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1981 Supreme(Kar) 377
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
M.P. Chandrakantaraj, J.
M.R. Anthony Swamy —Appellant
Vs.
Commissioner of Income Tax, Karnataka-I and others —Respondent
Writ Petition No. 221 of 1979
Decided on : 27-05-1981
Advocate Appeared:
Mr. R. Venkateshwar Rao, for the Appellant
Mr. S.R. Rajasekharamurthy, C.S. Kothavale, for the Respondent
The court established that a sale could not be set aside after confirmation unless there were demonstrable errors of jurisdiction or error of law apparent on the face of the record. The court also emphasized the importance of protecting the title of the auction-purchaser and the public policy underlying tax recovery procedures.
Headnote:
Tax Recovery - Sale of Immovable Property - Sch. II to the I.T. Act, 1961 - r. 61, r. 86(1)(c) - Violation of Principles of Natural Justice - Material Irregularity in Conducting the Sale - Inadequacy of Consideration - Substantial Injury - Jurisdiction under art. 226 of the Constitution - Wide Powers of High Court - Sale Confirmation - Restitution to Auction-Purchaser
Fact of the Case:
The petitioner, a contractor and assessee, challenged the legality of the orders passed by the Tax Recovery Office and the Commissioner of Income Tax, Karnataka-I, regarding the sale of his immovable property to recover tax arrears. The petitioner contended various grounds for setting aside the sale, including violation of natural justice, material irregularity in conducting the sale, and inadequacy of consideration.
Finding of the Court:
The court found that the petitioner had ample opportunity to present his case and failed to establish substantial injury due to the material irregularity in the conduct of the sale. The court also rejected the contentions regarding non-compliance with sale proclamation requirements and inadequacy of consideration. The court held that the sale could not be set aside after confirmation, and restitution to the auction-purchaser was not permissible.
Issues: Violation of natural justice, material irregularity in conducting the sale, inadequacy of consideration, jurisdiction under art. 226 of the Constitution, and restitution to auction-purchaser.
Ratio Decidendi: The court emphasized that setting aside a sale after confirmation was not permissible unless there were demonstrable errors of jurisdiction or error of law apparent on the face of the record. The court also highlighted the wide powers of the High Court under art. 226 of the Constitution but noted that such powers should be used judiciously. Additionally, the court emphasized the importance of protecting the title of the auction-purchaser and the public policy underlying tax recovery procedures.
Final Decision: The petition was dismissed, and the court discharged the rule, holding that the petitioner was entitled only to the amount deposited by the auction-purchaser and no more, unless fresh assessment orders for the relevant year were completed and the amount was adjusted against such dues as may be found.
Chandrakantaraj Urs, J.—The petitioner in this writ petition has assailed the legality of the order date July 14, 1978, passed by the Tax Recovery Office-III, Bangalore (2nd respondent herein), passed under r. 61 of Sch, II to the I.T. Act, 1961 (hereinafter referred to as "the Act"), as well as the order date December 30, 1978, passed under sub-r. 1(c) of r. 86 of Sch. II to the Act, in appeal, by the 1st respondent, Commissioner of Income Tax, Karnataka-I.
2. The petitioner is a contractor by profession and is also an assessee borne on the file of the ITO, Assessment-2 Circle II, Bangalore. He was assessed to Income Tax for the relevant assessment years 1968-69 and 1972-73. Aggrieved by the assessment orders, he preferred appeals the AAC partly allowed the appeal relating to the assessment year 1968-69 and in respect of the assessment year 1972-73, he confirmed the assessment order made by the ITO. Aggrieved by the orders of the AAC, the petitioner preferred revision petitions to the 1st respondent-Commissioner of Income Tax, Karnataka-I, Bangalore, under s. 264 of the Act on November 17, 1977, which were pending on the date of the filing of this petition. The ITO, in the meanwhile, and issued the recovery certificate on June 17, 1975, in respect of the petitioner to recover the arrears of tax of Rs. 4,10,372. The petitioner had made several requests to keep the recovery proceeding pending till the disposal of the revision petition. It is necessary to state that there was no stay of the recovery proceedings obtained by the petitioner from the Commissioner of Income Tax in the revision petitions pending before him. The TRO, 2nd respondent, proceeding under Pt. I of Sch. II to the Act brought to sale certain immovable property of the petitioner situated in Bangalore City. The proclamation of sale was issued on October 19, 1977, and the date of sale was fixed as 18th November, 1977. The sale was postponed from time to time and the property was sold by public auction on April 20, 1978. The reserved price was fixed at Rs. 55,000 and the property at the auction fetched the highest bid of Rs. 1,08,000. The property consisted of a vacant site measuring approximately 339 sq. yds. situated in what is now a commercial area known as "Unity Commercial Complex" in the Mission Compound in Bangalore City. The property was purchased by the 3rd respondent - R. Shivashankar - a businessman. On the 3rd respondent-purchaser depositing the full amount, the sale came to be confirmed on July 31, 1978, by the 2nd respondent, though the issuance of the sale certificate was stayed by the 1st respondent on September 4, 1978.
3. The petitioner, soon after the sale, applied to the 2nd respondent under r. 61 of Sch. II to the Act praying for setting aside the sale, inter alia, contending :
(1) That the arrears were disputed in appeal and, therefore, the sale violated the principles of natural justice.
(2) That the petitioner had no saleable interest in the site sold.
(3) That the sale was held within 30 days after the issue of the sale proclamation contrary to r. 15(2) of Sch. II to the Act.
(4) That the sale was conducted without affording a reasonable opportunity to the petitioner.
(5) That the site was sold for a price far below the market value prejudicial affecting the interests of the petitioner as well as the revenue.
(6) That the site was sold deliberately out of vested interest.
4. The 2nd respondent-TRO in his proceedings under r. 61 of Sch. II to the Act dismissed the application made by the petitioner of setting aside the sale by a detailed order which is produced at Ex. B to the petition. Aggrieved by that order the petitioner preferred the appeal against the same under r. 86(1)(c) of Sch. II to the Act which also came to be dismissed by a considered order which is produced at Ex. A to the petition.
5. Aggrieved by the aforementioned orders of respondents Nos 2 and 1, respectively, the petitioner had questioned the validity of the same in this
