs. 10,70,643.13. A certificate was issued to the Collector for the recovery of the tax and the Collector, pursuant to the said certificate, attached all the immovable properties of the assessee in July, 1959. The ITO also issued a notice under S. 46(5A) of the Act restraining the tenants of the property from paying rents of nearly Rs. 1,200 per mensem to the petitioner; and since July, 1959, onwards, the ITO himself has been collecting the rents directly from the tenants.

(3.) THE ITO, Special Investigation Circle, in his counter pleaded that with respect to the asst. yrs. 1955-56, 1956-57 and 1957-58, a settlement was arrived at. In pursuance of the said settlement, the assessment for the asst. yr. 1956-57 was modified and the tax was reduced to Rs. 1,72,159; and as a consequence of the revision of assessment for 1955-56 after remand by the AAC, the demand of Rs. 1,04,417 was made. Intimations regarding the modification of the demand in respect of the above two years were given to the TRO, which is in conformity with the requirements of S. 3(1)(b)(ii) of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964. Subsequently, the assessments for the years 1957-58, 1958-59 and 1959- 60 were completed and further demands to the tune of Rs. 9,11,265 were made. The assessment for 1957-58 was made on the basis of a settlement subject to certain additions being allowed to be agitated on appeal, and inasmuch as the tax was not paid as per the demands made on him, certificates under S. 222 of the Act were issued and forwarded to the TRO. The total demand thus made on the appellant for these years comes to Rs. 11,97,341, and what little was collected was only due to the coercive process taken by the authorities and not to the voluntary payments made by the appellant towards the discharge of the same. It is further stated that the raiding of the premises of the appellant showed that, with the fraudulent intention of defeating and delaying the recovery proceedings, the appellant had created several nominal and benami alienations in favour of his wife, brother, relations and friends in respect of most of his properties; that the appellant had made a settlement in favour of his wife in respect of a house worth Rs. 1,00,000 situated in Sultan Bazar, Hyderabad, without any consideration, which is void and unenforceable in law; that a mortgage was created by the appellant in favour of his brother, Kesarichand Bhora, who was residing in Delhi, by a deed, dt. 21st Feb., 1959, for Rs. 60,000, which is also nominal and collusive; and that he had also entered into nominal and collusive transactions without consideration with some of his friends and relations residing in Bombay. As the appellant did not pay the arrears of tax, the TRO had to attach the properties belonging to him and bring the same to sale. The proclamation of sale was issued on 4th Aug., 1964, and the auction was fixed to take place on 19th Oct., 1964. Thereupon a number of claimants filed claim petitions before the TRO claiming that they were entitled to the property in some cases and in other cases claiming priority on the ground that they were secured creditors as there were mortgages in their favour. The wife, in whose favour the settlement was made, subsequently died leaving an alleged will, settling the properties on her husband and her sons and daughters. The TRO, after hearing the objections, found that the claims put forward were invalid and not binding on the Department. Against the decision of the TRO, appeals were preferred to the District Collector and the same are said to be still pending.