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Dadala Ramanayya Vs. Tax Recovery Officer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberW.P. No. 6968 of 1984
Judge
Reported in[1987]168ITR266(AP)
ActsIncome Tax Act, 1961 - Sections 2(43B), 2(44), 124, 126 and 156
AppellantDadala Ramanayya
RespondentTax Recovery Officer
Appellant AdvocateRama Rao, Adv.
Respondent AdvocateM. Suryanarayana Murthy and ; T. Bheem Sen, Adv.
Excerpt:
.....over property situate in union territory - alleged that attachment and sale pursuant to notice issued by respondent was illegal - court observed that there was no want of jurisdiction - court declined to interfere in matter at last stage even if there was jurisdictional error - act of respondent was in conformity with section 126 - held, there was no illegality in sale. head note: income tax recovery--jurisdiction of tro--non-issuance of notice under r. 118(1)--does not vitiate tax recovery certificate held: the notification issued by tax recovery commissioner, andhra pradesh having extended jurisdiction of tro, visakhapatnam over kakinada, circle ii whose ito was conferred jurisdiction over union territory of yanam by commissioner's notification dt. 31-8-1982, the tro,..........we may add that notice contemplated by rule 2 of schedule ii to the income-tax act is the notice issued by the tax recovery officer to the defaulter calling upon him to pay the amount specified in the certificate within 15 days from the date of service of the notice and intimating that in default steps would be taken to realise the amount. the petitioner has not specified the date on which the notice was served upon him by the tax recovery officer. we, therefore, cannot hold that the notice issued by the tax recovery officer in this case is without the jurisdiction on the ground that the petitioner is residing in yanam and that it is outside the jurisdiction of the 1st respondent. the sale was, it must be noted, held subsequent to the conferment of the jurisdiction on the 1st.....
Judgment:

Jeevan Reddy, J.

1. This writ petition is filed for the issuance of a writ, order or direction calling for the records relating to the sale of the petitioner's immovable properties held on March 13, 1984, and to quash the sale. The facts relevant are as follows : The petitioner says that he is a resident of Yanam, which was formerly a French territory and which become a Union territory with effect from August 16, 1962, when the 14th Amendment to the Constitution took effect. The Income tax Officer, A-Ward, Circle-1, Kakinada, initiated assessment proceedings against the petitioner. He wanted to treat certain immovable properties situated in Kakinada town as belonging to the petitioner. Though the petitioner denied the same, it was held that those properties are held by him. Since he was unable to explain the source of income with which those properties were acquired, assessments were made and tax payable was determined. This happened during the assessment year 1964-65. In the subsequent assessment years, the income from the said property was treated as income in the petitioner's hands and was brought to tax. The petitioner defaulted in paying the tax due. Ultimately, tax recovery certificates were issued to the first respondent herein, the Tax Recovery Officer, Visakhapatnam, for recovery of more than one lakh rupees. Actually three tax recovery certificates were issued. They are dated February 23, 1972, October 5, 1974, and August 19, 1975. respectively. Petitioner's properties at Yanam were brought to sale on March 13, 1984, in pursuance of the sale proclamation issued on February 9, 1984, by the 1st respondent. At the auction the 4th respondent became the purchaser; he deposited the entire sale amount within the time prescribed. This writ petition was filed before the sale could be confirmed and stay of confirmation of proceedings was also obtained. The validity of the sale is challenged by the petitioner on the following three grounds;

(i) The 1st respondent has no jurisdiction over Yanam. Therefore, the sale of property situated at Yanam by the 1st respondent is without jurisdiction and void;

(ii) The notice under rule 2 of Schedule II to the Income-tax Act was issued by the 1st respondent. Inasmuch as he has no jurisdiction over Yanam, the said notice is bad. Accordingly, all the proceedings taken subsequent and pursuant to the said notice including attachment and sale are illegal;

(iii) The tax recovery certificates sent to the 1st respondent are themselves invalid for the reason that they include interest for the period preceding the issuance of tax recovery certificates in respect of which interest notices under rule 118(1) of the Income-tax Rules were not issued. Since notices under rule 118(1) were not issued, the said interest amount had not fallen due and hence could not be recovered. The tax recovery certificates include the said amount. Therefore, they are invalid.

2. We shall deal with the above contentions in their proper order.

3. Coming to the first contention, it is not disputed that Yanam is a Union territory and not a part of Andhra Pradesh. The question is whether the 1st respondent (the Tax Recovery Officer, Visakhapatnam) has territorial jurisdiction over Yanam so as to sell the properties situated at Yanam for recovery of the amount mentioned in the tax recovery certificates sent to him. Learned standing counsel for the Revenue, who was called upon by us to produce the necessary notifications and orders, has produced the following proceedings - (i) Extract from Commissioner's Notification in S.P. No. X (26 & 27) /KKA/1982-83 dated August 31, 1982. In this notification, the jurisdiction of various Income-tax officers was specified, evidently under section 124 of the Act. So far as the Income tax Officer, C ward, Circle-II, Kakinada, is concerned, his jurisdiction is said to extend to all the persons in the Union territory of Yanam. An extract from another notification dated September 20, 1982, has been placed before us according to which the said Income-tax Officer has been conferred jurisdiction over all the persons in the Union territory of Yanam.

4. The notification issued by the Tax Recovery Commissioners, Andhra Pradesh I, II, III, allocating the tax recovery work among the Tax Recovery Officers of Andhra Pradesh : This notification was issued with out prejudice to the concurrent jurisdiction in the State of Andhra Pradesh including the territory of Yanam in the Union territory of Pondicherry vested in them by the Board. It was stated in this notification that the Tax Recovery Officers shall exercise the functions in relation to the defaulters of the income tax circles mentioned against each of them in that area. According to the table appended to the notification, the jurisdiction of the Tax Recovery Officer, Visakhapatnam, extends, inter alia, over Kakinada Circle-II, Kakinada.

5. From the above notifications, it appears that as far back as 1980, the Tax Recovery Commissioners have issued a notification conferring upon the 1st respondent, the jurisdiction over Kakinada Circle-II and, according to the notification issued in 1982 aforesaid, Kakinada Circle-II includes the persons residing in and the territory of Yanam.

6. Mr. Sreerama Rao, learned counsel for the petitioner, then argued that the notification conferring the jurisdiction upon the Tax Recovery Officer must have been issued by the Central Board of Direct Taxes and not by the Tax Recovery Commissioners and hence the notification dated June 20, 1980, relied upon by standing counsel for the Revenue, is not sufficient in law to confer jurisdiction on the first respondent.

7. We are not satisfied about the correctness of the above contention. Rule 6 of the Income-tax (Certificate Proceedings) Rules, 1962, no doubt, says that the Tax Recovery Officers referred to in sub-clause (iii) of clause (44) of section 2 shall exercise jurisdiction in respect of such areas as the Board may direct. On a perusal of section 126, it is evident that the Board is competent to delegate its functions to the Commissioners. Section 126 specifically says that the Board may by notification in the Official Gazette empower Commissioners to perform such functions in respect of such areas as may be specified in the notification. In the circumstances, we must presume that the Board must have delegated its power under rule 6 of the aforesaid Rules to the Tax Recovery Commissioners. The Tax Recovery Commissioners are undoubtedly Commissioners as the definition of 'Tax Recovery Commissioner' in section 2(43B) of the Income-tax Act would indicate. Apart from the above, we are of the opinion that this court should not exercise its discretionary jurisdiction under article 226 of the Constitution in favour of the petitioner on this point. As stated above, tax recovery certificates were issued as far back as 1972, 1974 and 1975. At no stage since 1972 has the petitioner chosen to challenge the jurisdiction of the 1st respondent. It is only after the sale was held in March, 1984, i.e., practically 12 years after the 1st tax recovery certificate was issued, that the present objection is raised. All that is stated in ground (C) of the writ petition is that there is no notification by the Board as contemplated by rule 6 of the Income tax (Certificate Proceedings) Rules, 1962. No ground is specifically taken that the said power has not has not been delegated to the Tax Recovery Commission on June 20, 1980, is invalid. In this connection, it must also be remembered that the first assessment year to which the tax relates is 1964-65 and that for all these years the petitioner has chosen to remain a defaulter. We are, therefore, not inclined to interfere with the sale held already or to exercise the discretionary jurisdiction under article 226 of the Constitution in view of the conduct of the petitioner. Had he objected to the jurisdiction of the Tax Recovery Commissioner at the earliest possible stage, assuming that his objection is sustainable, this court might have been inclined to interfere but not at this stage. It is well-settled that under article 226, this court is not bound to interfere on each and every illegality or irregularity made out. This court will interfere only if there is failure of justice. In view of the conduct of the petitioner, we do not think that the interests of justice will be served by interfering on the above technical ground. The first condition of learned counsel is accordingly rejected.

8. In so far as the second contention is concerned, we may add that notice contemplated by rule 2 of Schedule II to the Income-tax Act is the notice issued by the Tax Recovery Officer to the defaulter calling upon him to pay the amount specified in the certificate within 15 days from the date of service of the notice and intimating that in default steps would be taken to realise the amount. The petitioner has not specified the date on which the notice was served upon him by the Tax Recovery Officer. We, therefore, cannot hold that the notice issued by the Tax Recovery Officer in this case is without the jurisdiction on the ground that the petitioner is residing in Yanam and that it is outside the jurisdiction of the 1st respondent. The sale was, it must be noted, held subsequent to the conferment of the jurisdiction on the 1st respondent. In the absence of notice or in the absence of the date on which the notice under rule 2 was served upon the petitioner, it is not possible to say that the notice was bad. Moreover, the petitioner owns properties in Kakinada and it is not clear as to at what place the notice under rule 2 to Schedule II was served on the petitioner, i.e., whether at Kakinada or at Yanam. For this reason, the second contention of the petitioner also fails.

9. Now, coming to the third contention, it is based upon rule 118 of the Income Tax Rules read with section 156 and sub-section (2) of the section 220 of the Income-tax Act. Rule 118(1) says that where the tax has fallen due, the Income-tax Officer shall calculate the interest payable under sub-section (2) of section 220 at the end of each financial year and serve a notice of demand under section 156 of the Act. Section 156 provides for notice of demand for the tax or interest due. Sub-section (2) of section 220 says that if the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at fifteen percent. Per annum from the day commencing after the end of the period in sub-section (1). The contention of Mr. Sreerama Rao is that unless and until the notice of demand under section 156 is served in respect of the interest falling due at the end of each financial year as contemplated by rule 118, that amount of interest does not become due and cannot be recovered. In other words, the contention is that such interest amount cannot be included in the certificate and its inclusion in the certificate is illegal and vitiates the certificate itself. We are afraid we cannot give effect to this argument on the basis of material placed before us. The writ petition does not specify how much amount or what portion of the amount mentioned in the certificate represents the pre-certificate interest. It is evident that rule 118(1) speaks of only pre-certificate interest and not of post-certificate interest. So far as post-certificate interest is concerned, it is provided in sub-rule (3) of rule 119 of the Income Tax Rules, to which, even according to learned counsel for the petitioner, rule 118 has no application. The petitioner also says that he has been paying some amounts from time to time. These amounts would have been adjusted both against the principal and interest. We, therefore, do not know whether in fact the tax recovery notices include any pre-certificate interest. Now, even assuming that the recovery certificates include certain amount of pre-certificate interest, the question is whether the contention urged by learned counsel for the petitioner merits acceptance. As stated above, the tax recovery certificates were issued in the years 1972, 1974, and 1975. Except barely alleging that no demand notices for interest as contemplated by rule 118 read with section 156 were served upon the petitioner, no particulars are stated by the petitioner in the writ petition.

10. In the counter-affidavit filed by the Tax Recovery Officer, it is denied that no such notices were issued. Of course, it is also argued that serving of such notices is not obligatory : non-service does not vitiate the certificates. But having regard to the fact that the petitioner is seeking to raise a factual dispute with respect to what happened or did not happen. Prior to 1972, it was his duty to state all the facts clearly. In the absence of the same, we do not think, we would be justified in allowing the petitioner to urge this contention at this late stage. Learned counsel could not also bring to our notice any decision saying that unless a notice of demand as contemplated by rule 118(1) is issued, the said amount cannot be included in the certificate. Rule 119(1) expressly says that at the time of issuing a certificate under section 222, the Income-tax Officer shall calculate the interest payable under sub-section (2) of section 220 on the amount of arrears of tax up to the date of issue of the certificate. In this case, we must presume that this must have been done. In such a case, if the petitioner is really aggrieved and if what he now says is true, i.e., that no notices were issued in respect of pre-certificate interest at the end of each financial year, nothing prevented him from approaching the concerned Income-tax Officer who issued the certificate and requesting him to recall the certificate on the ground that it includes interest for which notices under rule 118 were not issued. The petitioner has taken no steps for all these years. After more than 12 years, the petitioner is seeking to raise this contention in this court. It is relevant to mention that rule 118(1) starts with the words 'Subject to the provisions of rule 119...' The correctness of the amount mentioned in the tax recovery certificate is not disputed. But what is disputed is that a part of the amount mentioned in the tax recovery certificate relates to the pre-certificate interest. This is neither factually established nor are we satisfied that non-issuance of such notice vitiates the tax recovery certificates. Learned counsel could not bring to our notice any decision in support of his contention that, in such a situation, the tax recovery certificates is vitiated. We may also mention in this behalf that no such objection was raised before the Tax Recovery Officer or at any stage prior to the filing of the writ petition.

11. When we put to learned counsel for the petitioner that in exercise of jurisdiction of this court under article 226 of the Constitution, this court is not bound to interfere on a mere irregularity being made out and that this court has got discretion in the matter which should be exercised having regard to the facts and circumstances of each case, he sought to contend on the basis of a decision of the Supreme Court in Isha Beevi v. TRO : [1975]101ITR449(SC) , that where the total want of jurisdiction is made out, the court should interfere. There can be no dispute about the proposition that when there is a total want of jurisdiction, the court should interfere even at a late stage. But in this case we are not satisfied that there is total want of jurisdiction on the part of the 1st respondent. Even if the contention of learned counsel for the petitioner is accepted, it amounts to jurisdictional irregularity and what we are saying is that in view of the aforesaid conduct of the petitioner, we are not inclined to interfere at this late stage. We may also mention here that the 4th respondent who purchased the property has deposited the entire amount in March, 1984, i.e., about two years and eight months ago, and is waiting for the delivery of possession, while the petitioner who has not paid any amount towards the tax due is continuing in possession of the property by virtue of the interim orders of this court.

12. Learned counsel for the petitioner lastly made a request that we must extend the time for paying the amount. We are afraid that this request is made in the wrong forum and at a wrong stage. Not only has the third party's interest intervened, the circumstances are not such that we should show any indulgence, even assuming that we are entitled to extend the time in this writ petition.

13. For the above reasons, the writ petition is dismissed with costs. Advocate's fees Rs. 500.


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