M.C. Agarwal, J. - (1.) BY this petition under Article 226 of the Constitution of India, the petitioner challenges an order passed by the Tax Recovery Officer confirming an auction sale of house property No. D-53/91-D situate at Luxa in the town of Varanasi and also an order passed by the Commissioner of Income-tax by which the latter dismissed the petitioner's revision petition under Section 264 of the Income-tax Act, 1961, against an order of confirmation of sale.
(2.) COUNTER and rejoinder affidavits have been exchanged. We have heard Sri R. P. Goel, senior advocate assisted by Sri Arjun Singhal, advocate, for the petitioner, Sri Bharat Ji Agarwal, senior advocate, for respondents Nos. 1 and 2 and Sri M. K. Shukla, learned counsel for the auction purchaser, respondent No. 3. The petitioner was one of the co-owners of the aforesaid property. His case is that one Sri P. M. Wahi was carrying on business in a partnership in the name of United Provinces Commercial Corporation Luxa, Varanasi. From 1960, it started facing labour trouble and ultimately its business collapsed on June 7, 1967, after which the firm became defunct and the partners left their ancestral home at Varanasi. The income-tax authorities went on completing the assessments of the firm and its partners and also levied penalties. This resulted in heavy demands. Thereafter recovery proceedings were initiated by the issue of recovery certificate and the aforesaid property was put to auction in 1979-80. The petitioner has stated that he filed his objection/submission through a letter dated December 24, 1979, but the Tax Recovery Officer ignored the same and proceeded ahead with the auction. It was in 1986-87 that the petitioner and his other partners came to know of the year-wise/section-wise assessments and penalties and demands against the firm and the partners took immediate steps and found that no notice of demand was served on the firm or the partners. The Income-tax Appellate Tribunal allowed their appeals by order dated December 11, 1987, a copy of which is annexure 1 to the writ petition. All the demands thus stood cancelled, reduced and liquidated/paid by 1996 and 1997. The Income-tax Officer, Ward-2, Varanasi, himself reported to the Commissioner of Income-tax, Allahabad, through a letter dated March 26, 1990, that as on that date no demands were payable by the firm. A copy of the said letter was endorsed to the Tax Recovery Officer, Varanasi, with the request to cancel the relevant recovery certificate. The Tax Recovery Officer in spite of several requests took no action to amend or cancel the recovery certificate though it was mandatory for him to do so in terms of Section 225(3) of the Income-tax Act. On July 6, 1998, the assessee's counsel was given to understand that the Tax Recovery Officer, Varanasi, has passed some adverse orders on March 25, 1998, and June 3, 1998, against the petitioner. On an inspection of the relevant record it was found that such orders were passed without any notice to the petitioner. The order dated March 25, 1998, is an order confirming the auction sale that was allegedly held on January 11, 1980, and the other order dated June 3, 1998, ,consisted of a certificate of sale regarding the said property. The said orders are stated to be with reference to recovery certificates Nos. 77, 78 and 79 relating to the aforesaid partnership firm and certificates Nos. 80, 81 and 82 relating to the petitioner. It is claimed that the recovery certificate Nos. 80, 81 and 82 were not shown to the petitioner when the record was inspected on July 10, 1998. It was, however, verbally informed that the recovery certificates Nos. 80, 81 and 82 related to Sri S. M. Wahi. It is claimed that as a result of the appellate orders the demands that were mentioned in the recovery certificates got extinguished and instead the petitioner became entitled to some refunds which were adjusted against the other demands against the petitioner. It is claimed that the proclamation of sale dated December 3, 1979, was in respect of the whole property, 50 per cent, of which belonged to other persons completely fallen to the alleged defaulters and that the proclamation of sale was made without making any enquiries about the ownership of the property. It is claimed that the demands in respect of which recovery certificates Nos. 77, 78, 79, 80, 81 and 82 had been issued had become final and conclusive on March 31, 1975, and no sale of immovable property could be held under Schedule II to the Income-tax Act after the expiry of three years from the end of the financial year in which the order giving rise to a demand of tax had become conclusive under the provisions of Section 245-I or in terms of the provisions of Chapter XX. It is thus claimed that the sale was barred by time. It is claimed that the aforesaid property belonged to four persons, namely, P. M. Wahi, S. M. Wahi, Ram Mohan Wahi and Krishna Mohan Wahi, as per will dated May 28, 1962, and that there were no liability against Ram Mohan Wahi and Krishna Mohan Wahi who had neither been assessed to tax nor were partners in the firm, United Provinces Commercial Corporation. It is claimed that Krishna Mohan Wahi had filed a suit for partition and injunction regarding his share in the property aforesaid and the said suit being Suit No. 398 of 1999 is pending in the Court of Civil Judge (Senior Division), Varanasi, and by order dated April 9, 1999, the said court had restrained the defendants co-sharers in the property in question from transferring the property in question in favour of any person. Earlier another suit being Suit No. 1 of 1980 was filed by Smt. Padma Wahi, w/o the late R. M. Wahi, challenging the sale proceedings. The suit for injunction was, however, dismissed for default on January 12, 1998, and a restoration application was pending. The petitioner preferred a revision petition under Section 264 before the Commissioner of Income-tax challenging the orders of confirmation of sale and a direction to the petitioner to hand over physical possession of his interest in the property to the auction purchaser. The petitioner also filed Writ Petition No. 324 of 1998 in this court in which an interim order was made but the same was ultimately dismissed as the petitioner was seeking alternative remedy by filing a revision petition under Section 264. The Commissioner ultimately rejected the petitioner's revision petition by order dated May 21, 1999, a copy of which is annexure 17 to the writ petition. It is claimed that in rejecting the revision petition, the Commissioner has failed to consider the legal implication of liquidation of demand.
(3.) IN the counter affidavit filed on behalf of respondents Nos. 1 and 2 it has been stated that the assessments were completed by the Assessing Officer ex parte after rendering reasonable opportunity to the assessee. It is claimed that the petitioner's contention that he came to know of the demand in 1986/1987 is wrong because notices in Form I. T. C. P. No. 25 were issued and sent to the petitioner by registered post in August, 1975, and adjournment was sought through one Dipanker Basu through a letter dated August 28, 1975. It is also stated that the letters were issued to the two persons aforesaid and they sent their replies through letters dated October 15, 1975, and October 5, 1975. Although it is stated in the counter affidavit that a photocopy of the letter and RAD is enclosed, no document has actually been enclosed with the counter affidavit. It is claimed that the recovery certificates were issued to the Tax Recovery Officer in the year 1973. Thereafter the aforesaid property was attached and sale proclamation was issued fixing January 3, 1980, for sale which was postponed to January 11, 1980, on which date the sale was actually conducted and Smt. Ram Jyoti Devi, respondent No. 3, declared as the purchaser. The auction purchaser deposited the amounts as required under the law by January 25, 1980, and thus discharged her duty within the stipulated period. It is claimed that the issue of the sale letter was held up because of the civil court's stay order dated January 9, 1980, by which the confirmation of sale was stayed. The said stay order was granted on the application of Smt. Padma Wahi and the suit filed by her was ultimately dismissed. It is claimed that at the time of the auction of the property arrears of demand as mentioned in the recovery certificates Nos. 77, 78, 79, 80, 81 and 82 were outstanding and no objection was filed by the petitioner before the Tax Recovery Officer at the time of the auction proceedings or even thereafter and the validity of the auction was not challenged. It is claimed that no application either by the firm or by the two partners was filed under the Second Schedule to the INcome-tax Act for reconsideration of the auction proceedings or for setting aside the auction sale dated January 11, 1980, and that no occasion arose on the part of the Tax Recovery Officer to reconsider the valid auction concluded on January 11, 1980. According to the respondents, the issue of the sale certificate was only a consequential action. It is admitted in the counter affidavit that as a result of the appellate orders, the demands covered by the aforesaid certificates stood wiped out. It is also claimed that the plea of limitation in conducting the auction sale was not applicable to the sale in question which according to the respondents was held before the enactment of the provision of Rule 68B of the Second Schedule. It is also claimed that what was sold in the auction was only the interest of S. M. Wahi and P. M. Wahi in the aforesaid property and, therefore, the interest of the other co-sharers, if any, was not affected by the sale. It is claimed that the Commissioner of INcome-tax has decided the revision petition according to law taking into consideration all material facts. As regards the auction purchaser, she has filed a counter affidavit sworn by her husband. Her case is that the sale was validly held and confirmed and there is no case for exercising jurisdiction under Article 226 of the Constitution of India in their favour. She claims that the petition is misconceived and the petitioner has already taken unjust advantage of the suit filed by other co-sharers. It is claimed that at the time of the auction the demands were outstanding and, therefore, the sale was properly held. It is claimed that the sale having been held and the auction purchaser having deposited the bid money according to law and no objection having been filed, there was no option for the Tax Recovery Officer except to confirm the sale.;