S. Padmapriya vs Income Tax Officer and Another

N.V. Balasubramanian, J.—The writ petition is filed for the issue of a writ of mandamus forbearing the respondents from in any way

proceeding by way of sate of the properties referred to in the notice dated January 5, 1996, under reference No. S.1-23/Cuddalore, issued by the

first respondent.

The case of the petitioner is that the father of the petitioner was an Income Tax assessee. He had income from a lodge known as ""Hotel Brin-

davan"" and a cinema theatre known as ""New Cinema Theatre"" both at Cuddalore. He was assessed to Income Tax for the assessment year 1976-

77 and thereafter. It is stated that on receipt of the notice impugned, the petitioner made enquiry with the officials, and she carne to know that her

father was liable to pay Income Tax arrears of a sum of Rs. 67,575 with interest for the assessment years 1976-77 to 1983-84. The petitioner is

challenging the notice on the ground that her father was assessed to Income Tax ex parte for the assessment year 1976-77 and the same was

continued up to 1983-84, and her father also made certain payments and when her father committed defaults in the payment of instalments, there

were demands requiring the father of the petitioner to pay the arrears of Income Tax and her father subsequently paid certain amounts. It is stated

that on December 11, 1985, the father of the petitioner died. It is stated that the property of the petitioner was attached on March 14, 1989, by

the Tax Recovery Officer, Chennai. It is the specific case of the petitioner that under Rule 68B(3) of the Second Schedule to the Income tax Act,

1961, the sale of the property cannot be effected after a period of three years from the date of attachment. It is, therefore, stated that since the

property was attached prior to June 1, 1992, and the orders which gave rise to the demand of tax were made prior to June 1, 1992, and the

property was attached prior to June 1, 1992, the proceedings initiated are beyond the period provided in Rule 68B of the Rules. It is also stated

that the petitioner is the legal representative of the deceased defaulter, but no notice was served on her.

The first respondent has filed a counter affidavit and it is not necessary to notice the averments made therein in detail.

Mr. K. Srinivasan, learned counsel appearing for the petitioner, referred to Rule 68B of the Second Schedule to the Income Tax Act and

submitted that the demand of tax was made for the assessment year 1976-77 and the property was attached before June 1, 1992, viz., on March

14, 1989, and the notice for settling the sale proclamation was issued on January 5, 1996, i.e., beyond three years from June 1, 1992, and, hence,

the entire proceedings should be quashed. Learned counsel for the petitioner also submitted that the petitioner is the legal representative of the

deceased assessee, but she was not served with any notice and, hence, on that account also the proceedings should be quashed.

Mr. C. V. Rajan, learned senior standing counsel appearing for the Department, submitted that the sale proceedings were initiated within the

time stipulated in Rule 68B(1) of the Second Schedule to the Income Tax Act. He further submitted that the proceedings are being continued

against the petitioner as a legal representative of the deceased assessee from the stage at which the proceedings were left on the date of the death

of the defaulter.

I have carefully considered the submissions of learned counsel for the petitioner and learned senior standing counsel appearing for the

Department. Rule 68B(1) of the Second Schedule to the Income Tax Act provides that no sale of immovable property shall be made under the

said Act after the expiry of three years from the end of the financial year in which the order which gave rise to a demand of any tax, interest, fine,

penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under the provisions of

Section 245-1 or, as the case may be, final in terms of the provisions of Chapter XX. The said rule was inserted with effect from June 1, 1992.

On the facts of the case, the demands for the payment of tax were made for the assessment years 1976-77 to 1983-84. Sub-rule (3) of Rule

68B of the Second Schedule to the Income Tax Act provides that where an immovable property has been attached before June I, 1992, and the

order which gave rise to the demand of any tax, interest, fine, penalty or any other sum for the recovery of which the immovable property was

attached became final before the said date, that date should be deemed to be the date on which the said order has become conclusive or final. The

effect of Sub-rule (3) of Rule 68B of the Second Schedule to the Income Tax Act is that when the property was attached before June 1, 1992,

and the order which gave rise to the demand of tax for the recovery of which the property was attached has become conclusive before June 1,

1992, then, June 1, 1992, is statutorily fixed as the date on which the demand became conclusive. The reading of Sub-rule (1) of Rule 68B shows

that the period of three years provided under the said Act would commence from the end of the financial year in which the order which gave rise to

the demand of tax has become conclusive. In my view, Rule 68B(3) should be read along with Rule 68B(1) of the Second Schedule to the Income

Tax Act as Rule 68B(3) deals with cases where the attachment of the property was made prior to June 1, 1992, and the respondents are justified

in calculating the period of three years from the end of the financial year in which the order which gave rise to the demand of tax became

conclusive. Sub-rule (3) of Rule 68B, in my view, fixes June 1, 1992, as the date on which the demand of tax has become final in all cases where

the demand was made and the property was attached prior to that date and that date is fixed for a limited purpose to determine the time limit

prescribed under Sub-rule (1) of Rule 68B. In other words, in all cases falling under the ambit of Rule 68B(3), the date is statutorily fixed as June

1, 1992, as the conclusive date to find out the three years period prescribed under Sub-rule (1) of Rule 68B and it is not correct to assume that

June 1, 1992, should be taken as the starting point for determining the limitation period under Sub-rule (1) of Rule 68B of the Second Schedule to

the Act. Therefore, there is no difficulty in holding that the sale notice issued by the first respondent on January 5, 1996, is within the period

stipulated in Rule 68B(1) of the Second Schedule to the Income Tax Act.

The second submission of learned counsel for the petitioner is that the petitioner was not served with any prior notice after the death of her

father. This contention is also not acceptable. Rule 85 of the Second Schedule to the Income-lax Act empowers the Tax Recovery Officer to

continue the recovery proceedings against the legal representatives of the defaulter from the stage at which it was left on the death of the defaulter

and in the said proceedings, all the provisions of the Second Schedule would apply as if the legal representative is the defaulter. I have gone

through the affidavit filed in support of the petition and the counter affidavit and I find that the petitioner was also issued notice and it was served on

the petitioner demanding payment of arrears of tax with interest. Therefore, I hold that there is no violation of the principles of natural justice,

The result is the writ petition is liable to be dismissed and accordingly, it is dismissed. However, considering the fact that the petitioner is the

legal representative of the deceased defaulter, I am of the view that the petitioner should be given some time to clear off the arrears of tax.

Accordingly, the petitioner is given six months time from the date of the receipt of the order to clear off the arrears and if the amount is not paid

within the time stipulated, it is open to the Department to proceed against the property on the basis of the notice issued on January 5, 1996, and

also by the issue of a fresh proclamation of sale. In the circumstances of the case, there will be no order as to costs.