D. S. Tewatia, J. - Petitioner Jaswant Singh has impugned sale notice which is annexed to the petition as Annexure-B issued by the TRO (Home Tax), Ludhiana, on the grounds :
(i) that the property was worth lacs and the arrears of Income-tax could be recovered from the movable assets. The proclaimed auction had not been preceded with issue of service of writ of demand and attachment of petitioner who is in possession of the property.
(ii) that the petitioner had placed on record before the IT Authorities Jamabandies of the land of respondent No. 3 defaulter, situated in village Dakha and some of which had since been sold by Nahar Singh, attorney of the defaulter but the IT Authorities had not proceeded against him.
(iii) that the impugned proclamation published in the Tribune and the Hind Samachar did not indicate the amount for which the property was being auctioned nor the name of the defaulter and his liability for which the proceedings of attachment and sale were in progress.
(iv) that the proceedings had been purposely kept secret from the petitioner who held the property in his possession and admittedly the owner thereof. The petitioner never had any notice of any claim against him, his said partner or the partnership concern except orders of assessment against which appeals were pending before the competent Tribunals.
(v) that the appeals against the assessments for 1966-67 were pending before the Income-tax Tribunal, Chandigarh, and the assessment for the year 1968-69 had not been communicated to the petitioner since the same was still pending with the AAC Ludhiana and that the appeal with respect of 1969-70 was also undecided.
(vi) that the attachment was finally removed on 26-3-1972 and thereafter, legally no second attachment was made nor any steps were initiated for attachment and sale of the property for recovery of outstanding income-tax arrears under a legal certificate by competent authority and that the alleged attachment of property on 12-3-1973 was wrong or a concealed document.
(vii) that the sale of the property in question and auction of the partnership would create complications and hardships.
(viii) that the proceedings on the face of the record betray a prejudicial approach against the petitioner to favour the defaulter-respondent No. 3 and to shield the defaulter-respondent No. 3 and his associates in the department of Income-tax who permitted the defaulter-respondent No. 3 to leave the country with clearance certificate and thereafter permitted his surety to escape the liability by issuing to her income-tax clearance certificate.
2. Before proceeding with the grounds on which the sale notice (Annexure B) has been impugned, it may be necessary to recapitulate a few circumstances alleged in the petition pertaining to the partnership concern. The petitioner has alleged that in the partnership concern known as Ashoka Oil Mill, Samrala, the petitioner had one-fourth share and respondent No. 3 had three-fourth share. The capital investment was also made in the same proportion by both the partners. Respondent No. 3 Dhanwant Singh retired from the partnership on 10-5-1968 and thereafter the petitioner became the sole surviving partner and the partnership came to be dissolved a preliminary decree was passed by Sub-Judge 1st Class, Samrala on 24-10-1970, but the final decree after the rendition of accounts had not so far been passed because respondent No. 3 Dhanwant Singh had left the country and settled down in Canada. Respondent No. 3 Dhanwant Singh had not produced original account books and instead produced forged account the books with the intention defraduing the State Revenue and also cheating the petitioner and on complaint by the petitioner, books of accounts were impounde by the IT Authorities for investigation with respect to the alleged forgery and the necessary prosecution after the same was detected. Respondent No. 3, in order to escape the prosecution and with the active connivance of the departmental staff, obtained Income-tax clearance certificate on or about 3-10-1970. The firm was originally assessed for 1966-67 and the Mill was attached for the recovery of Rs. 85,386 from Dhanwant Singh-respondent No. 3, and Rs. 26,326 from the firm vide order dt. 5-10-1971, which order was ex parte. The appeal of the firm u/s 146 of the IT Act was accepted and the said attachment was, consequently, quashed and the case was reopened for fresh assessment according to law. The ex parte assessment was set aside on 23-11-1971 by the ITO, Ludhiana, and the entire proceedings ceased to have any effect.
3. After obtaining the Income-tax Clearance Certificate, when respondent No. 3 filed the country and the liability to pay the tax arrears was taken up by his wife Shrimati Sheila Sekhon, and the personal property of respondent No. 3 was also pledged to the department for the said arrears, the petitioner brought to the notice of the IT Authorities that Shrimati Sheila Sekhon was also leaving the country without clearing the arrears and the liability undertaken by her and the departmental authorities in spite of the intimation and request by the petitioner, permitted her to leave the country with family in June, 1972.
4. The property in question was published to be sold on 28-3-1972 under orders of respondent No. 2, against which the petitioner filed Civil W.P. No. 1005 of 1972, which was rendered infructuous as the department accepted the pleas of the petitioner and cancelled the attachment and promised to proceed according to law. The attachment was finally removed on 28-3-1972.
5. After the publication in the press of the sale notice the petitioner tried to approach respondent No. 2 to file objections u/Sch II(2) but the respondent was neither available nor his tour programme or whereabouts could be obtained from the ministerial staff and the date of the auction was very near, which left no alternative but to approach this court on the writ side.
6. In the written statement filed on behalf of respondents Nos. 1 and 2, it has been maintained that the entire property of Ashoka Oil Mills, Samrala, did not belong to the petitioner. His share therein was only one-fourth while that of respondent No. 3 was three-fourth. After the closure of the partnership business w.e.f. 10-5-1968, both the petitioner and respondent No. 3 remained co-owners in the property of the said Mill to the extent of their respective shares. The records of the department showed that there was no trouble in the first two years of the running of the partnership between the petitioner and respondent No. 3, who incidentally happened to be petitioners brotherss-in-law (sisters husband). The differences between them seemed to have occurred thereafter, which culminated in the final closure of the business in May 1968. On 22-9-1969 the petitioner addressed a complaint to the department which led to the impounding of the account books of the Ashoka Oil Mills, Samrala, and the shop which was being run by the partnership on 11-11-1969. Thereafter assessments were completed on the firm as well as in the individual files of its partners - the petitioner and respondent No. 3 - in respect of the asst. yrs. 1966-67, 1967-68 and 1968-69. During the course of these proceedings the petitioner had free access to the account books which had been in the custody of the department. Since the petitioner had alleged tampering with the account books by respondent No. 3, he was particularly given an opportunity to look into these books of account with a view to finding out as to which of the accounts books were genuine and which of them were forged or tempered with by respondent No. 3. After going through all the account books the petitioner made a statement on oath on 25-11-1971, wherein the admitted that the books of the mills and the shop relating to the period 1-7-1964 to 30-6-1965 and 1-7-1965 to 30-6-1966, relevant to the asst. yrs. 1966-67 and 1967-68, were genuine and there was no incorrect entry in these books of account relating to these two years. As regards the books relating to the next two years, that is, the period ending 30-6-1967 and 30-6-1968, the petitioner stated that he could not vouch for the genuineness of the books of account of that period as the cash book of the shop for the year ending 30-6-1967 and all the books of account for the shop for the year ending 30-6-1968 were not traceable. It is alleged in the written statement that in the books impounded by the department on the complaint of the petitioner, the cash book for the year ending 30-6-1967 was not amongst them, nor were the Khata Bhis and Nagals for the period after 1-7-1967. The ITO closely questioned the petitioner regarding the possibility of the duplicate books of account having been maintained in respect of these later two years. The petitioner expressly stated that he had no such information. His assertion that the books of account for this period were not genuine, wat based only on suspicion. The petitioner could not point out even a single discrepancy in the books of account relating to these two years. Thereafter the assessments were completed in respect of these two assessment years as well.
7. As a result of the assessments and the consequent demand notices issued to the firm and its partners u/s 156 of the IT Act the following amounts were outstanding against the firm and its partners by the end of February, 1973 :
Dues of the firm
Dues of Dhanwant Singh, partner
Dues of the petitioner
Recovery certificates for the recovery of these dues were issued from time to time to respondent No. 3 till February, 1973. The above figures represented the position as on 28-2-1973 and the actual figure was likely to differ upwards depending on supplementary recovery certificates issued thereafter, to which effect had to be given by the TRO in accordance with law.
8. Respondents Nos. 1 and 2 denied the suggestion that respondent No. 3 had left the country with the connivance of the department. It is mentioned that respondent No. 3 approached the department for the grant of a clearance certificate in order to enable him to go abroad on a temporary visit for the purpose of seeing his three sisters, two of whom were alleged to be settled in England and one in Canada. In his affidavit dt. 21-9-1970 respondent No. 3 gave the details of his assets in India including the property of the Ashoka Oil Mills, Samrala, and land in village Dakha, District Ludhiana, and assured that though the assessments of his business were pending, there would be enough assets in India to meet any demand that would be created as a result of these assessment. Since there was nothing to show that these assertions were not correct and particularly in view of the fact that in his statement recorded by the Inspector of the department on 23-9-1970, respondent No. 3 clearly stated that his wife Shrimati Shiela Sekhon would be there to meet any tax demand, that might be created against him, out of his property in India, so respondent No. 3 was allowed a clearance certificate. The department had nothing concreate against respondent No. 3 except that his brother-in-law, the petitioner, was dissatisfied with his manner of dealing with him. Considering that in the same complaint the petitioner had included his own father Shri Nahar Singh also to ventilate his grievance to the department, it appeared nothing more than family dispute, and therefore, the departments action in issuing the clearance certificate was a bona fide one.
9. Regarding the contents of paras 4, 5 and 6 of the petition it was stated that the original assessment of the asst. yr. 1966-67 was made on 31-3-1971. It was a best judgment assessment and the total income of the firm was assessed at Rs. 1,48,490. Consequently, the liability of the firm, which was assessed as a registered firm, was fixed at Rs. 26,326. Since this amount was not paid by the firm, a recovery certificate was issued to respondent No. 2 and the first attachment was made by him on 2-7-1971 for the recovery of these unpaid dues of the firm, i.e., Rs. 26,326. There was an appeal to the Commissioner, Jullundur Division, against that attachment, which was cancelled with directions to make an attachment afresh in accordance with the provisions of the Second Schedule to the IT Act, vide his order dt. 6-9-1971. Accordingly on 5-10-1971, a fresh attachment was made against the property of the mills. In the meantime a recovery certificate against Dhanwant Singh respondent No. 3, in respect of the tax assessed against him, namely, Rs. 85,386 had also been received and the attachment was for the recovery of both these amounts.
10. In the meantime on 23-11-1971 the ITO cancelled the best judgment assessment for the asst. yr. 1966-67 and the demand against the firm stood cancelled. Consequently, the sale proclamation issued on 6-2-1972, as a result of the second attachment, mentioned only the demand of Rs. 45,093 outstanding against respondent No. 3 only. The petitioner filed a writ petition in the High Court and since in the meantime the final assessment of the asst. yr. 1966-67 was also completed by the ITO and other assessments were also completed, it was considered advisable to wait for all the outstanding recoveries to be certified, before any action against the assessee was taken. Thus respondent No. 2 withdrew the attachment and, consequently, civil W.P. No. 1005 of 1972 became infructuous and was dismissed as such on 28-7-1972.
11. The suggestion contained in para 7 of the petition, that the departmental authorities at Ludhiana had any hand in allowing Shrimati Shiela Sekhon to leave the country, was denied. It was, however, admitted that an information was received from the petitioner that his sister Mrs. Shiela was leaving the country. That information was passed on to the ITO (Foreign Section), Amritsar, on telephone. On 1-10-1971. Subsequently a letter was also addressed to him on 6-10-1971 not to issue any clearance certificate to Shrimati Shiela Sekhon. Information regarding this was also given to the other departmental authorities. Including the CIT Patiala. No clearance certificate had been issued to Shrimati Shiela Sekhon and respondent No. 2 was not aware if Shrimati Shiela Sekhon had left the country. It was admitted the substantial tax arrears were outstanding against her husband Dhanwant Singh, respondent No. 3 and that his assets in India including his share in the property of the mills in question, were therefore, liable for the recovery of those dues.
12. In answer to para 8 of the petition it was asserted that it was considered advisable to make a consolidated attachment of the property of the mills for the recovery of the outstanding demands, not only against the firm but also against its partners, the petitioners and respondent No. 3.
13. In reply to para 9 of the petition it was admitted that the attachment was removed on 28-3-1972. It was, however, denied that no demand notice had been issued to the firm and the petitioner and respondent No. 3 in connection with the tax dues-assessed against them respectively. It was asserted that demand notice were duly served in the files of the firm as well as of its partners the petitioner and respondent No. 3. It was also asserted that demand notices u/Sch II, r. 2 of the IT Act were served on the petitioner on 16-2-1973. They were all received by his wife Shrimati Mohinder Kaur, who always received notices on behalf of the petitioner As regards the demand notices issued u/Sch II, r. 2 of the IT Act in the case of the firm and respondent No. 3, these were also duly served on the defaulters.
14. While denying para 10 of the petition it was asserted that intimation or demand of Income-tax arrears due from the firm or the petitioner in person were served on the petitioner. The petitioner was duly served with notices of demand in respect of the various orders on 16-2-1973. The notices of demand against the firm were duly served by affixation on 28-7-1972 in respect of the three years. It was further mentioned that according to the recovery certificates received from the ITO for recovery against received from the ITO for recovery against respondent No. 3, a total amount of Rs. 52,404 was due as arrears. However, while issuing the attachment order dt. 14-5-1973. The petitioner had tried to misuse that order by twisting facts in his favour, which was not correct. The attachment order correctly mentioned a total amount of Rs. 12,971 due from the firm.
15. Respondents Nos. 1 and 2 while denying para 11 of the petition, asserted that the petitioner had not sent any information to the department respondent No. 3 by Shri Nahar Singh. Besides the property of the mills in question, the other property of respondent No. 3 was agricultural land, in which one Rattan Singh was co-sharer and the land was with the tenants who were likely to make their own claims under the law. Thus the property of the mills was the only property which would be proveeded against without any complication for the recovery of the dues of the firm and its partners.
16. While denying para 13 of the petition it was submitted that the latest attachment, third in series, was made on 12-3-1973. Consequent upon this attachment, sale proclamation was issued no 25-6-1973 fixing 6-8-1973 as the date for holding the auction for holding the auction for the recovery of the aforesaid revenue-dues from the firm and its partners-the petitioner and respondent No. 3. A notice of the sale proclamation u/s 52(2) of the II schedule was served upon the petitioner by affixture u/s 20, Order-V of the Code of Civil Procedure on 3-7-1973. The other partner respondent No. 3 was served on 5-7-1973 by service of notice on the general attorney Shri Balwant Singh. Publication in the newspapers like : The Tribune of Ambala, the Hind Samachar in Urdu, The Vir Pratap in Hindi and Ajit in Punjabi all of Jullundur was duly made on 29-7-1973. No application was made by the petitioner before respondent No. 2 though he had enough time to raise any objection that he was advised and which was available to him under the law. The petitioner could have moved respondent No. 2 personally in time in July 1973, when he was not on tour, on any day Respondent No. 2 was at Patiala in the first week of August, 1973 in connection with a training courses, otherwise he had all through been at Ludhiana. However, even during his absence at Patiala his office was open and any objections could have been filed by the petitioner and received by the office of respondent No. 2 during his absence.
17. Coming to the grounds on which the sale notice (Annexure B) has been impugned, respondents Nos. 1and 2 have averred that the department had no notice regarding any cash or other assets held by anybody for respondent No. 3. The attachment has been duly preceded by notices of demand as requited by law. That the liability of the firm and its partners could most appropriately be recovered out of the assets of the firm. That it was not necessary to reproduce the entire sale proclamation in the advertisement in the news papers. The prospective bidders could have all the particulars from the respondent No. 2 and from the proclamation of sale which had been drawn up in accordance with the law and which gave all the particulars of the property. That the question of keeping anything secret from the petitioner did not arise. That the third attachment of the property in question was made on 12-3-1973. That no appeal except the appeal against the asst. had his remedy by way of appeal to the CIT (Recovery) against any order of recovery of any tax passed by respondent No. 2.
18. A perusal of the petition and written statement would show that the basic assumption on which the petitioner has approached this court as also the specific questions are all questions of fact, which have been controverted. The petitioner has not shown any legal infirmity in the sale notice.
19. The ld. counsel for the petitioner merely sought to point out that there has been noncompliance with r. 52 of Sch. II of the IT Act and that the notice was not published in the language of the district which is Punjabi. Apart from the fact that there is no such assertion in the petition, it may be observed that the proclamation had been published in four languages, i.e., English, Hindi, Punjabi and Urdu. Hence there is no merit in this contention.
20. This court on the writ side is loath to enquirt into the disputed questions of fact. It is clear from the written statement that all necessary formalities (had been complied with) that were to precede the issuance of the sale notice (Annexure B) had been duly observed.
21. In the result I hold that the sale notice does not suffer from any legal infirmity and I find no merit in the petition and dismiss the same with costs. Counsels fee Rs. 200.