JUDGMENT

Dalveer Bhandari, J.

1. This appeal is directed against the judgment of the Division Bench of the High Court of Andhra Pradesh at Hyderabad passed in writ petition No.22038 of 1996 on 6.9.2001.

2. The short question which arises for consideration in this appeal is whether the Income Tax Department is justified in auctioning the attached property for recovery of debt?

3. Brief facts which are necessary to dispose of this appeal are as under: The appellant M/s Janatha Textiles is a registered firm with four partners viz. Radhey Shyam Modi, Pawan Kumar Modi, Padmadevi Modi and Indira Chirmar. The firm and its partners were in arrears of tax for the assessment years 1985- 86, 1986-87, 1987-88, 1989-90. All the demands pertaining to assessment years 1986-87 to 1989-90 have been stayed by various Income Tax Authorities and these demands were never enforced for collection. The demand pertaining to assessment year 1985-86 was alone enforced.

4. The agricultural lands owned by the partners of the appellant firm at Bodametlapalem had been attached and sold in public auction on 5.8.1996 after following the entire procedure laid down under second schedule to the Income Tax Act, 1961 (hereinafter referred to as "the 1961 Act"). Nine people participated in the public auction held on 5.8.1996. The sale was confirmed in favour of L. Krishna Prasad who offered the highest price. No procedural irregularity or illegality in public auction process was even alleged by the appellants.

5. A demand of Rs.7,84,072/- for the assessment year 1985-86 was initially raised against the appellant firm. By virtue of grant of partial relief in the appeal, the demand was reduced to Rs.4,65,174/- and as against the said amount, the appellant firm paid only Rs.4,34,927/- leaving a balance of Rs.30,247/-. In addition to this, there was demand of Rs.5,65,538/- raised by virtue of levy of penalty imposed under section 271(1)(c) of the 1961 Act for the said assessment year. The levy was confirmed in appeal by the Commissioner of Income Tax (Appeals). Further demands were also raised for a sum of Rs.2,82,160/-, Rs.3,42,518/- and Rs.2,86,075/- at the hands of individual assessment of appellant nos.2, 3, and 4 respectively. In the assessment year 1985-86, partial relief was granted and ultimately quantified the amount due from the appellant firm and its partners. After adjusting the amounts paid, the amount due as on the date of auction for the assessment year 1985-86 stood at Rs.4,99,133/-. In addition to these arrears, an amount of Rs.7,56,017 fell due by way of interest. Thus, a total amount of Rs.12,55,150/- was due from the appellants for the assessment year 1985-86 towards tax, interest and penalty. 6. It may be pertinent to mention that the demands relatable to assessment years 1986-87 to 1989-90 have never been enforced because of the various stay orders by the different Income Tax authorities.

7. Even after issuance of sale proclamation, the respondent-department issued communication in SR No.2/94 dated 15.7.1996 informing the appellants that a sum of Rs.5,68,913/- was due as on that date towards tax, interest and penalty under the 1961 Act. The said amount, however, does not include interest payable under section 220(2) of the 1961 Act. The appellant firm acknowledged receipt of the letter on 17.7.1996 and had not contradicted the quantum of tax and interest as mentioned in the said letter. It was made clear that the demand for the assessment year 1985-86 alone was being enforced. Therefore, it was absolutely no warrant for the appellant to mix up the said demands relatable to the assessment year 1985-86 in this appeal. According to the records of the Income Tax Department, the net amount of tax, interest and penalty due for the assessment year 1985-86 as on the date of auction stood at Rs.12,55,150/- and hence the respondent-department was fully justified in auctioning the property of the appellants to recover its outstanding dues.

8. Learned counsel f