Back
1982 Supreme(P&H) 42
PUNJAB & HARYANA HIGH COURT
A.S.Bains, J.
Chhotu Sood
Versus
Tax Recovery Officer
Civil Writ No. 1023 of 1973,
Decided On : JANUARY 20, 1982
Rules 15(2) and 59(2) of the Second Schedule to the Income Tax Act, 1961, are mandatory and not directory. Therefore, any failure to comply with these rules renders the auction sale void.
Headnote:
INCOME TAX - AUCTION SALE - IRREGULARITIES - CANCELLATION OF SALE - VALIDITY - INCOME TAX ACT, 1961 (43 OF 1961), SECOND SCHEDULE, RULES 15(2), 59(2).
Fact of the Case:
The petitioner, Chhotu Sood, participated in an auction sale conducted by the Income Tax Department (ITD) for the sale of properties belonging to a defaulter, Bhagwan Dass and Sons. The petitioner was the highest bidder and the sale was confirmed in his favor. However, the sale was later canceled by the Commissioner on the grounds of irregularities in the conduct of the auction.
Finding of the Court:
The court found that the auction sale was conducted in violation of Rule 59(2) of the Second Schedule to the Income Tax Act, 1961, which requires a person bidding on behalf of another person to furnish authority on his behalf. The court also found that the auction sale was conducted in violation of Rule 15(2) of the Second Schedule, which requires a fresh proclamation of sale to be made where a sale of immovable property is adjourned for a longer period than one calendar month.
Issues: 1. Whether the auction sale was conducted in violation of Rule 59(2) of the Second Schedule to the Income Tax Act, 1961? 2. Whether the auction sale was conducted in violation of Rule 15(2) of the Second Schedule to the Income Tax Act, 1961?
Ratio Decidendi: 1. Rule 59(2) of the Second Schedule to the Income Tax Act, 1961, is mandatory and not directory. Therefore, the failure of the petitioner to furnish authority on behalf of the person who participated in the auction proceedings on his behalf rendered the bid null and void. 2. Rule 15(2) of the Second Schedule to the Income Tax Act, 1961, is also mandatory and not directory. Therefore, the failure of the ITD to issue a fresh proclamation of sale after the expiry of one calendar month from the date originally fixed for the sale rendered the sale void.
Final Decision: The court dismissed the petition and upheld the cancellation of the sale by the Commissioner.
Ajit Singh Bains, J.
1. M/s. Bhagwan Dass and Sons was a company carrying on its business at Hoshiarpur. It was mainly the resin business which was being done by the company. It became a defaulter to the tune of Rs. 36,32,825" to the I.T. Dept. For realizing the arrears, the factories of the aforesaid company were attached under Section 222 of the I.T. Act, 1961 (hereinafter referred to as "the Act"). Since the money, which was in arrears, was not realized by the I.T. Dept. the property was put to auction to satisfy the arrears.
2. Proclamation for sale of the property was issued on 22nd of July, 1970, and the date of auction was fixed on 8th of September, 1970. After that, the date of the auction was postponed three times and ultimately on 23rd of November, 1970, the auction took place. The highest bidder on that day was the petitioner, Shri Chhotu Sood, son of Shri Amrit Lal Sood, grandson of Shri Bhagwan Dass (defaulter) and auction was confirmed in his favour for Rs. 1,41,000. Some other persons including Gurdev Lal had also participated in the auction proceedings. Gurdev Lals bid was Rs. 1,40,000.
3. Certain complaints were made to the authorities that the auction was not properly held and that after the bid of Gurdev Lal, the TRO, Shri Sukhdev Singh, wrote the name of Chhotu Sood as the last bidder without telling it to anybody that Chhotu Sood was the grandson of the defaulter, Shri Bhagwan Dass. The Commissioner, Jullundur Division, held enquiries in the matter and entrusted it to the Deputy Commissioner, Hoshiarpur. The Public Grievances Officer reported that the TRO, Shri Sukhdev Singh, had conducted the auction in an irregular manner. In the meantime, Gurdev Lal also filed objections and ultimately the sale in favour of Chhotu Sood was cancelled by the Commissioner. Dissatisfied with the order of the Commissioner, Shri Chhotu Sood unsuccessfully went before the Financial Commissioner and the revision was dismissed. It is against the cancellation of the sale in his favour that the present writ petition has been filed by Shri Chhotu Sood, son of Shri Amrit Lal Sood and grandson of Shri Bhagwan Dass (defaulter).
4. Reply has been filed on behalf of the TRO, I.T. Dept. Chandigarh.
5. It was canvassed on behalf of the petitioner that the Commissioner has not passed a judicial order and there has been no material irregularity or substantial injustice in the conduct of sale and that the sale could not be cancelled at the instance of Gurdev Lal in view of the clear provisions of IT. 60 and 61 of the Second Schedule to the Act, and that the order of the Financial Commissioner is not a speaking order.
6. I have perused the order of the Financial Commissioner. It is a detailed order affirming the order of the Commissioner. Thus, I find no merit in the contention that the Financial Commissioners order is not a speaking order. Moreover, he affirmed the order of the Commissioner. Sitting on the revisional side, he was to give detailed reasons only if he was to disagree with the Commissioner.
7. So far as the locus standi of Gurdev Lal, the objector, is concerned, the petitioner has relied upon Cherla Poulose Koovapally Kattavil v. K.P. Sathivan Nair, AIR 1970 Ker 94, wherein it is observed that even the auction purchaser has no locus standi. That auction took place under the Code of Civil Procedure and not under the I.T. proceedings. The Commissioner, in my view, even could go into the matter suo motu as certain patent illegalities were brought to his notice and specially when the bid was in favour of the grandson of the defaulter. Thus, I do not find any ground that the Commissioner had no jurisdiction to go into the matter at the instance of Gurdev Lal. It is not only Gurdev Lal who had filed complaint and objections, some other persons also complained to the higher authorities. The Commissioner is holding a public office and it is his duty that if certain irregularities or fraud is brought to his notice, he should go i
