KANAKIA TRADING CO Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The petitioner is a partnership firm consisting of two partners--Sri Hemant Dhirajlal Kanakia and Smt. Sonal Ashok Kanakia. The petitioner became the owner of premises No. 9, Pollock Street, Calcutta, which is a partly one-storeyed and partly two-storeyed building, on October 7, 1983, under the circumstances mentioned hereafter. The said premises was initially purchased in the year 1947 by one Sri Jatindra Kumar Doss and Smt. Tarangini Bala Dassi. Smt. Taran-gini Bala Dassi died on March 12, 1969, leaving her husband the said Sri Jatindra Kumar Doss, as her sole heir and legal representative. On or about July 11, 1969, Mercantile Bank Limited instituted a suit against the said Sri Jatindra Kumar Doss in this court in its original side being Suit No. 1883 of 1969, inter alia, for a decree for Rs. 2,09,004.39, interim interest and interest on judgment and for various other reliefs mentioned in the plaint filed therein. During the pendency of the said suit, Sri Jatindra Kumar Doss also died on or about May 21, 1978, leaving him surviving no heir or heiress or legal representative. Thereafter, pursuant to an application made by the said Mercantile Bank Ltd., the Administrator-General of West Bengal was substituted as the defendant in place and stead of the said Sri Jatindra Kumar Doss in the said pending suit being Suit No. 1883 of 1969. Subsequently, by a decree dated April 25, 1980, the said suit was decreed in favour of the said Mercantile Bank Limited. On or about September 10, 1981, the said decreeholder, Mercantile Bank Ltd., made an application before this court for execution of the said decree dated April 25, 1980. On the said application, Dipak Kumar Sen J. by an order made on September 22, 1982, appointed Mr. Tarapada Das, barrister-at-law, as receiver with directions to him to sell the said premises either by public auction or by private treaty, subject to confirmation by the court. Pursuant to the said order dated September 22, 1981, passed by Dipak Kumar Sen J., the receiver caused advertisements for sale of the said premises to be published once in The Statesman and once in the Ananda Bazar Patrika on October 23, 1981, and October 27, 1981, respectively. Ultimately, the offer of Rs. 2,40,000 given by Mrs. Sonal Ashok Kanakia, one of the partners of the petitioner firm, was found to be the highest and accordingly the said receiver duly accepted the said offer. The said Smt. Sonal Ashok Kanakia duly caused a sum of Rs. 60,000 only being the amount equivalent to 25% of the agreed sale price to be paid and/or deposited with the said receiver through her solicitors and advocates towards earnest money and/or part payment of the agreed consideration money as per the "conditions of sale" of the receiver. Thereafter, by an order dated December 23, 1981, Dipak Kumar Sen J. confirmed the sale of the said premises in favour of the said Smt. Sonal Ashok Kanakia or her nominee or nominees and directed the receiver to complete the sale in accordance with law. The said Smt. Sonal Ashok Kanakia thereafter nominated the petitioner firm as her nominee to purchase the said property and thereafter the said property was sold to the petitioner by the said receiver by and under an indenture of conveyance dated October 7, 1983. The petitioner duly paid the entire consideration of Rs. 2,40,000 to the said receiver.

(2.) The case of the petitioner is that before the said property was purchased by the petitioner as aforesaid, it had enquired as to whether there was any encumbrance or charge of any nature on the said property and was informed that there were some outstanding income-tax dues of late Sri Jatindra Kumar Doss and that for realisation of the said outstanding dues, the Income-tax Authorities had initiated certificate proceedings which were pending. The petitioner \yas further informed that the Tax Recovery Officer had, however, given permission to the Mercantile Bank Limited for selling the said property. The petitioner was also given copy of a letter dated August 28, 1981, addressed by the Tax Recovery Officer to the Mercantile Bank Limited, wherein it was stated, inter alia, that the bank should proceed to sell the said property and after meeting the tax arrears, the bank should appropriate the balance of the sale proceeds against its dues. It was further stated in the said letter that in case the bank could prove that under a court order, its demand had a priority claim over the claim of the Income-tax Authorities, then the bank may, under intimation to the Tax Recovery Officer, realise its demands from the sale proceeds and remit the balance to the Tax Recovery Officer against tax arrears of late Sri Jatindra Kumar Doss. The petitioner was further informed that the Income-tax Officer had also issued notices under Section 226(3) of the Income-tax Act, 1961, to the various tenants of the said property, inter alia, requiring them to pay to the Income-tax Officer any amount due from the said tenants to or held by them for and on account of the said Sri Jatindra Kumar Doss and also to pay any money which may subsequently become due from the tenants to the said Sri Jatindra Kumar Doss or which the tenants may subsequently hold for or on account of him. The petitioner was informed that in view of the fact that the Tax Recovery Officer had granted permission for sale of the said property, there is or can be no question of the said notices under Section 226(3) being given effect to after the said property was purchased by the petitioner and that the charge of the Income-tax Authorities, if any, would stand shifted to the sale proceeds. In the circumstances, the petitioner was informed that there was no encumbrance or charge on the said property in so far as the outstanding tax dues of late Jatindra Kumar Doss are concerned. The petitioner had purchased the said property in view of the said permission granted by the Tax Recovery Officer for sale of the said property.

(3.) At the time of the purchase of the said premises by the petitioner, there were twelve or thirteen tenants in the said premises having valid tenancies. Besides the said tenants, portions of the said premises were also occupied by about fifteen or more persons, who had no tenancies or any other right to occupy the said premises. According to the petitioner, the said persons were and are trespassers and liable to be evicted. It was also claimed that the price paid by the petitioner for the said premises, no portion of which was vacant, was more than its fair market value.