Period of limitation under Rule 68B for sale of attached immovable property-SC admits SLP

Period of limitation under Rule 68B for sale of attached immovable property-Supreme Court admits SLP due to contrary view of High Courts

ABCAUS Case Law Citation:
ABCAUS 3316 (2020) (06) SC

Important case law relied upon by the parties:
M.U. Joshi Vs. Tax Recovery Officer & Ors.
Noorudin Vs. Tax Recovery Officer
Rajendran Vs. Tax Recovery Officer
Rajiv Yashwant Bhale Vs. Pr. CIT [2018] 401 ITR 408 (Bom)
Sanjay Khetan Vs. CIT [2004] 266 ITR 453

The Hon’ble Supreme Court have admitted a Special Leave Petition (SLP) of the Income Tax Department against the judgment of the High Court on the issue of limitation period under Rule 68B of the Second Schedule to the Income Tax Act,1961 (“the Act”).

The Hon’ble Supreme Court noted that the impugned judgment was passed placing reliance on the view taken by the High Court, whereas the Department had submitted that a contra view was taken by the High Court of Allahabad.

Period of limitation under Rule 68B for sale of attached immovable property

In the instant case, the respondent had by way of filing a Writ Petition in the Hon’ble High Court, challenged a sale proclamation issued by the Tax Recovery Officer, and a notice issued by the Income Tax Department advertising public auction for sale of various immovable properties in a local newspaper.

The grandparents of the said respondent (Petitioner before the High Court) were the original assesses who had died intestate. The Income Tax Department had raised sizable tax dues of the said assesses in relation to several assessment years.

The said assesses had left behind several immovable properties, some of them were tenanted. Most of the properties were placed under attachment by the Income Tax Department for unpaid dues. The Income Tax Department received the rent   of the tenanted properties after the same were placed under   attachment

The Income Tax Department, initiated steps for auctioning the immovable properties for recovery of income tax dues. Most of the heirs including the respondent had given their consent for auctioning the said   immovable properties.

Subsequently, the Income Tax Department issued the and published the auction notice in the daily newspaper inviting bidders to participate in the auction of the said immovable properties. At that stage, the respondent, challenged the impugned action of the Department inter alia on the ground that the sale proclamation was hit by period of limitation prescribed in said Rule 68B.

Rule 68B was inserted by the Finance Act, 1992 w.e.f. 1.6.1992. As per sub-rule (1) of Rule 68B, no sale   of immovable property would be made after the expiry of three years from the end of the financial  year in which the order giving rise to a demand of tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive.

the legislature provided for the first time w.e.f. 1.6.1992 a time   limit of a period of three years for sale of attached immovable property starting from the end of financial year in which the order giving rise to a demand of tax, interest etc has become conclusive.  Sub-rule (4) of Rule 68B provides for the   consequences of the immovable property not being sold within such time. As per this sub-rule in such a situation, the   attachment order in relation to the said property would be deemed to have been vacated on the expiry of the time limit   specified.    

The Hon’ble High Court opined that in the instant case, Rule   68B applied strongly as the attachment of the said immovable   properties was ordered way back in the year 1997.  Whereas the sale proclamation was made in 2019 which was hit by the   period of limitation prescribed under such Rule.  By virtue of sub-rule (4) of Rule 68B therefore, upon completion of the period of limitation, the attachment would be deemed to have been vacated. The auction sale, therefore, could not have been carried out.

The Hon’ble High Court relied upon judgments of Madras High Court and the judgment of its Division Bench.

The Revenue relied upon the judgment of the Allahabad High Court which held that held that Rule 68B inserted w.e.f  1.6.1992 was not retrospective and not applicable in respect of the certificate issued in March 1992 in regard to earlier arrears. However, the Hon’ble High Court opined that the crux of the   judgment was that the Court was not inclined to exercise   discretionary writ jurisdiction in favour of the petitioner since in the opinion of the Court, the petitioner failed to show equity in his favour.

In view of the above, the Hon’ble High Court had quashed the sale proclamation and attachment over the immovable properties was also set aside.

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