Calcutta High Court
Sajjan Kumar Kayan vs Tax Recovery Officer, Xxxi And Ors. on 13 April, 1989
Equivalent citations: (1990)1CALLT43(HC)
JUDGMENT Monoranjan Mallick, J.
1. The petitioner who is one of the trustees of the Trust Estate of Kayan Trust has filed this writ petition challenging the sale of the trust properties by auction by the Respondent Tax Recovery Officer in connection with the certificate Case Nos. 148 to 173/TC/81-82 and others for which a purported notice has been published in the "Statesman", dated 9.2.1987 and praying for prohibiting the respondents from proceeding further with the said certificate cases and for cancelling, rescinding and setting aside the order purporting to sell by auction the premises No. 103, Park Street and 156, Maharaja Nanda Kumar Road as published in the Statesman, dated 9.2.1987 or otherwise and for some consequential relief.
2. Bhagabati Prasad Banerjee, J. by the interim order directed, the auction sale to be held on the date fixed but only restrained the completion of the said sale till the disposal of this writ petition. Pursuant to the said order of B. P. Banerjee, J. the above two properties have been put to public auction and the same has been purchased in auction by Ravi Auto Ltd. who was a highest bidder and Ravi Auto Ltd. has thereafter been added as Added Respondent by the learned Judge.
3. The writ petitioner has challenged in the writ petition the above sale on the following grounds :
(a) the purported action of the respondents in not considering the petitioner's application to adjourn and/or postpone the sale published in the Statesman, dated 9.2.1987 is illegal and in no proper exercise of discretion as required under the provisions of Schedule II to the Income Tax Act,
(b) the respondents without giving the petitioner an opportunity to inspect the records arbitrarily, mala fide and illegally imposed a huge tax liability;
(c) the Respondents without giving any opportunity to the petitioner to substantiate the petitioner's case illegally and mala fide refused to grant any stay as prayed for in the application which is annexure 'F' to this petition,
(d) the respondents without following the provisions as laid down in the Schedule II of the Income Tax Act for recovery of tax acted capriciously and in contrary with the procedure as laid down,
(e) the purported action of the respondents violates Article 300A of the Constitution of India,
(f) the purported action of the respondents violates the principles of natural justice to the petitioner,
(g) the purported action of the respondents in not adjourning and postponing the sale as published in the Statesman, dated 9.2.1987 violates the petitioner's fundamental rights guaranteed under Article 14 of the Constitution of India,
(h) the respondent No. 1 although has been empowers to adjourn and/or stop the sale under Rule 15 of the Schedule II of the Income Tax Act, 1961 illegally and mala fide and without any reason failed to exercise his discretion in adjourning the sale as published in the Statesman, dated 9.2.1987.
4. In the submissions made before this Court, the petitioner has also taken the further plea that the trust property being a charitable trust is not liable either for Income Tax or for Wealth Tax and the Income Tax as well as Wealth Tax assessments for recovery of which the above certificate cases have been filed are all illegal.
5. The writ petition has been opposed by the respondent Nos. 1 to 4 by filing an affidavit-in-opposition jointly. The added respondent who has however, not filed any separate affidavit-in-opposition has also contested the writ petition by making oral submissions.
6. The original respondents as well as the added respondent have urged that the writ petition is not maintainable, that notices have been duly served and the Certificate proceeding are in accordance with law that neither the petitioner nor any other trustees participated in the Certificate proceeding even though served with notices, that whether the notices have been served or not is a question of fact and if the records would show that the notices were duly served, this writ court cannot enter into the disputed question as whether actually the service was effected as alleged by the respondents or not. It is also contended that there is no provision to adjourn the sale as prayed for by the writ petition before the Tax Recovery Officer and that under the provision of Schedule II of the Income Tax Act after any auction sale is held the assessee has got the right to apply for setting aside the sale on the ground of non-service notice and also other grounds and the Tax Recovery Officer by refusing to adjourn the sale when the writ petitioner appeared in response to the advertisement in the "Statesman" had not committed and illegality. It is also contended that the trust property of the Trust Estate in question is private trust, that the Income Tax as well as Wealth Tax are assessable on the income of the said Trust Estate, that the present Certificate proceedings are for the Wealth Tax dues including interest together with the penalty imposed thereon and that the trustee made representation before the concerned authorities praying for exemption of the penalty which has been refused and that the assessment orders have become conclusive and final and cannot be challenged by the writ petitioner in this writ petition while challenging, the certificate proceeding. It is also urged that the petitioner is one of the trustees, that at the instance of one of the trustees only when other trustees are not interested the present writ petition praying for quashing the sale cannot be entertained.
7. The grievance of the writ petitioner is that the petitioner's prayer for adjournment of sale was not acceded to illegally and the assessee's prayer for adjournment should have been considered and the Tax Recovery Officer should not have proceeded with the sale when the petitioner complained before him that up notices of the Certificate cases were duly served upon the trustees of the trust estate and the petitioner was not given proper opportunity to substantiate his case. In my view when sale date is fixed there is no obligation for the Tax Recovery Officer to adjourn the sale as there is no such provision in Schedule II of the Income Tax Act, 1961 for the sale being adjourned at the state when the same has been fixed by the Tax Recovery Officer after complying with all formalities. The petitioner, however, complains that no notices were served upon the Trustees and therefore no formalities were complied with. But if a Tax Recovery Officer put the property to auction sale without serving notices on the assessee or with material irregularity in publishing or conducting the sale the assessee can under Rule 61 of the Schedule II of the Income Tax Act apply to set aside such sale.. But if the Tax Recovery Officer is of the view that he has complied with the provisions of Schedule II and has committed no irregularity there is no obligation for him to adjourn the sale. The assessee has still the right to set aside the sale under Rule 61. However, under the order of Bhagabati Prasad Banerjee, J. sale has taken place and the Added Respondent Ravi Auto Ltd. has purchased the properties in public auction but the sale has not been completed in terms of the order of Bhagabati Prasad Banerjee, J.
8. The writ petitioner has the right to apply for setting aside such sale and if he has already applied for it, the Tax Recovery Officer would decide it in accordance with law. Even if the Tax Recovery Officer refuses to set aside the sale the petitioner can file appeal against such order. So the petitioner may still have the legal remedy to set aside the sale. But I am of the view that the sale cannot be set aside only on the ground that the same has been held ignoring the petitioner's prayer for adjourning the sale. As a matter of fact, the petitioner moved this court for stay but the learned Judge directed sale to be held on public auction as advertised and has only stayed the Tax Recovery Officer to complete the sale. So the first contention fails. The second contention of the petitioner is non-service of notices. It is urged on behalf of the respondents that the Respondents have produced the relevant records to show that the notices as required to be served under Schedule II were duly served in the office of the Trust Estate, that some of the notices were also sent to 40, Strand Road and the petitioner refused the notice sent by registered post and thereafter the notice was served by affixation and the report of such service of notice by affixation is in the file.
9. The Respondents have also urged that whether the notices were served or not, is a question of fact and that can only be decided by taking evidence and for that the provision is contained in Rule 61 of the Schedule II of the Income Tax Act of 1961 and the writ court cannot enter into such disputed question. On behalf of the Respondents the Supreme Court decision of 82, ITR (SC) page 888 (CIT West Bengal v. Ramendra Nath Ghosh) and 121 ITR 288 (Rajasthan) Damodhar Lal Kabra v. ITO and others have been cited in support of the same.
10. On perusing the record and on hearing the submissions made by both the parties, I am of the view that the Respondents have produced sufficient materials before the Court regarding the service of various notices on the Trustees of the Trust Estate and also on the petitioner who is one of the trustees. The validity of such notices cannot be gone into by this writ Court. That is a matter to be decided at the appropriate proceeding for setting aside the sale which right the petitioner has in terms of Rule 61 of the Schedule II of the Income Tax Act. I would, therefore, refrain from entering into the disputed questions as to whether the proper notices to proper persons and in their proper addresses have been served or not, because it is now well settled that the writ court cannot enter into disputed question of fact, more so when the writ petitioner has alternative remedy to agitate the point in the application for setting aside the sale.
11. Even though in the writ petition, no specific plea taken that the trust estate in question was a public charitable trust and was not liable for income tax and wealth tax and the whole assessment of the tax was illegal and invalid, such a question has been sought to be made at the time of the hearing.
12. On behalf of the petitioner it is urged that the Division Bench of this Court has treated the R. K. Kayan Trust Estate as a public trust and has directed the Revenue to exempt 20% of the income from the income tax and that there is nothing to show as to whether the said order has been complied with and it is necessary that the petitioner be given opportunity to re-open the whole matter of assessment and for that the sale is required to be set aside so that he can urge all the relevant points in connection with the assessment orders passed.
13. I have carefully perused the judgment of D. K. Sen and S. C. Sen, JJ. in Income Tax Reference No. 269 of 1982, Commissioner of Income Tax W.B.I., Calcutta v. Estate of R. D. Kayal Trust. That judgment dated 21st August 1984 did not hold the trust to be a public trust. The Division Bench approved the Tribunal's order granting 20% exemption of the income of the Trust Estate under Section 431 of the Income Tax Act even though the Revenue challenged that exemption on the ground that it was a private trust. Therefore, this decision does not declare the R. K. Kayal Trust Estate a public trust to be wholly exempt from income tax.
14. On behalf of the Respondents, it is contended that the Certificate cases in question have been initiated for recovery of the Wealth Tax dues' and not income tax dues and induing interest on arrears and penalty imposed, that the trustees did not raise objection to the said assessment and only applied for exemption from penalty but that was refused, that at the Certificate proceeding the assessee has no right to challenge the assessment which has become final and Certificate cases were filed after the assessee failed to pay the said assessed amount inspite of notice and that under the Wealth Tax Act there is no such provision of even partial exemption of the tax as is found in the Income Tax and the writ petitioner is not entitled to re-open the matter of assessment in Certificate proceedings and cannot challenge such proceedings on the ground that the assessment was not legal or proper.
15. When there is no satisfactory material to show that the trust estate in question is a public trust and when it has been held by the Division Bench to be a private Trust, then it is not exempt from Wealth Tax under Section 5(i) of the Wealth Tax Act. The Certificate proceedings have been initnated by the Tax Recovery Officer for recovery of Rs. 20,81,870 for non-payment of Wealth Tax including interest on arrears and penalty for the assessment years 1965-66 to 1985-86. There is nothing to show that any appeal was filed against the said assessment orders. So the contention of the Respondents that the assessments have become final has to be accepted as correct. The Respondents have also contended that the assessee filed writ petition against such assessment but the said writ petition has been dismissed. The petitioner is unable to challenge this contention. It is also contended that under Rule 2 of the Schedule II of Income Tax Act the assessee was directed to pay the amount but it did not comply with that notice and that thereafter all the statutory notices were served on the assessee in the Certificate proceedings and the properties in question have been put to sale and the petitioner who is one of the trustees is not entitled to challenge the sale at this stage challenging the assessment which has already been made final and conclusive. My attention has been drawn to Section 224(1) of the Income Tax Act 1961 where it has been laid down that it shall not be open to the assessee to challenge the assessment before the Tax Recovery Officer and correctness of the assessment cannot be challenged on any ground.
16. I am of the view when the petitioner cannot challenge the assessment before the Tax Recovery Officer he cannot file any writ petition praying for setting aside the auction sale held by the Tax Recovery Officer challenging the validity of the assessment.
17. In the result, none of the contentions raised by the petitioner is sustainable. The writ petition is dismissed. All interim orders are vacated.
18. There is no order as to costs.
19. The learned Lawyer appearing for the writ petitioner prays for stay of operation of this judgment and order. Such prayer is allowed. Let the operation of this judgment and order be stayed for 3 weeks from date.