w w w . L a w y e r S e r v i c e s . i n



M/s. Sri Lakshmi Brick Industries v/s The Tax Recovery Officer XXVII, Range XIV & Others

    W.P. Nos. 22913 to 22915 & 24101 of 2012

    Decided On, 01 February 2013

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE R. SUDHAKAR

    For the Petitioners: R. Sivaraman, Advocate. For the Respondent: R1 & R2, T. Promodkumar Chopta, Sr. Counsel (IT), R3, N. Srinivasan, Additional Government Pleader.



Judgment Text

(Prayer: Writ Petition Nos.22913 to 22915 of 2012 filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus, calling for the records of the first respondent in Order TR No.185/2012-13 relating to the assessment year 2006-07, TR No.187/2012-13 relating to the assessment year 2009-10, TR No.186/2012-13 relating to the assessment year 2008-09, and quash the order of attachment of immovable property dated 15.5.2012 and direct the first respondent to lift the order of attachment of immovable property and intimate the third respondent herein insofar as it relates to assessment years 2006-07, 2009-10 and 2008-09 are concerned.

Writ Petition No.24101 of 2012 filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus, calling for the records of the first respondent in TRC Nos.185 to 187 relating to the assessment year 2006-07 to 2009-10 and quash the letter dated 22.8.2012 and direct the first respondent to lift the order of attachment of immovable property in respect of 25 flats is concerned.)

COMMON ORDER

1. Writ Petition Nos.22913 to 22915 of 2012 are filed praying to issue a Writ of Certiorarified Mandamus, calling for the records of the first respondent in Order TR No.185/2012-13 relating to the assessment year 2006-07, TR No.187/2012-13 relating to the assessment year 2009-10, TR No.186/2012-13 relating to the assessment year 2008-09, and quash the order of attachment of immovable property dated 15.5.2012 and direct the first respondent to lift the order of attachment of immovable property and intimate the third respondent herein insofar as it relates to assessment years 2006-07, 2009-10 and 2008-09 are concerned.

2. Writ Petition No.24101 of 2012 is filed praying to issue a Writ of Certiorarified Mandamus, calling for the records of the first respondent in TRC Nos.185 to 187 relating to the assessment year 2006-07 to 2009-10 and quash the letter dated 22.8.2012 and direct the first respondent to lift the order of attachment of immovable property in respect of 25 flats is concerned.

3. By consent, all four writ petitions are taken up together for final disposal.

4. Heard Mr.R.Sivaraman, learned counsel appearing for the petitioner in all four writ petitions; Mr.T.Pramodkumar Chopta, learned counsel appearing for the respondents 1 and 2 in all writ petitions and Mr.N.Srinivasan, learned Additional Government Pleader appearing for the third respondents in W.P.Nos.22913 to 22915 of 2012.

5. The petitioner undertook an housing project and as a consequence to the development of the project and the profit derived thereon, they sought the benefit of Section 80-IB of the Income Tax Act, 1961, more particularly Sub Clause 10, which reads as follows:-

"Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.

80-IB (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section.

.....

(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,--

(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October 1998 and completes such construction, --

(i) in a case where a housing project has been approved by the local authority before the 1st day of April 2004, on or before the 31st day of March 2008;

(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April 2004 (but not later than the 31st day of March 2005), within four years from the end of the financial year in which the housing project is approved by the local authority;

(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005 within five years from the end of the financial year in which the housing project is approved by the local authority)

Explanation - For the purpose of this clause:-

(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;

(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;

(b) the project is on the size of a plot of land which has a minimum area of one acre:

Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;

(c) The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place;

(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three percent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher;

(e) not more than one residential unit in the housing project is allotted to any person not being an individual; "

6. Special deduction from tax was sought under Chapter VI-A of the Tamil Nadu Income Tax Act, 1961 and that was disallowed by the assessing officer and a demand was raised. The petitioner, however, filed an appeal to the Commissioner of Income Tax (Appeals), who partially allowed the appeal and reduced the tax liability.

7. The writ petitions have been filed challenging the original demand notice stating that the demand notice should be revised in terms of the order of the Commissioner of Income Tax (Appeals). It is now transpires that the department as well as the assessee made further appeals to the Income Tax Appellate Tribunal and the Appellate Tribunal by a common order in ITA Nos.1644 to 1647(Mds)/2012 (Assessment Years : 2006-07 to 2009-10) and ITA Nos.1662 to 1665 (Mds)/2012 (Assessment Years : 2006-07 to 2009-10) has allowed the petitioner's appeal in entirety and dismissed the appeal filed by the department. As a result, according to the petitioner, no tax is liable to be paid as of now.

8. Learned counsel for the petitioner produced a copy of the order of the Income Tax Appellate Tribunal passed in ITA Nos.1644 to 1647 (Mds)/2012 Assessment Years : 2006-07 to 2009-10 and ITA Nos.1662 to 1665(Mds)/2012 Assessment Years : 2006-07 to 2009-10 dated 22.11.2012. Para 12 of the order reads as follows:-

'In view of our above findings and the law laid down by the Hon'ble Karnataka High Court, all the four appeals filed by the assessee relevant to the assessment years 2006-07 to 2009-10 are allowed.'

9. Consequent to the order passed by the Income Tax Appellate Tribunal, on 15.1.2013, the Assistant Commissioner of Income Tax Circle XIV passed an order giving effect to the order of the Income Tax Appellate Tribunal in Nos.1662 to 1665(Mds)/2012 Assessment Years : 2006-07 to 2009-10 dated 22.11.2012. In effect, the entire tax liability has become nil pursuant to the order of the Tribunal and that has been given effect to by the Assistant Commissioner of Income Tax, Circle XIV. Petitioner states that they have paid a sum of Rs.3,96,212/- in respect of the assessment year 2009-10 after giving credit to tax deduction at source. Nothing remains to be paid. Therefore, the order of attachment has to be set aside. In normal circumstances, the Assistant Commissioner of Income Tax, Circle XIV should have communicated the order to the Tax Recovery Officer to lift the order of attachment since there is no liability for payment of tax whatsoever consequent to the order giving effect to the Income Tax Appellate Tribunal's order dated 22.11.2012.

10. Mr.Pramodhkumar Chopda, learned counsel appearing for the respondents 1 and 2 in all the writ petitions states that the time limit for filing a tax appeal is not over and therefore, the demand notice should continue in terms of Section 225(2) and (3) of the Income Tax Act, 1961 and it reads as follows:-

'225. Stay of proceedings in pursuance of certificate and amendment or cancellation thereof

(1) x x x

(2) Where the order giving rise to a demand of tax for which a certificate has been drawn up is modified in appeal or other proceeding under this Act, and, as a consequence thereof, the demand is reduced but the order is the subject-matter of further proceeding under this Act, the Tax Recovery Officer shall stay the recovery of such part of the amount specified in the certificate as pertains to the said reduction for the period for which the appeal or other proceeding remains pending.

(3) Where a certificate has been drawn up and subsequently the amount of the outstanding demand is reduced as a result of an appeal or other proceeding under this Act, the Tax Recovery Officer shall, when the order which was the subject-matter of such appeal or other proceeding has become final and conclusive, amend the certificate, or cancel it, as the case may be.'

11. To counter this plea, Sri Sivaraman, learned counsel for the petitioner relies upon the decision of the Supreme Court in Mohan Wahi - vs. - Commissioner of Income Tax and others reported in (2001) 248 ITR 799 : (2001) 167 CTR (SC) 86 : (2001) 116 TAXMAN 63 (SC) to state that if the demand made against the assessee stood reduced to nil, the Tax Recovery Officer is entitled to stop the confirmation of the sale, by reading of Section 225(3) read with Rule 56 and 63 of Schedule II. The questions arose in that case were as follows:

(i) Whether the TRO could have confirmed the sale on 25th March, 1998, when the demands on account of tax for the recovery of which tax recovery certificates were issued had admittedly ceased to exist; and

(ii)What is the effect of a notice of demand under s.156 of the IT Act, 1961 having not been served on the assessee on the sale held for recovery of arrears of income-tax?'

The Supreme Court held that the Tax Recovery Officer is obliged to cancel the certificate when the tax liability stood reduced to nil and he has no power to order confirmation of sale. Para 4, 5 and 6 of the decision reads as follows:-

'Taking up first question the first, according to Section 222 where an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may issue a certificate specifying the amount of arrears due from assessee and shall proceed to recover from such assessee the amount so specified by one or more of the modes which include attachment and sale of the assessee's immovable properties. The Second Schedule sets out the procedure for recovery of tax. We will refer to some of the rules contained in the Second Schedule and relevant for our purpose. Rules regarding attachment and sale of immovable property are contained in Part III of Second Schedule. Rule 56 provides that the sale shall be by public auction to the highest bidder and shall be subject to confirmation by the Tax Recovery Officer. Several provisions contained in the rules which follow Rule 56 are in pari materia with the provisions dealing with attachment and sale of immovable property contained in Order 21 of the C.P.C. dealing with execution of decrees passed by civil courts. However, in Order 21 of the C.P.C., a provision similar to Rule 56 of Second Schedule is not to be found. Rule 60 provides for an application to set aside sale of immovable property being made by defaulter or an interested person on his depositing the specified amount within 30 days from the date of sale. Rule 61 deals with application to set aside sale of immovable property on the ground of non-service of notice on the defaulter under the Schedule or on the ground of material irregularity in publishing or conducting the sale. Under Rule 62 a sale may be set aside on an application by the purchaser on the ground that the defaulter had no saleable interest in the property sold. The prescribed time limit within which the application can be made under Rule 60, 61 or 62 is 30 days from the date of sale. Where no application is made for setting aside the sale or such an application having been made is disallowed, the Tax Recovery Officer shall make an order confirming the sale and thereupon the sale shall become absolute. On a sale of immovable property becoming absolute, a sale certificate shall be issued under Rule 65.

5. Under Section 224, an assessee cannot dispute the correctness of any certificate drawn up by the Tax Recovery Officer but it is lawful for the Tax Recovery Officer to cancel the certificate for any reason if he thinks it necessary to do so or to correct any clerical or any arithmetical error therein. Sub-section (3) of Section 225 provides as under:-

'(3) Where a certificate has been drawn up and subsequently the amount of the outstanding demand is reduced as a result of an appeal or other proceeding under this Act, the TRO shall, when the order which was the subject-matter of such appeal or other proceeding has become final and conclusive, amend the certificate, or cancel it, as the case may be.'

The term 'reduced' in Sub-section (3) of Section 225 would include a case where the demand consequent upon an appeal or any proceedings under the Income-tax Act has been reduced to nil also. The Tax Recovery Officer is obliged to give effect to such reduction in demand and accordingly amend or cancel the certificate. The scheme of Part III of Second Schedule indicates that the sale proceedings terminate on their becoming absolute whereafter all that remains to be done is the issuance of sale certificate. However, an order confirming the sale by the Tax Recovery Officer is a must. The efficacy of the sale by public auction in favour of the highest bidder has been made to depend on the order of confirmation by the Tax Recovery Officer by incorporating Rule 56 in the Schedule. It is true that ordinarily if there is no application filed for setting aside sale under Rules 60, 61 or 62 and 30 days from the date of the sale have expired, the Tax Recovery Officer has to make an order confirming a sale. Nevertheless, an order shall have to be actually made. The combined effect of Sub-section(3) of Section 225 of the Act and Rule 56 and Rule 63 of Second Schedule is that if before an order confirming the sale is actually passed by the Tax Recovery Officer, the demand of tax consequent upon an order made in appeal or other proceedings under the Act has been reduced to nil, the Tax Recovery Officer is obliged to cancel the certificate and as soon as the certificate is cancelled, he shall have no power to make an order confirming the sale. The sale itself being subject to confirmation by the Tax Recovery Officer, would fall to the ground for want of confirmation.

6. In the case at hand the sale was held on 11.1.1980. No application was filed for setting aside the sale either by the assessee or by the auction purchaser or by anyone interested in the property. On expiry of 30 days from the date of the sale the Tax Recovery Officer could have passed an order confirming the sale. However, the Tax Recovery Officer was injuncted by the writ of civil court from confirming the sale. The interim order issued by the civil court ceased to operate on 12.1.1998 whereafter an order of confirmation was passed on 25.3.1998 by the Tax Recovery Officer ignoring, or unmindful of, the important event which had taken place in between. Before 25.3.1998, the demand against the assessee admittedly stood reduced to nil. This fact was in the notice of Income-tax Officer as well as the Commissioner of Income Tax. Attention of the Income-tax Officer as also the Tax Recovery Officer was also invited by the firm M/s. UPCC through its communication dated 22.11.1996 (Annexure P- 6). On 16.1.1997, the counsel for the assessee had specifically called upon the Income Tax Officer who had raised the demand against the assessee to confirm if all the recovery certificates issued against the assessee-firm had stood withdrawn or cancelled. In view of the facts within the knowledge of the department and the communications so made, the Tax Recovery Officer could not have confirmed the sale on 25.3.1998. Rule 56 in Second Schedule of the Income-tax Act, 1961 is neither a redundant nor a formal provision. It casts an obligation on the Tax Recovery Officer to pass an order confirming the sale consciously and with due application of mind to the relevant facts relating to sale by public auction which is to be confirmed. Under Rule 63, confirmation of sale is not automatic. An order confirming the sale is contemplated to make the sale absolute. Ordinarily, in the absence of an application under Rule 60, 61 or 62 having been made, or having been rejected if made, on expiry of 30 days from the date of sale the Tax Re

Please Login To View The Full Judgment!

covery Officer shall pass an order confirming the sale. However, between the date of sale and the actual passing of the order confirming the sale if an event happens or a fact comes to the notice of the Tax Recovery Officer which goes to the root of the matter, the Tax Recovery Officer may refuse to pass an order confirming the sale. The fact that sale was being held for an assumed demand which is found to be fictitious or held to have not existed at all, in fact or in the eye of law, is one such event which would oblige the Tax Recovery Officer not to pass an order confirming the sale and rather annul the same. The High Court in our opinion, clearly fell in error in not allowing relief to the petitioner-appellant by setting aside the sale.' 12. In the present case, the order of the Income Tax Appellate Tribunal, which is the highest fact finding authority, held in favour of the petitioner assessee and that order has been given effect to. As a consequence, the Tax Recovery Officer is bound to give effect of the order of the Assistant Commissioner who accepted the order of the Tribunal. It is another matter for the department to proceed in appeal and the department is always at liberty to proceed for recovery if they succeed in the appeal before the court. The provisions of Section 225(2) of the Income Tax Act, 1961 gives a mandate to Tax Recovery Officer to pass appropriate orders based on the orders passed in appeal or other proceedings. 13. In such view of the matter, the first respondent Tax Recovery Officer is directed to pass necessary orders, consequent to the proceedings of the Assistant Commissioner of Income Tax, Circle XIV, accepting the order of the Tribunal. Taking note of the nil payment insofar as the assessee for all the assessment year, the Tax Recovery Officer has to release the property from attachment in terms of the order of the Tribunal and consequent order of the Assistant Commissioner, Circle XIV. 14. The Writ Petitions are allowed as above. No costs.
O R