MANCHANDA J. - This is a writ petition under article 226 of the Constitution. The relief is for issue of a writ, order or direction in the nature of mandamus restraining the Tax Recovery Officer, Kanpur, and the Tahsildar/Magistrate, Income-tax, Kanpur, from taking any further steps for the delivery of possession of house No. 30/137 Ghumni Mohal, Kanpur, to the auction purchaser in pursuance of the auction held on September 4, 1963.
The facts leading up to this petition are these :
The petitioner is the grandson and the sole executor of the last will and testament of one Channalal Dalal, who died on September 15, 1963, at Kanpur. Before Channalals demise there were income-tax dues outstanding against him amounting to Rs. 27,455.71 nP. On 27th September, 1961, a prohibitory order was issued by the Additional Collector and District Magistrate, Kanpur, to Shri Channalal Dalal, the assessee, who was alive on that date, informing him 'that in default of payment of the income-tax dues house No. 38/156, Gillis Bazaar and 30/137, Ghumni Mohal, Kanpur, have been attached on September 27, 1961. You are, therefore, prohibited to sell, mortgage or transfer the above-mentioned immovable properties in any way till further orders from this court under whose order the said property have been attached'. Both these houses were put up for auction. In respect of house No. 38/156 Gillis Bazaar, Kanpur, with which this petition is not concerned, the proceedings were stayed on the objection of the vendor to the assessee on the ground that the full price had not been paid and the title of the assessee was not perfected. This matter is pending before the Commissioner in appeal.
In respect of the house No. 30/137, Ghumni Mohal, Kanpur, with which this petition is concerned, it was directed to be put up for auction for the second time on 4th September. Once before it was auctioned but it realised only Rs. 8,100 and on objection taken by the assessee, the sale was set aside by the Tax Recovery Officer, Kanpur, by his order dated 12th December, 1962. The fresh date for the sale of the said house by auction, as already observed, was fixed for 4th September, 1963. On the 3rd September, 1963, the assessee moved an application before the Inspecting Assistant Commissioner of Income-tax, Kanpur, praying that the auction fixed for 4th September, 1963, be stayed. The grounds taken in this application, inter alia, were that the assessments had not yet been finalised and were the subject-matter of appeals and reference to the High Court and, therefore, as the demand created on the petitioner was a disputed one, the auction fixed for the 4th September, 1963, should be stayed. The Inspecting Assistant Commissioner acceded to the request of the assessee to stay the auction sale. On that very day by a letter dated the 3rd September, 1963, the Income-tax Officer wrote to the Tahsildar, Kanpur :
'I have been directed by the Inspecting Assistant Commissioner of Income-tax, Kanpur, to inform you that the auction may kindly be stayed till further intimation. The assessee has come forward for payment of the part of the arrear demand and has asked for instalments for the balance. In view of this the auction is being stayed by the Inspecting Assistant Commissioner.'
Unfortunately, for the assessee, the communication was not delivered to the Tahsildar till mid-day on the 4th September, 1963, although the office of the Income-tax Officer and the Tahsildar are said to be near each other. The result was that the auction took place at 10 a.m. on the 4th September, before the stay order was received. The auction purchaser was a third party and there is no allegation that he or anyone else, who had bid at that auction, had any knowledge of the stay order which was passed on the previous evening. The counsel for the petitioner also, unfortunately, did not take the precaution of seeing that the stay order reached the Tahsildar before the time scheduled for the auction to take place on the following morning. The result was that the auction had, in fact, taken place before the stay order was received.
A few days later on the 15th September, 1963, the assessee passed away. The petitioner who was the sole executor and grandson of the assessee moved an application on 2nd October, 1963, before the Tax Recovery Officer, Kanpur. A copy of this application has not been annexed to the writ petition, and, therefore, it is not possible to say as to what the contents of that application were. It is, however, not unreasonable to assume that what the applicant had said was that after the sale had been stayed by the Inspecting Assistant Commissioner of Income-tax, no auction could or should have taken place on the 4th October, 1963. The prayer made in that application, however, has been set out in the petition and this reads :
'It is respectfully prayed that the auction sale held on September 4, 1963, be set aside and the sale cancelled for the reasons stated above and in the alternative, it is prayed that the auction sale be not confirmed for three months to enable the applicant to seek his legal remedy as he may be advised.'
It is not clear as to under what rule or provisions the application for setting aside the sale or for stay of the confirmation of the sale for three months was made. Presumably, this application was in the nature of objections filed either under Order 21, rule 90, of the Civil Procedure Code, or under clause 60 or 61 of Schedule II to the Income-tax Act, 1961. The objections were dismissed on 25th November, 1963. On the 6th December, 1963, the sale was confirmed. On 13th December, 1963, the sale certificate was issued in favour of the auction purchaser. This writ petition is directed against the auction held on 4th September, 1963.
The main question which falls to be considered in this writ petition is as to interpretation that is to be placed on the provisions of section 225 of the Income-tax Act,. 1961. This reads :
'Notwithstanding that a certificate has been issued to the Tax Recovery Officer for the recovery of any tax, the Income-tax Officer may grant time for the payment of the tax, and thereupon the Tax Recovery Officer shall stay the proceedings until the expiry of the time so granted.'
The section, manifestly, is mandatory and once a stay is granted by the Income-tax Officer, the Recovery Officer has no discretion and must stay the recovery proceedings. The real question, however, is as to when a stay order becomes effective, that is, whether the stay order will take effect from the date of communication of the order to the Tax Recovery Officer or from the date when it is passed. In other words, if a stay order is passed by Income-tax Officer but before that order is communicated to the Recovery Officer, the latter has in ignorance of the stay order proceeded to sell the attached property by public auction and the right of a third party has intervened, will the stay order have the effect of nullifying the auction sale ?
The stay order to be effective, where the right of a third party has intervened, must necessarily be communicated before it can take effect. The Recovery Officer is after all the agent of the principal, i.e., the Income-tax Officer, in the matter of recovery the income-tax dues from the defaulting assessee. If the agent, before receiving the instructions of his principal countermanding his earlier instructions to sell, proceeds to sell the attached property of the defaulting assessee and the rights of a third party, the auction purchaser, have intervened, then it would be difficult, if not impossible, to say that the action taken by him was one wholly without jurisdiction and as such a nullity.
In a Full Bench decision of this court in Parsotam Saran v. Barhma Nand, the question arose as to the effect of an order granting the stay of sale by the High Court, passed before the date of sale but communicated after the sale had taken place It was held that if no irregularity in publishing or conducting the sale is found, the sale was perfectly good and should not be declared to be void, because the auction was held subsequent to an order of stay passed by the High Court. There was a conflict of opinion on this question between the various Benches of this court and also between the various High Courts, but after this Full Bench decision, so far as this court is concerned, there cannot be the slightest doubt that a stay order requires to be communicated before it takes effect in all cases where the rights of third parties, auction purchasers, have intervened. The ratio of this case would, in my judgment also apply to the provisions of section 225 of the Income-tax Act, 1961, and to recovery proceedings taken under Schedule II of the Income-tax Act, 1961.
That apart, the petitioner has an equally adequate alternative remedy, which he could have pursued, under the provisions of clauses 60, 61, 63, 65, 66, 86 and 87 of Schedule II of the Income-tax Act of 1961, and on this ground also the petition would require to be dismissed.
Lastly, a question was raised as to whether these recovery proceedings which were started in September, 1961, would fall to be considered under section 46(2) of the Act of 1922 or under the Act of 1961. Section 297(2)(j) would appear to give a discretion to the Income-tax Officer to proceed either under the old Act or under the new Act of 1961. Sub-clause (j) reads :
'Any sum payable by way of income-tax, super-tax, interest, penalty or otherwise under the repealed Act may be recovered under this Act, but without prejudice to any action already taken for the recovery of such sum under the repealed Act.'
It is, however, unnecessary to give a concluded opinion on this question in these proceedings as the position, so far as the present case is concerned, would not be any different whether the recovery proceedings are under the old Act or the new Act as the general principle would apply that an order staying recovery proceedings would be ineffective until that order was communicated to the Recovery Officer and if the latter had already sold the attached property and the right of third parties had intervened, such a sale cannot be set aside as one without jurisdiction or as being null and void.
For reasons given above, the petition is dismissed. Under the peculiar circumstances of this case, there will be no order as to costs.