Ram Pal vs Union of India and Others

K.C. Gupta, J.—This is a writ petition filed under Article 226/227 of the Constitution of India, seeking a writ of certiorari for quashing the order of the Income Tax Commissioner exercising the powers of the Tax Recovery Commissioner (Income Tax), Jalandhar, dated January 24, 1985, annexure P-8 and directing respondents Nos. 1 and 2 by way of mandamus to confirm the orders of the Tax Recovery Officer, Bhatinda, annexures P-6 and P-7, dated March 2, 1981, whereby he made the sale absolute and issued sale certificate in favour of the petitioner. Briefly stated the facts are that on April 1, 1979, M/s. Hari Singh (HUF), respondent No. 4, was a defaulter to the tune of Rs. 71,478 while M/s. Sant Singh (HUF) was a defaulter to the tune of Rs. 18,471 of Income Tax dues. M/s. Hari Singh (HUF) was the owner to the extent of 1/3rd share while M/s. Sant Singh (HUF) was the owner to the extent of 1/6th share, i.e., both were owners to the extent of 1/2 share in the Dal Factory, Jawaharke Road, Mansa. The other 1/2 share of the said property was owned by a third party. The Income Tax Officer issued orders dated October 29, 1959, March 22, 1961, and March 26, 1962, etc., to the Tax Recovery Officer (for short "the TRO"), Bhatinda, respondent No. 3, for recovering the aforesaid arrears against the defaulter-respondents Nos. 4 and 5. The Tax Recovery Officer accordingly attached 1/2 share in the aforesaid Dal Factory, Mansa, belonging to respondents Nos. 4 and 5 along with other properties vide order dated November 20, 1961, and January 10, 1962. Proclamation of the attached properties was issued on May 15, 1968, fixing the auction for June 19/20/21, 1968.

However, respondents Nos. 4 and 5 under Rule 16 of the Second Schedule to the Income Tax Act, 1961, requested the Tax Recovery Officer, Bhatinda, to permit them to sell a 1/2 share of the Dal Factory by private sale instead of public auction. The Tax Recovery Officer acceded to their request and settled the terms with the defaulters and permitted them to sell 1/2 share in the Dal Factory to Ram Pal, petitioner, vide order dated April 26, 1980, annexure P-1.

The petitioner as surety, undertook to pay the Income Tax dues against the defaulters to the tune of Rs. 26,094 and the Tax Recovery Officer permitted him to deposit the aforesaid amount by way of instalments and the defaulters put the petitioner in possession of 1/2 share in part performance of the agreement. The petitioner deposited the amount with the Tax Recovery Officer as agreed and requested the Commissioner of Income Tax, Jalandhar, vide letter dated January 10, 1981, annexure P-2, to issue the sale certificate in his favour. He accordingly, directed the petitioner to contact the Tax Recovery Officer, Bhatinda, vide letter, dated February 16, 1981, annexure P-3. In compliance with the said letter respondent No. 3 issued direction to the petitioner as contained in the letter dated February 27, 1981, annexure P-4.

In compliance with the letter annexue P-4, the petitioner deposited Rs. 1,05,689 with the Tax Recovery Officer, Bhatinda (respondent No. 3), on March 2, 1981, over and above the amount of Rs. 76,811 which was already deposited by him. The petitioner further submitted to the Tax Recovery Officer vide letter dated February 28, 1981, annexure P-5, for confirming the sale and declaring the sale absolute and also requested for issuing sale certificate in his favour. The Tax Recovery Officer, Bhatinda, confirmed the sale on March 2, 1981, vide annexure P-6 and issued the sale certificate dated March 2, 1981, annexure P-7 in favour of the petitioner.

Respondents Nos. 4 and 5 (the defaulters) in this case appealed to the Commissioner of Income Tax, Jalandhar, exercising the powers of the Tax Recovery Commissioner, against the orders of the Tax Recovery Officer, Bhatinda, annexures P-6 and P-7 who after hearing the parties, vide his order dated January 24, 1983, annexure P-8, set side the orders of the Tax Recovery Officer, Bhatinda, annexures P-6 and P-7.

After passing of the order annexure P-8, the petitioner withdrew Rs. 1,05,689 from the Tax Recovery Officer which was lying in his personal account as he had already deposited the amount of Rs. 76,811 which were to be paid by the defaulters.

The petitioner by way of the present writ petition has challenged the abovesaid order annexure P-8 on the ground that the same was illegal, without jurisdiction against law and facts on the file and principles of natural justice and further respondents Nos. 4 and 5 were estopped to challenge the said order by the principle of promissory estoppel.

On June 24, 1983, notice of motion was issued in this writ petition. Counsel for respondents Nos. 1 to 3 as well as counsel for respondents Nos. 4 and 5 appeared and ultimately after hearing the parties, the writ petition was admitted vide order dated October 10, 1983. Respondents Nos. 1 to 3 as well as respondents Nos. 4 and 5 filed separate replies. In fact respondents Nos. 1 to 3 filed joint reply while respondents Nos. 4 and 5 filed separate replies.

I have heard learned counsel for the parties and carefully gone through the file.

Learned counsel for the petitioner contended that the order annexure P-8 dated January 24, 1983, passed by Shri V.P. Bhagat, Tax Recovery Commissioner, Jalandhar, was illegal as he had no authority to hear the appeal. In my opinion, there is force in the contention of learned counsel for the petitioner. Under Rule 86 of the Second Schedule, the only officer on whom powers of the Tax Recovery Commissioner in Sub-clause (iii) of Clause (44) of Section 2 of the Income Tax Act have been conferred has got jurisdiction to hear appeal against the order of Tax Recovery Officer. The powers of the Tax Recovery Commissioner have not been conferred on respondent No. 2, viz., Income Tax Commissioner, Jalandhar, and as such he was not empowered to hear the appeal. A notification under Rule 4 of the Income Tax (Certificate Proceedings) Rules, 1962, was issued by the Central Government on February 17, 1971, appointing the Commissioner of Income Tax, Patiala, holding jurisdiction over Punjab, Jammu and Kashmir, Haryana, Chandigarh and Himachal Pradesh as the Tax Recovery Commissioner, vide annexure R-2/1. In the course of time, the aforesaid charge was bifurcated into four territorial charges as stated in paragraph 18 of the reply filed by respondents Nos. 1 to 3, which reads as under :

"(a) Commissioner of Income Tax, Patiala, exercising jurisdiction on a part of Punjab, entire Himachal Pradesh and Union Territory of Chandigarh ;

(b) Commissioner of Income Tax, Amritsar, exercising jurisdiction on a part of Punjab and entire Jammu and Kashmir ;

(c) Commissioner of Income Tax, Jalandhar, exercising jurisdiction on six revenue Districts of Punjab State ; and

(d) Commissioner of Income Tax, Rohtak, exercising jurisdiction on the entire territory of Haryana.

The charge of Commissioner of Income Tax, Jalandhar, was created on July 14, 1976."

Annexure R-2/2 is the notification dated July 14, 1976, of the Central Board of Direct Taxes bifurcating the charge into three territorial charges and not four. However, no notification issued by the Central Government and published in the Gazette of India has been placed on the file showing that the Central Government had appointed the Commissioner of Income Tax, Amritsar, Jalandhar and Rohtak, to be Tax Recovery Commissioners. Earlier, when the Commissioner of Income Tax, Patiala, was appointed as Tax Recovery Commissioner for Punjab, Jammu and Kashmir and the Union Territory of Chandigarh, then a notification was issued by the Central Government and duly published in the Gazette of India as is clear from annexure R-2/1, dated February 17, 1971. Since, the Central Government has not issued notification appointing the Commissioner of Income Tax, Jalandhar, as the Tax Recovery Commissioner for the areas mentioned in annexure R-2/2, so the Commissioner of Income Tax, Jalandhar, was not competent to exercise powers of Tax Recovery Commissioner.

Learned counsel for respondents Nos. 1 to 3 contended that all powers which were exercised by the Commissioner of Income Tax, Patiala, as the Tax Recovery Commissioner on bifurcation came to be exercised automatically by the Commissioners of Income Tax, Jalandhar, Amritsar and Rohtak, etc. In my opinion, the contention of learned counsel is not tenable. The powers which were earlier exercised by the Commissioner of Income Tax, Patiala, as the Tax Recovery Commissioner could not be exer- cised automatically by the Commissioner of Income Tax, Jalandhar without a notification issued by the Central Government in exercise of the powers conferred by Rule 4 of the Income Tax (Certificate Proceedings) Rules, 1962.

Learned counsel for respondents Nos. 1 to 3 next contended that the petitioner had filed an appeal before the Tax Recovery Commissioner (Income Tax), Jalandhar, with his eyes open and had submitted himself to his jurisdiction. So, he is estopped from pleading that the Tax Recovery Commissioner, Jalandhar, had no jurisdiction to pass the order. In my opinion, the contention of learned counsel is also not tenable. Even if, the petitioner has submitted to the jurisdiction of so called Tax Recovery Commissioner, Jalandhar, then also he can raise an objection of lack of jurisdiction because there cannot be any estoppel against the law or statute.

Learned counsel for respondents Nos. 1 to 3 also contended that it was not the case that new area has been created but only a new Commissioner of Income Tax was appointed for Jalandhar Division and he exercised jurisdiction over the part of area which was earlier exercised by the Commissioner of Income Tax, Patiala, and, as such, there was no need for any fresh notification. Again in my opinion, the contention of learned counsel is not tenable. Since, separate divisions were created, so, fresh notification was required for appointing the Commissioner of Income Tax as the Tax Recovery Commissioner, Jalandhar.

Hence, in view of the above discussion, it is held that the order annexure P-8, dated January 24, 1983, passed by Shri V.P. Bhagat, Tax Recovery Commissioner, Jalandhar, is without jurisdiction, illegal and is, therefore, quashed.

The petitioner has also prayed by way of writ of mandamus or any other writ for issuance of direction for confirming the orders annexures P-6 and P-7 issued by the Tax Recovery Officer, Jalandhar. In view of Rule 66 of the Second Schedule to the Income Tax Act, 1961, the Tax Recovery Officer, Bhatinda, vide his order dated March 2, 1981, annexure P-6, had confirmed the sale of 1/2 share in the Dal Factory, Jawaharke Road, Mansa, in favour of the petitioner and he was declared purchaser of the said share for Rs. 1,82,500 as M/s. Hari Singh (HUF) and M/s. Sant Singh (HUF) had defaulted in making payment of Income Tax dues. Annexure P-7, dated March 2, 1981, is the sale certificate of the aforesaid property in favour of the petitioner. In my opinion, the aforesaid order cannot stand scrutiny of law as no sale in the eyes of law had taken place. It may be stated here that M/s. Hari Singh (HUF) and M/s. Sant were owners of 1/2 share in the Dal Factory and the remaining 1/2 share of the abovesaid property was owned by a third party having no connection with the defaulters, i.e., respondents Nos. 4 and 5. Out of the said 1/2 share M/s. Hari Singh (HUF) was the owner to the extent of 1/3rd share while M/s. Sant Singh (HUF) was the owner to the extent of 1/6th share. M/s. Hari Singh (HUF) owed Rs. 71,478 while M/s. Sant Singh (HUF) owed Rs. 18,471, i.e., in all Rs. 89,949 to the Income Tax Department as arrears of Income Tax standing against them u/s 220(2) of the Income Tax Act as on April 1, 1979, excluding interest. The said 1/2 share along with other properties was attached on November 20, 1961, and January 10, 1962, by the Tax Recovery Officer. Proclamation for the sale of the aforesaid property along with other properties was issued on May 15, 1968, fixing the auction for June 19/20/21, 1968. The sale was, however, postponed as Kanwar Sain Bansal on behalf of respondents Nos. 4 and 5 requested the Tax Recovery Officer to allow him to raise the amount by way of private sale. Subsequently Ram Pal, petitioner, undertook to be the surety for payment of Income Tax arrears in the cases of M/s. Hari Singh (HUF) and M/s, Sant Singh (HUF). He also declared that Kanwar Sain Bansal of M/s. Hari Singh (HUF) had made an agreement to sell a 1/2 share in the Dal Factory and that he had advanced a sum of Rs. 20,000 against the abovesaid purchase which amount had been duly deposited against the arrears of the aforesaid parties. He further undertook on April 16, 1980, that after transfer of the aforesaid property in his name for which a request had already been made by Kanwar Sain Bansal, he would not mortgage, charge, lease or otherwise deal with the aforesaid property except with the prior permission of the Tax Recovery Officer or till the arrears of Income Tax were paid. Vide letter dated April 26, 1980, addressed to Ram Pal, petitioner, a copy of which was endorsed to Shri Kanwar Sain Bansal, the Tax Recovery Officer allowed the parties to execute the sale deed subject to the terms and conditions spelt out in the said letter. However, Shri Kanwar Sain Bansal did not execute the sale deed in favour of the petitioner, although Ram Pal, petitioner, had deposited the necessary amount of arrears of Income Tax. Therefore, the only option left for the Tax Recovery Officer was to proceed to auction the immovable property after issuing a fresh proclamation in accordance with Rule 67 of the Second Schedule. Certainly, the Tax Recovery Officer had no authority to grant specific performance of the agreement of sale executed by Kanwar Sain Bansal in favour of Ram Pal, petitioner, and declare the petitioner as purchaser of the property. Therefore, the orders passed by the Tax Recovery Officer annexures P-6 and P-7 are illegal and cannot stand the scrutiny of law.

Moreover, Shri Kanwar Sain Bansal was a member of M/s. Hari Singh (HUF) and he was not authorised to enter into an agreement of sale on behalf of M/s. Sant Singh (HUF) and as such the said agreement of sale was not binding on respondent No. 5. Mere depositing the amount of arrears of Income Tax by the depositor does not mean that the sale of immovable property had taken place in his favour. Since, the property was under attachment, so the only remedy left with the Tax Recovery Officer was to put the property for auction. Therefore, the agreement could be valid to the extent of 1/3rd share belonging to M/s. Hari Singh (HUF) but since the sale deed was not executed by respondents Nos. 4 and 5 in favour of the petitioner, nor any auction had taken place at the instance of the Tax Recovery Officer, Bhatinda, so, the orders annexures P-6 and P-7, dated March 2, 1981, are illegal arid are liable to be set aside. Consequently, no direction can be issued by way of mandamus for reiterating the legality of the orders annexures P-6 and P-7.

As a result of the foregoing discussion, the writ petition partly succeeds and the order dated March 24, 1983, annexure P-8 passed by the Income Tax Commissioner allegedly exercising the power of the Tax Recovery Commissioner, Jalandhar, is quashed with no order as to costs.