MOHAMMED NIYAS V. THE INCOME TAX COMMISSIONER

RP/886/2016

AI Insights

The case involves Mohammed Niyas, a subsequent purchaser of a property originally owned by a defaulter under the Income Tax Act, 1961. Niyas challenged the auction sale conducted for recovery of dues and sought to limit his liability to only those dues for which the property was attached. The High Court of Kerala had previously set aside the sale but allowed the Income Tax authorities to recover all dues from the property. Niyas argued that he was only responsible for the dues directly related to the property at the time of his purchase. The court dismissed his review petition, stating that the statutory charge on the property includes all outstanding dues, and it is up to Niyas to either settle these dues or participate in the sale of the property.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 699882 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 09-11-2016
• Assessment Year: misc
• Other Referred Cases: State of WB v. Kemal Sengupta [(2008) 8 SCC 612]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; JACOB SEBASTIAN
• Assessee Lawyers: A RAJASIMHAN; K NIRMALAN
• Keywords: Auction Sale; Income tax recovery; Statutory Charge; Equitable Consideration; Subsequent Purchaser
• Section: 8; 58

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 9TH DAY OF NOVEMBER 2016/18TH KARTHIKA, 1938 RP.No. 886 of 2016 (C) --------------------------------- AGAINST THE JUDGMENT IN W.P(C).NO. 27423/2013, DATED 11.08.2016 -------------- REVIEW PETITIONER(S)/PETITIONER IN W.P(C) : ----------------------------------------------------------------------- MOHAMMED NIYAS, AGED 46 YEARS, S/O. LATE YAHIYA KOYA, NIAZ MANZIL, KANNIMELCHERY, KILIKOLLOOR P.O., KOLLAM. BY ADVS. SRI.A.RAJASIMHAN SRI.K.NIRMALAN RESPONDENT(S)/RESPONDENT IN W.P(C) : ----------------------------------------------------------------- 1. THE INCOME TAX COMMISSIONER AAYAAGHAR, KAUDIAR, THIRUVANANTHAPURAM- 695 003. 2. THE INCOME TAX OFFICER, CENTRAL CIRCLE INCOME TAX OFFICE, THIRUVANANTHAPURAM- 695 001. 3. THE INCOME TAX RECOVERY OFFICER, INCOME TAX OFFICE, KALAPANA PAYIKKADA ROAD, QUILON- 691 004. 4. HIND SHERIF, D/O. LATE SHAHUL HAMEED, ZAVAD MANZIL, 2ND MILE STONE, KANNIMEL, KILIKOLOOR P.O., KOLLAM- 691 004. 5. ZAV AD SHERIF, S/O. LATE N.H.SERIEF, ZAV AD MANZIL, 2ND MILE STONE, KANNIMEL, KILIKOLOOR P.O., KOLLAM- 691 004. 6. ANFAZ SHERIF, S/O. LATE N.H.SHERIFF, ZAVAD MANZIL, 2ND MILE STONE, KANNIMEL, KILIKOLOOR P.O., KOLLAM- 691 004. 7. FOUSIYA ARSHAD, W/O. ARSHAD, KANNAKARA PUTHENVEEDU, KILIKOLOOR P.O., KOLLAM- 691 004. ..2/- ..2.. RP.No. 886 of 2016 (C) --------------------------------- * ADDITIONAL R8 & R9 IMPLEADED 8. K.SOMASUNDARAM, KESAVAVILASOM BUNGLOW, KIDANGIL LANE, RAJADHANI NAGAR-39, MANGAD, KILIKOLLOOR, KOLLAM DISTRICT, PIN- 691 004. 9. S.VENUGOPAL, KESAVAVILASOM BUNGLOW, KIDANGIL LANE, RAJADHANI NAGAR-39, MANGAD, KILIKOLLOOR. * ADDITIONAL R8 & R9 ARE IMPLEADED AS PER ORDER DATED 28.10.2016 IN I.A.NO. 491 OF 2016. R1 TO R3 BY ADV. SRI.JOSE JOSEPH, S.C, FOR INCOME TAX R4 TO R7 BY ADV. SRI.JACOB SEBASTIAN THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 09-11-2016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: Msd. RP.No. 886 of 2016 (C) --------------------------------- APPENDIX PETITIONER(S)' ANNEXURES : ANNEXURE A1: TRUE COPY OF THE ORDER DATED 09.09.2016 CERTIFIED COPY OF THE JUDGMENT IN W.P(C).NO. 27423 OF 2013 DATED 11.08.2016. RESPONDENT(S)' ANNEXURES : NIL //TRUE COPY// P.S.TO JUDGE Msd. K. Vinod Chandran, J -------------------------------------------------------------------- R.P.No.886 of 2016 in W.P.(C) No.27423 of 2013-C ---------------------------------------------------------------------- Dated this the 09th day of November, 2016 ORDER The petitioner, a subsequent purchaser of a property of a defaulted assessee, under the Income Tax Act, 1961, was before this Court challenging the auction sale conducted in pursuance to the steps for recovery taken under Schedule-II of the Income Tax Act. The petitioner sought interdiction of the confirmation of sale for reason of the default committed by the purchaser in paying the amounts in accordance with Rule 58 of Schedule II of Income Tax Act. This Court found that the sale was bad and in such circumstance of the sale having been set aside, the Income Tax authorities had a charge on the property for which they could have proceeded with a fresh sale. On equitable consideration, it was opined by this Court that the petitioner being a subsequent purchaser from the defaulter under the Income Tax Act if settling the entire dues, could then obtain unencumbered title of the property which was put up for sale. RP.886 of 2016 in - 2 - WP(C).27423 of 2013 2. The petitioner has now come forth with a contention that the petitioner was not aware of any other outstanding liabilities than that for which the properties were then attached. The writ petition was disposed of and now the petitioner is faced with Annexure A1 notice, demanding amounts due for the years 1982-83 and 1983-84 in addition to that of 1977-78 and 1978-79; which alone was the defaulted amounts for which attachment was originally made. The submission of the learned Counsel appearing for the petitioner is that the petitioner's undertaking was only for the payment of the dues for which attachment of the property was made and there could be no further dues mulcted on the property. 3. For one, it has to be noticed that the petitioner had filed the writ petition specifically with prayer No.(iii), which reads as under: “(iii) issue a writ of mandamus or order directing the 2nd respondent to permit the petitioner to pay the outstanding income tax liability by 6 monthly installments”. Hence, the outstanding income tax liability of the defaulter was undertaken to be paid. The learned Counsel for the petitioner would RP.886 of 2016 in - 3 - WP(C).27423 of 2013 contend that, what was intended was only the liability for which the attachment was made. However, this Court considered the undertaking and has not restricted it nor can it be so restricted for reason of there being a statutory charge on the property. If the sale had not taken place, then necessarily the subsequent liabilities would also be a charge on the property. If the sale has taken place and there was balance remaining after adjustment of the dues relating to the certificate of attachment, the Income Tax authorities would be entitled to recover all dues existing as on the date of sale under Rule 8 of Schedule II. 4. In the present case, this Court had merely, on equitable consideration, directed payment of the outstanding dues so as to enable the petitioner to get the property. If the petitioner does not clear the outstanding liability, then necessarily the property would have to be put for sale; in which the petitioner would also be entitled to participate. There cannot be any fault found on the Income Tax department seeking for deposit of the entire amounts due from the defaulter and it is for the petitioner to decide as to whether the RP.886 of 2016 in - 4 - WP(C).27423 of 2013 payment of the demanded amounts would be worthwhile; with reference to the value of the property and if not, definitely the next option is participation in the sale conducted by the department. 5. It has also to be noticed that the review filed is for a modification of the judgment insofar as restricting the liability to only that mulcted on the property at the time of sale by virtue of the attachment alone. This would not come within the contours of review, as has been held in State of WB v. Kemal Sengupta [(2008) 8 SCC 612]. Further if the property is worth more than that liability and there are other amounts remaining due from the defaulter, the predecessor-in-interest, then necessarily the tax authorities would be further entitled to make a fresh attachment and sale. The review petition fails and it is accordingly dismissed. Sd/- K.Vinod Chandran Judge. vku/- [ true copy ] "