Sanjay Kumar V. The Commissioner Of Income Tax and Ors

CWJC/15681/2014

AI Insights

The case involves three separate writ petitions filed by Sanjay Kumar, Sushil Kumar, and Veena Prasad against the Commissioner of Income Tax (Central), Patna, and the Tax Recovery Officer, Central Range-I, Patna. The petitioners challenged the orders and subsequent proclamation of sale concerning certain properties claimed to be owned by them but were being treated as properties of Tripurari Mohan Prasad, an assessee with pending tax arrears. The High Court had previously allowed the Tax Recovery Officer to proceed against the petitioners but required them to produce evidence of the source of income for the property purchases. The Tax Recovery Officer's subsequent orders rejecting the petitioners' claims were found to lack proper reasoning and application of mind, leading to the quashing of these orders and a remand for a fresh decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 686122 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 05-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ARCHANA SINHA; SUMAN MISHRA
• Assessee Lawyers: ABHINAV SRIVASTAVA
• Keywords: Income Tax; Ostensive source of income; Proclamation of Sale; Property acquisition; Tax Recovery Officer
• Section: 222

Judgement Text

"IN THE HIGH COURT OF JUDICATURE AT PATNA Civil Writ Jurisdiction Case No.15681 of 2014 ====================================================== Sanjay Kumar son of Late Bashistha Narain Sinha presently resident of Samarpan House, Rajendra Path, Sheikhpura, P.O. - B.V. College, P.S. - Shastri Nagar, District - Patna .... .... Petitioner/s Versus 1. The Commissioner of Income Tax (Central), Patna. 2. Tax Recovery Officer, Central Range -1, Patna. .... .... Respondent/s ====================================================== with Civil Writ Jurisdiction Case No.15732 of 2014 ====================================================== Sushil Kumar son of Late Bashistha Narain Sinha presently resident of Samarpan House, Rajendra Path, Sheikhpura, P.O. B.V. College, P.S. - Shastri Nagar, District - Patna. .... .... Petitioner/s Versus 1. The Commissioner of Income Tax (Central), Patna. 2. Tax Recovery Officer, Central Range - 1, Patna. .... .... Respondent/s ====================================================== with Civil Writ Jurisdiction Case No.15733 of 2014 ====================================================== Veena Prasad daughter of late Surendra Prasad resident of Samarpan House, Rajendra Path, Sheikhpura, P.O. - B.V. College, P.S. - Shastri Nagar, District - Patna. .... .... Petitioner/s Versus 1. The Commissioner of Income Tax (Central), Patna. 2. Tax Recovery Officer, Central Range - 1, Patna. .... .... Respondent/s ====================================================== Appearance : (In CWJC No.15681 of 2014) For the Petitioner/s : Mr. Abhinav Srivastava For the Respondent/s : Mr. Archana Sinha @ Archana Shahi Mr. Suman Kr. Mishra (In CWJC No.15732 of 2014) For the Petitioner/s : Mr. Abhinav Srivastava For the Respondent/s : Mr. Archana Sinha @ Archana Shahi Mr. Suman Kr. Mishra (In CWJC No.15733 of 2014) Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 2 For the Petitioner/s : Mr. Abhinav Srivastava For the Respondent/s : Mr. Archana Sinha @ Archana Shahi Mr. Suman Kr. Mishra ====================================================== CORAM: HONOURABLE MR. JUSTICE RAMESH KUMAR DATTA and HONOURABLE DR. JUSTICE RAVI RANJAN ORAL ORDER (Per: HONOURABLE MR. JUSTICE RAMESH KUMAR DATTA) 5 05-12-2014 Heard learned counsel for the petitioners and learned counsel for the respondent Income Tax Department. The petitioners are aggrieved by three separate orders dated 30.5.2014 and subsequent proclamation of sale dated 10.8.2014 passed by the Tax Recovery Officer, Central Range-I, Patna, by which he has rejected their representations. This is the second round of litigations by the petitioners before this Court. Earlier, the petitioners had filed three writ petitions challenging the proclamation of sale made earlier by the Tax Recovery Officer with respect to certain flats which are claimed to be belonging to them but which the Tax Recovery Officer was claiming as being the properties of Tripurari Mohan Prasad, assessee before the Income Tax Department and for recovery of his arrears of tax the proclamation of sale had been made. The writ petitions being C.W.J.C. Nos.5705/2014, 5713/2014 and 5851/2014 respectively were disposed of by a common order dated 16.5.2014 holding that with the passage of time the cause of action in the writ petitions does not survive and Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 3 it was clarified that the respondent-Department would be at liberty to proceed against the petitioners in accordance with law. It was further clarified that in the event the petitioners intended to produce materials in respect of source of their income, they might do so within fifteen days from the date of the order. It is not in dispute that all the three petitioners produced their documents and materials before the Tax Recovery Officer, upon which the Tax Recovery Officer has passed three separate impugned orders dated 30.5.2014 and has come to the conclusion that as per the direction of this Court the onus was on the concerned petitioners to establish the source of income to purchase the impugned property which was purchased in the year 1992, giving reasons that in case of the petitioner Sanjay Kumar he was minor at that time, the impugned property of Veena Prasad was neither disclosed in the return of income tax of her father or father-in-law, and in case of the petitioner Sushil Kumar the property was not disclosed in the settlement application filed by him in the year 1996; and he came to the conclusion that in the said circumstances, the impugned property has not been acquired by the concerned petitioners or even by their father or father-in- law as claimed and they did not have ostensive source of income and not disclosed the same in the return of income tax. Therefore, Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 4 the Department intended to proceed against for recovery as per the direction of this Court in accordance with law. Subsequently, the proclamation of sale dated 10.8.2014 was issued. Learned counsel for the petitioners submits that the orders in question do not disclose any application of mind by the Tax Recovery Officer as he has not dealt with the documents and materials that have been produced by these petitioners and as to how those documents do not show that the property was purchased out of the income as per those documents and materials. It is further submitted that even if the finding of the Tax Recovery Officer on the question of not being able to establish ostensive source of income is to be accepted it could not lead to the conclusion of the said property as belonging to the assessee unless further materials could connect those properties with Tripurari Mohan Prasad and the finding therefore is perverse. Learned counsel for the petitioners further submits that as per the explanation to Section 222 of the Income Tax Act only the relations mentioned therein, namely, spouse, minor child or son’s wife or son’s minor child would be the relations, in whose case if the property has been transferred directly or indirectly, it would be open to the Tax Recovery Officer to proceed against and not in case of other relations like brother or brother’s wife as in the Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 5 present matter. Learned counsel for the respondent Income Tax Department, on the other hand, submits that the Tax Recovery Officer has fully exercised his mind to the materials placed before him and has passed a reasoned order. It is further submitted that if at all the petitioners are aggrieved by the order of the Tax Recovery Officer, they had alternative statutory remedy of appeal before the Commissioner, Income Tax provided under Rule 86 of IInd Schedule to the Income Tax Act which they have not exercised and have directly approached this Court. It is also submitted that since the petitioners had not filed any objection before the Tax Recovery Officer, hence, there was no occasion for the Tax Recovery Officer to act in terms of the provisions of Clause 4 of Schedule II Rule 11 thereof and rendering a finding in accordance with the said provision. In support of the same, learned counsel for the respondents has relied upon various decisions which, in view of the order that we intend to pass, may not be relevant for us to consider. So far as the reliance placed by learned counsel for the petitioners on the Explanation to Section 222 of the Income Tax is Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 6 concerned, in our view, the same refers to a transfer by the assessee directly or indirectly of any movable or immovable property to a spouse, minor child, son’s wife or son’s minor child, against which the Tax Recovery Officer may proceed, whereas the present matter does not relate to any transfer of property by the assessee in question, rather it is an alleged purchase by the assessee in the names of close relations, like brothers and brothers’ wife. We are further of the view that once the Tax Recovery Officer intends to proceed in terms of Section 222 read with the relevant Rules of IInd Schedule, the same would come into operation and rigors of those Rules would apply to the materials in hand before him. It is true that normally a person, whose property is sought to be attached and sold by the Tax Recovery Officer, is required to file an objection which was not done in the present matter, rather when the petitioners learnt about the proclamation of sale on the earlier occasion, they have approached this Court, but the fact remains that this Court in the earlier round of litigation had given liberty to the Tax Recovery Officer to proceed in the matter against the petitioners in accordance with law and had also clarified that in the event the petitioners intend to produce materials in respect of source of their income, they may do so Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 7 within 15 days from the date of the order. In the said circumstances, it is not open to the petitioners or the respondents to say that any other provision, except Rule 11 will not come to play. So far as the action of Tax Recovery Officer in this matter regarding investigation of such objection/claim/representation of the petitioners is concerned, we are, thus, clearly of the view that the Tax Recovery Officer is required to proceed in the matter in terms of Schedule-II laid down in the Income Tax Act and Rule 11 would clearly apply. In such circumstances, the liberty was granted by this Court to the petitioners to file objection or claim before the Tax Recovery Officer which had to be investigated in the manner laid down under Rule 11 of the Income Tax. So far as the impugned orders dated 30.5.2014 are concerned, evidently they suffer from a clear lack of application of mind, as none of the materials produced before the Tax Recovery Officer has been dealt with in the said order nor anything is stated therein which could show that the Tax Recovery Officer after application of his mind has arrived at a final conclusion. Moreover, we do not find that any attempt has been made by the Tax Recovery Officer to come to the further conclusion that the properties in question were not acquired by the petitioners or even Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 8 their fathers or father-in-laws as they did not have ostensive source of income, rather the impugned properties were purchased by the assessee in the names of his two brothers and brothers’ wife. For the said reasons, we hold that there has been failure on the part of the Tax Recovery Officer to exercise his jurisdiction in accordance with law as required not only by the provisions of the Act and Schedule but also the liberty granted by this Court on the earlier occasion by order dated 16.5.2014. Hence, the three separate impugned orders dated 30.5.2014 are quashed and the matter is remanded to the Tax Recovery Officer to decide the same again in accordance with the provisions of the Income Tax Act read with Schedule-II therein. By order dated 11.9.2014, this Court had passed interim orders in all the three cases separately. This Court had directed that the auction which was to be held on the next date shall proceed as scheduled but pending the petition, the sale will not be finalized without the permission of the Court. It is informed by Ms. Archana Sinha, learned counsel for the respondent- Income Tax Department that the auction-sale has already taken place but has not yet been finalized from the date of the interim order. It is made clear that the same would not be finalized until a fresh Patna High Court CWJC No.15681 of 2014 (5) dt.05-12-2014 9 decision is taken by the Tax Recovery Officer and for a further period of 30 days thereafter. The writ applications are, accordingly, allowed in terms of the above directions and observations. V.P.Sinha/- (Ramesh Kumar Datta, J) (Dr. Ravi Ranjan, J) U "