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High Court Of Calcutta
Ajit Kumar Sengupta
KANAKIA TRADING CO. - Appellant
Versus
INCOME-TAX OFFICER - Respondent
C. R. 2551 Of 1984
Decided On : 04/28/1986
INCOME TAX - SALE OF PROPERTY - TAX CLEARANCE CERTIFICATE - REQUIREMENT - VOLUNTARY SALE - INVOLUNTARY SALE - DISTINCTION - PROPERTY SOLD BY RECEIVER APPOINTED BY COURT - WHETHER TAX CLEARANCE CERTIFICATE REQUIRED - SECTION 230A OF INCOME-TAX ACT, 1961 - INTERPRETATION.
Fact of the Case:
The petitioner, a partnership firm, purchased a property in Calcutta from a receiver appointed by the court in execution of a decree. The property was previously owned by one Jatindra Kumar Doss, who died leaving no heirs or legal representatives. The Mercantile Bank Limited, a decree-holder in a suit against Jatindra Kumar Doss, obtained a decree and appointed a receiver to sell the property. The receiver sold the property to the petitioner, who paid the entire consideration of Rs. 2,40,000. The petitioner claimed that the property was purchased free of all encumbrances, including any outstanding income-tax dues of Jatindra Kumar Doss.
Finding of the Court:
The court held that the sale of the property by the receiver appointed by the court was not a voluntary sale and, therefore, the tax clearance certificate under Section 230a of the Income-tax Act, 1961, was not required. The court also held that the Income-tax Department, having notice and knowledge of the sale, chose not to intervene in the proceeding and, therefore, could not claim any charge on the property.
Issues: 1. Whether a tax clearance certificate under Section 230a of the Income-tax Act, 1961, is required for the sale of property by a receiver appointed by the court. 2. Whether the Income-tax Department can claim a charge on the property sold by the receiver.
Ratio Decidendi: 1. Section 230a of the Income-tax Act, 1961, which requires a tax clearance certificate for the registration of documents transferring immovable property valued at more than Rs. 50,000, does not apply to involuntary sales resulting from an order of the court or under a decree. 2. The Income-tax Department, having notice and knowledge of the sale of the property by the receiver, chose not to intervene in the proceeding and, therefore, could not claim any charge on the property.
Final Decision: The court quashed the proceedings under Section 226(3) of the Income-tax Act and Rule 26(1)(i) of the Second Schedule to the Act, which were initiated by the Income-tax Department to attach the rent of the property and claim a charge on the property.
( 1 ) THE petitioner is a partnership firm consisting of two partners--Sri Hemant Dhirajlal Kanakia and Smt. Sonal Ashok Kanakia. The petitioner became the owner of premises No. 9, Pollock Street, Calcutta, which is a partly one-storeyed and partly two-storeyed building, on October 7, 1983, under the circumstances mentioned hereafter. The said premises was initially purchased in the year 1947 by one Sri Jatindra Kumar Doss and Smt. Tarangini Bala Dassi. Smt. Taran-gini Bala Dassi died on March 12, 1969, leaving her husband the said Sri Jatindra Kumar Doss, as her sole heir and legal representative. On or about July 11, 1969, Mercantile Bank Limited instituted a suit against the said Sri Jatindra Kumar Doss in this court in its original side being Suit No. 1883 of 1969, inter alia, for a decree for Rs. 2,09,004. 39, interim interest and interest on judgment and for various other reliefs mentioned in the plaint filed therein. During the pendency of the said suit, Sri Jatindra Kumar Doss also died on or about May 21, 1978, leaving him surviving no heir or heiress or legal representative. Thereafter, pursuant to an application made by the said Mercantile Bank Ltd. , the Administrator-General of West Bengal was substituted as the defendant in place and stead of the said Sri Jatindra Kumar Doss in the said pending suit being Suit No. 1883 of 1969. Subsequently, by a decree dated April 25, 1980, the said suit was decreed in favour of the said Mercantile Bank Limited. On or about September 10, 1981, the said decreeholder, Mercantile Bank Ltd. , made an application before this court for execution of the said decree dated April 25, 1980. On the said application, Dipak Kumar Sen J. by an order made on September 22, 1982, appointed Mr. Tarapada Das, barrister-at-law, as receiver with directions to him to sell the said premises either by public auction or by private treaty, subject to confirmation by the court. Pursuant to the said order dated September 22, 1981, passed by Dipak Kumar Sen J. , the receiver caused advertisements for sale of the said premises to be published once in The Statesman and once in the Ananda Bazar Patrika on October 23, 1981, and October 27, 1981, respectively. Ultimately, the offer of Rs. 2,40,000 given by Mrs. Sonal Ashok Kanakia, one of the partners of the petitioner firm, was found to be the highest and accordingly the said receiver duly accepted the said offer. The said Smt. Sonal Ashok Kanakia duly caused a sum of Rs. 60,000 only being the amount equivalent to 25% of the agreed sale price to be paid and/or deposited with the said receiver through her solicitors and advocates towards earnest money and/or part payment of the agreed consideration money as per the "conditions of sale" of the receiver. Thereafter, by an order dated December 23, 1981, Dipak Kumar Sen J. confirmed the sale of the said premises in favour of the said Smt. Sonal Ashok Kanakia or her nominee or nominees and directed the receiver to complete the sale in accordance with law. The said Smt. Sonal Ashok Kanakia thereafter nominated the petitioner firm as her nominee to purchase the said property and thereafter the said property was sold to the petitioner by the said receiver by and under an indenture of conveyance dated October 7, 1983. The petitioner duly paid the entire consideration of Rs. 2,40,000 to the said receiver.
( 2 ) THE case of the petitioner is that before the said property was purchased by the petitioner as aforesaid, it had enquired as to whether there was any encumbrance or charge of any nature on the said property and was informed that there were some outstanding income-tax dues of late Sri Jatindra Kumar Doss and that for realisation of the said outstanding dues, the Income-tax Authorities had initiated certificate proceedings which were pending. The petitioner \yas further informed that the Tax Recovery Officer had, however, given permission to the Mercantile Bank Limited for selling the said pr
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