M. NEELAKANTAN VS TAX RECOVERY OFFICER
1998 P T D 2321
[222 I T R 404]
[Madras High Court (India)]
Before K.A. Swami, C.J. and Kanakaraj, J
M. NEELAKANTAN and others
versus
TAX RECOVERY OFFICER and others
W. A. No. 1085 of 1995 and C.M. Ps. Nos. 13747 and 13748 of 1995, decided on 25/01/1996.
Income-tax---
----Recovery of tax---Sale of property---Application for setting aside sale-- Condition that amount recoverable from defaulter should be deposited-- Deposit should be made before application is taken up for consideration-- Deposit of amount during pendency of writ proceedings to set aside sale-- Not sufficient---Sale could not be set aside---Indian Income Tax Act, 1961, Sched. II, R.61---Constitution of India, Art. 226.
Under rule 61 of Schedule II to the Income Tax Act, 1961, if an immovable property is sold in execution of the certificate, the defaulter or any person, whose interests are affected by such sale, is entitled to make an application within thirty days from the date of the sale, before the Tax Recovery Officer to set aside the sale of the immovable property, either on the ground that notice was not served on the defaulter to pay the arrears as required by the Second Schedule, or, that there was material irregularity in publishing or conducting the sale. The proviso thereto further imposes certain limitations on the power of the Tax Recovery Officer to set aside the sale, and also prescribes a condition to be satisfied by the applicant seeking setting aside of the sale. Clause (b) of the proviso imposes a condition on the applicant that he should deposit the amount recoverable from the defaulter in the execution of the certificate. The condition prescribed by clause (b) of the proviso has to be fulfilled before the application for setting aside the sale comes up before the Tax Recovery Officer for consideration. Under clause (b) of the proviso to rule 61 an application shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate. Therefore, it is not necessary that the amount should be deposited alongwith the application. It is permissible to deposit the amount before the application is taken up for the first time for consideration.
Held on the facts, that the deposit of the amount recoverable from the defaulter in the execution of the certificate was not deposited before the application for setting aside the sale was taken up for consideration. The amount was deposited only during the pendency of the writ petition against the order of the Tax Recovery Officer refusing to set aside the sale. Such a deposit could not be considered to be in conformity with the requirement of rule 61 of the Second Schedule so as to enure ;o the benefit of the applicant.
Devaki Ammal v. TRO (1996) 218 ITR 518 (Mad.) affirmed.
S. Raghavan for Petitioner.
S.V. Subramaniam for C.V. Rajan fer Respondent No. 1.
P.P.S. Janarthana Raja for Respondent No.3.
JUDGMENT
K.A. SWAMI, C. J.---This is a case, in which the appellants have failed to comply with clause (b) of the proviso to rule 61 of the Second Schedule to the Income Tax Act, 1961, relating to procedure for recovery of tax (hereinafter referred to as "the rules of the Second Schedule"). The house property bearing door No.15, Kanda Pillai Street, now known as Kandan Street, Chetpet, Madras-31, belonging to the late M. Natesan was attached and sold in public auction on April 26, 1985, towards the realisation of the tax arrears of the aforesaid late M. Natesan. The widow of the late M. Natesan filed an application under rule 61 of the rules of the Second Schedule for setting aside the sale. However, she did not deposit the amount recoverable from her late husband, M. Natesan, in the execution of the certificate. Therefore, the application was rejected buy the Tax Recovery Officer-V, Madras, in his proceedings T.R. No.3020 of 1972-73, dated June 13, 1985. Hence, she approached this Court in W.P. No.7088 of 1985 (see (1996) 218 ITR 518), under Article 226 of the Constitution, challenging the aforesaid order of the Tax Recovery Officer.
During the pendency of the writ petition, the petitioner, Devaki Animal died. Therefore, the appellants herein were brought on record as her legal representatives.
The learned Single Judge (see (1996) 218 ITR 518 (Mad.) by the order under appeal dismissed the writ petition on the ground that the requirement of clause (b) of the proviso to rule 61 of the rule of the Second Schedule as to depositing the amount recoverable from the defaulter in execution of the certificate, had not been complied with. The learned Single Judge (see (1996) 218 ITR 518 (Mad.)) also held that depositing the amount of tax recoverable as per the tax recovery certificate from the late Natesan during the pendency of the writ petition could not be held to be in accordance with clause (b) of the proviso to rule 61 of the Second Schedule, and, accordingly, dismissed the writ petition. Hence, this appeal.
Before us also it is submitted that during the pendency of the writ petition, the appellants have paid the entire arrears of income-tax and the same has been received by the Department; therefore, in equity, the first respondent should be directed to consider the application filed by the late Devaki Amrnal for setting aside the sale. Rule 61 of the rules of the Second Schedule provides for filing an application to set aside the sale of immovable property on the ground of non-service of notice or irregularity. It reads thus:
"61 Where immovable property has been sold in execution of a 'f`' certificate, such Income-tax Officer as may be authorised by the i"' Chief Commissioner or Commissioner in this behalf, the defaulter, or any person whose interests are affected by the sale may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale of the immovable property on the ground that notice was not served on the defaulter to pay the arrears as required by this Schedule or on the ground of a material irregularity in publishing or conducting the sale:
Provided that---
(a) no sale shall be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant has sustained substantial injury by reason of the non-service or irregularity; and
(b) an application made by a defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverable from him in execution of the certificate. "
Thus, as per the aforesaid rule, if an immovable property is sold in execution of the certificate, the defaulter or any person, whose interests are affected by such sale, is entitled to make application within 30 days from the date of the sale, before the Tax Recovery Officer to set aside the sale of the immovable property, either on the ground that notice was not served on the defaulter to pay the arrears as required by the Second Schedule, or, that there was material irregularity in publishing or conducting the sale. The proviso thereto further imposes certain limitations on the power of the Tax Recovery Officer to set aside the sale, and also prescribes a condition to be satisfied by the applicant seeking setting aside of the sale. Clause (a) of the proviso states that no sale can be set aside unless the Tax Recovery Officer is satisfied that the applicant seeking setting aside of the sale has sustained substantial injury by reason of non-service of notice on the defaulter to pay the arrears as required by the Second Schedule or that the material irregularity, in publishing or conducting the sale has resulted in causing substantial injury to the applicant, who may be the defaulter or any person whose interests are affected by the sale. Clause (b) of the proviso imposes a condition on the applicant that he should deposit the amount recoverable from the defaulter in the execution of the certificate. The condition prescribed by clause (b) of the proviso has to be fulfilled before the application for setting aside the sale comes up before the Tax Recovery Officer for consideration. In the instant case, the late M. Natesan/defaulter/predecessor-in-title of the applicants was in arrears of Rs.9,66,750. The immovable property in question was attached and sold for a sum of Rs.79,500 in public auction, which was concluded in favour of the third respondent. The applicant did not deposit the amount recoverable from the defaulter in the execution of the certificate, even on the date of disposal of the application for setting aside the sale, by the Tax Recovery Officer. Though rule 61 prescribes the period of 30 days from the date of sale for making an application to set aside the sale, it does not in specific terms state that such an application should be accompanied by the deposit of the amount recoverable from the defaulter in execution of the certificate. The words used in clause (b) of the proviso to rule 61 are that "an application" shall be disallowed unless the applicant deposits the amount recoverable from him in the execution of the certificate. Therefore, it is not necessary that the amount should be deposited alongwith the application. It is permissible to deposit the amount before the application is taken up for the first time for consideration. However, in the instant case, the deposit of the amount recoverable from the defaulter in the execution of the certificate was not deposited before the application was taken up for consideration. Therefore, it was dismissed for not complying with the condition as to the deposit of the amount. The amount has come to be deposited only during the pendency of the writ petition. Such a deposit cannot be considered to be in conformity with the requirement of rule 61 of the Second Schedule so as to enure to the benefit of the applicant. Hence, we see no reason to interfere with the order of the learned Single Judge (see (1996 218 ITR 518 (Mad.)). The appeal is, accordingly, rejected. The C.M. Ps. are also rejected. No order as to costs.
M.B.A/1556/FCAppeal dismissed.