R.M. Sahai, J. - (1.) THE validity of sale of the petitioner's property in question in lieu of arrears of income-tax and wealth-tax for years 1965-66 to 1975-76 except 1969-70 and 1970-71, on 4th and 18th March, 1986, has been challenged for want of jurisdiction and violation of the provision of law.
(2.) FROM the counter-affidavits filed by the Income-tax Officer and the Tax Recovery Officer, it is apparent that the two wings of the Department did not work in co-ordination and due to a communication gap between the two, the sale has been rendered without jurisdiction. What is unfortunate is that all this has happened even though the petitioner has been bringing the correct facts to the notice of the Department from time to time. Sale was held on a recovery certificate issued for Rs. 16 lakhs odd. The demand, however, had been reduced in appeal for different years much earlier and the outstandings of different years admittedly were Rs. 6 lakhs odd only. For instance, the taxable income for 1965-66 was reduced from Rs. 3,78,260 to Rs. 27,340 only by the Appellate Assistant Commissioner on January 25, 1977. It resulted in the wiping out of a demand of nearly Rupees two lakhs odd as tax and nearly the same amount as interest. Intimation of the appellate order was given by the assessee in March, 1977. And yet the demand was not modified. In the counter-affidavit filed by the Tax Recovery Officer, it is stated that intimation about reduction of demand in appeal was received in July and August, 1986, that is, both after the sale had taken place and its confirmation had been stayed by this court. The effect of reduction of tax in appeal was that the liability of the petitioner had been substantially reduced. It could not, therefore, be deemed to be in arrears of the amount erroneously mentioned in the recovery certificate. The jurisdiction of the Income-tax Officer under Section 222 of the Income-tax Act to attach and sell the immovable property of the asses-see emanates from default in payment of arrears due. When there was a mistake about it and the certificate was issued under a misapprehension, then the proceedings for sale stood vitiated. Alteration or withdrawal of the certificate after the sale under Sub-section (4) of Section 225 could not remove the infirmity in the sale which took place on a recovery certificate on arrears which did not exist in fact. In Union of India v. Jardine Henderson Ltd. [1979] 118 ITR 112 (SC), it was held that a sale held on a certificate which had been reduced was invalid. The argument of learned standing counsel and the stand in the counter-affidavit of the Income-tax Officer that the sale should not be quashed as the petitioner is in arrears of Rs. 36 lakhs odd is misconceived as even till the date of filing of the counter-affidavit in September, 1986, no certificate for recovery of over and above Rs. 16 lakhs had been issued. Although this court can refrain from exercising its extraordinary jurisdiction if the process of law is being abused or the petitioner does not come out with clean hands, yet it is just the otherwise. The Department is guilty of invoking its power illegally. It cannot be permitted to cover up its errors, both factual and legal, by taking recourse to such stand.
(3.) IN the results, this petition succeeds and is allowed. The sales, dated March 4, 1986, and March 18, 1986, are quashed. It shall be open to the Department to proceed in accordance with law. Since the sale has been quashed, the amount deposited by the auction purchaser may be refunded to him. There shall be no order as to costs.;