Bombay High Court
Rajiv Yashwant Bhale vs The Principal Commissioner Of ... on 5 June, 2017
Bench: S.C. Dharmadhikari
Judgment-WP.3366.2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 3366 OF 2017
WITH
CIVIL APPLICATION NO. 849 OF 2017
Rajiv Yashwant Bhale }
Survey No. 166/1+2+3, }
Bhale Residency, Bhale Mall, }
Near Pinnac, Gangotri, }
Aundh, Pune - 411 007 } Petitioner
versus
1. The Principal }
Commissioner of Income }
Tax, PMT Commercial }
Building, A-Wing, 4 th floor,
}
Shankar Sheth Road, }
Swargate, Pune - 411 037 }
}
2. The Tax Recovery }
Officer 1, Income Tax }
Department, PMT, PMT }
Commercial Building, }
C-Wing, 4 th floor, Shankar }
Sheth Road, Swargate, }
Pune 411 037 }
}
3. The Tax Recovery Officer }
2, Income Tax Department, }
PMT, PMT Commercial }
th
Building, C-Wing, 4 floor, }
Shankar Sheth Road, }
Swargate, Pune - 411 037 }
}
4. The Principal Chief }
Commissioner of Income }
Tax, Pune, Ayakar Bhavan }
12, Sadhu Vaswani Road, }
Pune - 411 001 } Respondents
Mr. Porus Kaka-Senior Advocate with
Page 1 of 66
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Mr.Manish Kanth and Ms. Chandana
Salgaonkar for the petitioner.
Mr. Charanjeet Chanderpal with ms.
Namita Shirke for respondent no. 1.
Mr. V. Sridharan-Senior Advocate with
Mr. Saket Mone, Mr. S. Sriram,
Ms.Chandni Patel, Mr. Vishesh Kalra and
Mr. Subit Chakrabarti i/b. M/s. Vidhi
Partners for the applicant in
CAW/849/2017.
CORAM :- S. C. DHARMADHIKARI &
PRAKASH. D. NAIK, JJ.
Reserved on 24 th April, 2017
Pronounced on 5 th June, 2017
JUDGMENT :- (Per S. C. Dharmadhikari, J.)
1. Rule. Respondents waive service. By consent, Rule is made
returnable forthwith.
2. By this writ petition under Article 226 of the Constitution of
India, the petitioner is seeking to quash and set aside the sale of a
residential bungalow, which was attached. The relief in that
behalf, as set out in prayer clause (b), reads as under:-
"b) that this Hon'ble Court be pleased to issue a Writ of
Certiorari, or any Writ order or direction in the nature of
Certiorari, and after going into the legality, validity and
propriety of the sale of the residential bungalow by
attachment letters dated 18 February 2013 and 28 April
2016 issued by the Respondent No 2, as also the orders
dated 16 January, 2017 and 28th February, 2017 passed
by the Respondent No 1; as also letters dated 22 July
2013, 1 November 2016 and 24 January, 2017 issued by
the Respondent No. 2 and 3 be pleased to quash and set
aside the said sale, orders and letters;"
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3. The petitioner, an Indian citizen, has impleaded to this writ
petition the Principal Commissioner of Income Tax and two tax
recovery officers so also the Principal Chief Commissioner of
Income Tax as respondents. The petitioner says that he is about
60 years of age and the principal business, in which he was
engaged, was automobile dealership. However, on account of
some erroneous commercial decisions, he suffered losses leading
to the closure of his automobile dealership business. He had
borrowed huge sums from banks and therefore, his properties
were attached. In an attempt to restructure the financial liability,
the petitioner started a business of developing properties. A
group was formed, which comprised of several companies and
joint venture agreements with third parties were executed in
order to bring in funds for development of the properties in Pune
and Pimpri Chinchwad area. The petitioner was involved in the
dealings in some litigated properties. The petitioner formed two
companies, namely, Yashraj Builders Private Limited and
Pratham Builders and Developers Private Limited, of which, the
petitioner is a director. The petitioner acquired certain rights in a
land (Survey Nos. 210 and 211 at village Wakad, Taluka Mulshi
in Pune District). After setting out the history of acquisition of
these rights, the petitioner states that he was involved in some
litigation regarding this Wakad land. Ultimately, this land was
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developed by the petitioner as a developer, after taking huge loan
and borrowing sums from financial institutions. He was unable to
repay the same and some recoveries were effected by the banks
and lenders.
4. As far as the Income Tax Act, 1961 (hereinafter referred to
as "the IT Act") is concerned, the proceedings, according to the
petitioner, commenced with a search carried out in the
petitioner's premises under section 132 of the IT Act on 11 th
January, 2008. Some papers and other documents were seized
by the Income Tax Officer. Thereafter, a notice was issued on 10 th
October, 2008 under section 142(1) of the IT Act. Then, a notice
was issued on 10th October, 2008 under section 142(1) of the IT
Act. The petitioner states that he filed an application before the
Settlement Commission on 30th July, 2010 invoking section 245-
C of the IT Act for the assessment years 2002-03 to 2008-09, in
which, he disclosed additional income. The petitioner gave an
explanation for his inability to repay the bank loans and other
liabilities. The petitioner, during the search, had declared an
additional income of Rs.4 crores as income earned by the
concerned company (Pratham Builders and Developers Private
Limited) to overcome possible error/mistake in not declaring the
income correctly for the past years. The petitioner relies upon
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the declaration. Then, he states that after receipt of notice under
section 153-A of the IT Act, he filed his returns and furnished his
computation. He furnished his computation along with the
returns was furnished by stating the net loss of Rs.3 crores from
the Wakad project. The petitioner states that during the course of
assessment proceedings, the assessing officer, after verifying
large number of transactions and complexity attached thereto,
came to a conclusion that the case was required to be given for
special audit under section 142(2A) of the IT Act. The special
auditor was appointed and the audit process was completed on
10th June, 2010.
5. Then, the petitioner refers to the application filed before the
Settlement Commission by him and the company Pratham
Builders and Developers Private Limited. There was a common
order passed by the Settlement Commission on 1st December,
2011. The Settlement Commission assessed the taxable income
at Rs.20.82 crores for the petitioner and the taxable income at
Rs.5.70 crores for the Pratham Builders and Developers Private
Limited. Annexure 'B' is a copy of the order passed by the
Settlement Commission. Then, the assessing officer worked out
the tax dues at Rs.11.98 crores along with interest for various
years under sections 234-A, 234-B and 234-C of the IT Act
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amounting to Rs.5.10 crores. The chart of year-wise working is
annexed as Annexure 'C' to the petition.
6. The petitioner then refers to the relief granted by the
Settlement Commission in its order and submits that the Deputy
Commissioner of Income Tax, Circle - 1(2), Pune passed an order
under section 153-A read with section 245-D(6) of the IT Act
giving effect to the order of the Settlement Commission. This
order of the Deputy Commissioner is dated 16 th January, 2012.
Annexure 'D' is a copy of the same. After referring to the details
of this order, the petitioner submits that there are assessment
orders passed for the years 2003-04 to 2008-09. There were
separate penalty orders also. The details of the same are
provided in para 16. The petitioner arranged and made payment
of Rs.3.55 crores against total amount of Rs.11.98 crores. The
final unpaid amount is worked out to Rs.8.43 crores as per
Annexure 'F'. Then, the petitioner refers to Annexure 'G', which is
a summary of various certificates of attachment as the petitioner
could not clear all dues. Then, there is a notice of demand and
details of the same are referred to in para 19 and a copy of the
same is annexed as Annexure 'H'. A reply thereto, given by the
petitioner is at Annexure 'I'. The residential bungalow of the
petitioner was attached by order dated 28th February, 2013
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Annexure 'J'. Thereafter, the second respondent wrote to the
petitioner on 22nd July, 2013 referring to the attachment order
dated 18th February, 2013 that the second respondent proposes
to sell the residential bungalow under Rule 37 and 52(1) of the
Second Schedule of the IT Act and a copy of this letter dated 22nd
July, 2013 is annexed as Annexure 'K'.
7. Then, the petitioner submits that he cooperated with the
Department, including disclosing a sale of the property at
Kusgaon. Thus, the petitioner appraised the Department of all
the details. Since the petitioner is in the business of development
of properties, including litigated properties, he provided details of
the agreements executed in that behalf. The petitioner states
that despite his cooperation and assistance, the Income Tax
Department attached several properties, the total value of which
far exceeds the demand raised on the petitioner. The valuation
has increased due to change in the D. C. Regulations in Pune with
effect from 5th January, 2017 granting greater FSI due to green
belt. The details of the attached properties are provided in para
22 at pages 14 and 15 of the paper book. The further details are
also provided in para 23 at page 15. Then, there is a reference
made to the attachment of the bank accounts of the petitioner and
his family members, thereby adversely affecting his business.
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Then, the petitioner, in para 25, refers to a hearing before the
Settlement Commission, held on 27th May, 2016. The request of
the Revenue, made at that time was for withdrawal of immunity.
However, the petitioner brought to the notice of the Commission
that the Income Tax Department has not given credit to the
petitioner for large amounts paid by him. On 26th June, 2016, the
Income Tax Department accepted the payments made by the
petitioner and gave the petitioner a figure of Rs.11,19,13,519/-
that is required to be paid to clear the total outstanding dues
against the Settlement Commission order. However, this figure
was changed by the assessing officer on the basis of his working of
the interest and interest on penalty. He computed the total
outstanding of Rs.16,51,55,214/-. Thus, the Department went on
changing and modifying its figure. Due to the revision made
repeatedly, the petitioner complains that he was unable to
procure a potential lender to finance the tax liability. Then, the
petitioner refers to the next date of hearing before the Settlement
Commission.
8. In the meanwhile, the petitioner refers to a communication
from him dated 20th June, 2016 Annexure 'N'. The petitioner
then refers to some offers made by him during the course of the
proceedings, but complains that despite the first attachment
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order, the third respondent issued another one dated 28 th April,
2016 attaching the residential bungalow. The Department also
illegally attached Plot Nos. G1 and G2, which does not form part
of the residential bungalow and is part of one Surobhee Enclave.
Thus, the attachment order, copy of which is at Annexure 'O' is
faulted by the petitioner and he then produces the third
respondent's letter dated 26th October, 2016 revising and
rectifying the demand from Rs.38,39,00,000/- to
Rs.37,08,02,437/-. Thus, the petitioner states that the interest
liability calculation is exorbitant and illegal and against which,
the petitioner has filed appeals before the appropriate authorities,
which are under consideration. These demands for assessment
years 2010-11 to 2012-13 have not attained finality. Then, the
petitioner relies upon a letter dated 1st November, 2016 of the
third respondent informing him that he was proposing to sell the
residential bungalow for failure to pay the amount as per the
Settlement Commission's order and called upon the petitioner to
handover copy of the property tax receipt and electricity bill.
The petitioner was called upon to handover possession of the
residential bungalow.
9. Then, the petitioner, in para 31, states that the letter dated
1st November, 2016 Annexure 'Q' was issued more than three
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years from the end of the financial year in which the order giving
rise for demand of any tax, interest etc. for the recovery of which
the immovable property has been attached, has become
conclusive. Since this order is beyond this period, therefore, it is
not legally valid and enforceable. Consequently, the petitioner
filed an appeal challenging the communication at Annexure 'O'.
This appeal was filed before the first respondent under Rule
86(1) of the Second Schedule of the IT Act. That appeal came to
be rejected on 16th January, 2017. Then, the petitioner refers to
a letter dated 24th January, 2017 of the second respondent,
calling upon him to vacate the residential bungalow. In that
letter, reliance was placed on the impugned order dated 16 th
January, 2017. Annexure 'T' is a copy of this letter dated 24 th
January, 2017. Against this communication, the petitioner filed
an appeal to the Chief Commissioner of Income Tax on 3 rd
February, 2017. The contention of the petitioner was that the tax
recovery officer ought to have appreciated that since the order of
the Settlement Commission was not conclusive, the entire action
proposed was premature and that is why this communication be
cancelled. By a letter dated 28th February, 2017 received by the
petitioner on 9th March, 2017, the petitioner's application was
rejected.
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10. Then, there was an advertisement inserted in the Daily
"Sakal" dated 20th February, 2017 advertising the auction of the
residential bungalow on 16, 17 and 21 st March, 2017. The
petitioner, therefore, challenges all these orders and
communications on the grounds set out in the writ petition.
11. We must note the development post filing of this writ
petition. An affidavit in reply has been filed by Mr. Shiv Dayal
Srivastava, Principal Commissioner of Income Tax-the first
respondent and after setting out the full chronology of events, the
said affidavit supports the entire action, including the orders
impugned before us.
12. Essentially, the contention appears to be that the final and
conclusive demand is intimated vide letter dated 30 th January,
2017. This demand is inclusive of the effect of the petitioner's
rectification application. Even the interest has been computed in
accordance with law. Thus, the previous letters are superseded
by this letter dated 30th January, 2017. This letter, according to
the Revenue, has not been placed on record. It is in these
circumstances that each of the paragraphs have been dealt with
and their contents denied. The petitioner is faulted for not
bringing on record the details of the request made for extension of
time limit by him. It is urged that these requests are made in
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writing. The Revenue submits that there are gross illegalities
committed by the petitioner and which are summarised in this
affidavit. Thus, it is urged that none of the steps, measures and
orders can be said to be contrary to law. On the other hand, it is
urged that the petition is filed by a defaulter. The defaulter has
defaulted in payment of tax despite availing of all the
opportunities to settle the dues. Thus, the settlement route was
chosen by the petitioner himself. However, even the relief, which
was granted by the Settlement Commission, has not been
accepted by the petitioner in letter and spirit. Once, the
recomputed demand also is not satisfied by the petitioner, then,
there was no alternative but to initiate measures to dispose of the
immovable properties. That is how even the legal argument has
been dealt with.
13. To this affidavit in reply dated 5th April, 2017, there is an
affidavit in rejoinder filed by the petitioner. Apart from
reiterating the contents of the petition, additionally, it is
submitted that the language of Rule 68B would enable the
petitioner to raise a challenge to all the proceedings. Once they
are not within the statutory time limit, then, the writ petition
deserves to succeed.
14. There is a civil application being Civil Application No. 849 of
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2017, which is filed by applicant-Deccan Homes Pvt. Ltd. The
applicant says that it has vital interest in the writ petition for the
simple reason that after the residential bungalow was attached
and put up for sale, the applicant, which is a company
incorporated under the provisions of the Companies Act, 1956,
inter alia, engaged in the business of development of
infrastructural facility, participated in the public auction. This
public auction was held by the third respondent to this writ
petition on 21st March, 2017. The third respondent had fixed a
reserve price of Rs.16,29,10,000/- for the property being
auctioned. The applicant placed its bid at Rs.17,01,00,000/-. The
third respondent declared, by a letter dated 22 nd March, 2017 the
applicant to be the highest bidder and directed it to pay 25% of
the price immediately as per Rule 57 of the Second Schedule of
the IT Act. Accordingly, a sum of Rs. 4,25,25,000/- being 25% of
the bid price was deposited by a Demand Draft with the third
respondent. The balance price had to be paid within 15 days from
the date of auction, which the applicant is ready and willing to
comply with. The balance price is to the extent of 75%. However,
the applicant says that the applicant has to be declared the
absolute owner and in that regard, relies upon Rule 63 of the
Second Schedule of the IT Act. Thus, the applicant would suffer
because its rights and contentions are directly affected by the
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present petition and its outcome. It is an interested party and
would suffer substantial injury in the event the writ petition is
allowed without hearing it.
15. This application was supported by an affidavit of the
applicant dated 5th April, 2017 affirmed by its Director
Dr.Avinash Mandke.
16. It is in the light of this application filed, supported by an
affidavit that, we have allowed the applicant to intervene and
oppose the writ petition along with other respondents.
17. Mr. Porus Kaka learned Senior Counsel appearing for the
petitioner submits that the factual background would indicate as
to how the petitioner has been treated by the respondents.
Mr.Kaka raised a preliminary objection to the impleadment of
M/s. Deccan Homes Pvt. Ltd. as party respondent to the writ
petition and relies upon several decisions of the Hon'ble Supreme
Court of India on the satisfaction to be recorded, namely that the
applicant would have to be a necessary party so as to direct its
impleadment as a party respondent. The applicant is not a
necessary party. Apart therefrom and without prejudice, the
applicant has made payment after being aware of the dispute
between the petitioner and the Department. The petitioner has
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objected to the sale in writing. It is in these circumstances that
Mr. Kaka would submit that the prayer for impleadment of the
applicant as party respondent should be rejected.
18. Then, Mr. Kaka would submit that the order of the
Settlement Commission dated 1st December, 2011 is final and
conclusive. In that regard, Mr. Kaka relies upon the language of
that order and section 245-I of the IT Act. He would submit that it
clearly and unambiguously states that the order of the Settlement
is conclusive in respect of income which has been fully and truly
disclosed by the petitioner vide his application before that
commission. Mr. Kaka submits that it is an undisputed matter or
fact that neither the petitioner nor the respondents have
challenged the efficacy and validity of the order of the Settlement
Commission dated 1st December, 2011. Therefore, the said order
of the Settlement Commission has attained finality and remains
conclusive. Further, there is no dispute between the petitioner
and the respondents or even the Settlement Commission that the
settlement order dated 1st December, 2011 has been obtained by
any fraud or misrepresentation which otherwise could have
resulted into the order itself being void.
19. Mr. Kaka submits that Respondent no.1 vide its impugned
order dated 16 January 2017 has erred in holding that Petitioner
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is in continuing default due to its failure to pay the installments of
tax dues. Such conclusion of Respondent no.1 of their being a
continuing default is contrary to the provisions of law and the
judgment of the Hon'ble Supreme Court of India in the case of Brij
Lal v. CIT (supra), as the settlement commission order u/s 245-
D(4) of the Act giving rise to the demand became conclusive on
the date of passing of such order of settlement by the Settlement
Commission. Non payment of the tax dues by the petitioner due
to precarious financial difficulties does not make a valid and
conclusive order of the Settlement Commission passed u/s 245-
D(4) of the Act inconclusive in absence of any fraud or
misrepresentation or without there being any challenge to such
order. Non compliance of the order cannot make the order itself
not a final or conclusive one. A continuing default per se is
different from the finality and conclusiveness of the order itself
and cannot affect the conclusiveness of an order of a judicial
authority.
20. Mr. Kaka submits that In fact, the conduct of the
respondents shows that even on their own interpretation they
have issued demands for payment and attached properties before
the time for payment of installments ended. They have also
charged interest and penalty from the date of the Settlement
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Commission's order irrespective of the installment time granted.
If the order was not conclusive till the installment time was not
over, then, the ITCP - 1 dated 23rd January 2013 and attachment
dated 18th February 2013 could not be done.
21. Mr. Kaka submits that the fact that the interests have been
levied u/s 220 and 245-D(6)(A) of the Act due to non payment of
demand arising out of the conclusive order of settlement itself
shows that such interests/penalty have been levied in
consequence of the order of settlement u/s 245-D(4) of the Act
which till date remains the only conclusive order for the block
assessment years determining total income chargeable under the
Act and the total demand consequent thereto.
22. Mr. Kaka submits that the respondents have also
vehemently argued that since the payment of tax dues has not
been done by the petitioner, the immunity granted by the
Settlement Commission may get withdrawn and therefore the
settlement order dated 1st December 2011 is not conclusive. The
petitioner says that the sale has been against the demand arising
out of the settlement order dated 1st December 2011 which has
become final and not for any additional demand not consequential
to the same settlement order. The attachment and sale is not for
any possible amendment to the order. In any event, even if the
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immunity is withdrawn and gives rise to any new demand in
future, that will be a new order giving rise to a new demand, if
any. The possibility of such new order in future cannot make the
order passed by the Settlement Commission under section 245-
D(4) as inconclusive qua the consequent demands that have
become final. The fact that the Respondents have attached the
residential bungalow against the demand arising out of or in
consequence of the Settlement Commission's order dated 1 st
December 2011 itself shows that such order dated 1 st December
2011 is a conclusive order as far as pending demand including
interest and penalties; and attachments are concerned.
23. Mr. Kaka's next submission is that the sale of the
immovable property is barred by limitation. Rule 68B of
Schedule II of the IT Act as introduced by Finance Act 1992, with
a view to prescribe a time limit of 3 years for sale of the attached
immovable properties, bars any sale after the expiry of 3 years
from the end of financial year in which the order giving rise to a
demand of any tax, interest, fine, penalty for which the
immovable property has been attached, has become conclusive.
The demand comprising of tax, interest, penalty in this case
arises out of the conclusive order of the Settlement Commission
under section 245-D(4) of the Act, dated 1st December, 2011.
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Since the aforesaid order of the Settlement Commission dated 1st
December, 2011 was conclusively passed during the financial
year 2011-12, the period of limitation for any sale of the
immovable property being the residential bungalow for recovery
of any tax dues arising out of such aforementioned order has
already expired, as per provision under Rule 68B(1). The
attachment of the residential bungalow vide the impugned
attachment order dated 18th February, 2013 is for the recovery
of tax dues which relates to/arises out of the order of settlement
dated 1st December, 2011. The impugned attachment order dated
28th April, 2016 attaches the same residential bungalow with
different survey numbers alongside plot G1 and G2 belonging to
Surabhee Enclave. It must be noted and emphasized that the
impugned letter for sale dated 1st November 2016 is for demands
that have become final and conclusive vide the Settlement
Commission's Order dated 1st December 2011 and not other years
pending in appeal and disputed. Therefore, the various
attachments and auction-sale thereupon of the residential
bungalow, including the advertisement for sale dated 20 th
February 2017 are against and/or in relation to demands
including the various interests and penalties arising out of the
only conclusive order of the Settlement Commission under
Section 245-D(4) read with Section 245-I of the Act.
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24. Mr. Kaka submits that the impugned letter dated 01 st
November 2016 for intimation of the sale of the attached
residential bungalow was undisputedly issued after the expiry of
3 years from the end of financial year 2011-12 during which the
final and conclusive order of the Settlement Commission dated
01st December 2011 was passed. Therefore any attachment of the
residential bungalow being the immovable property and its sale
are beyond the powers of the tax recovery officer.
25. Mr. Kaka further submits that Rule 68B of the IT Act makes
it obligatory on the part of the Revenue to complete the sale of the
immovable property attached by it for recovery of any tax,
interest, fine/penalty or any other sum within the prescribed
period. The sale of the immovable property attached for recovery
of any tax, interest, etc., cannot be held after the expiry of the
period of limitation prescribed under Rule 68B of Schedule II of
the IT Act and if the sale is not completed within the prescribed
period, the attachment, if any, levied on the property is liable to
be vacated. In fact, as held by the judgments of the High Court of
Madras and Karnataka, the attachment is deemed to have been
vacated already by operation of Rule 68B(4) of the Second
Schedule of the IT Act after the expiry of the period of limitation
of three years from the date of the order of Settlement
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Commission in facts of this case. Mr. Kaka submits that the
Hon'ble Supreme Court has also held in the case of India House
vs. Kishan N. Lalwani.1 that there is no equity in applying the
period of limitation.
26. Mr. Kaka submits that there was no order passed by the
Settlement Commission on 1st August, 2016 for payment of
Rs.1.25 crores. In any event, the hearing on 1 st August, 2016 was
in relation to the application filed by the Department for
withdrawal of immunity and Settlement Commission, in those
proceedings, orally advised/directed the petitioner to pay Rs.1.25
crores and adjourned such hearing to a further date. Therefore,
even if an order would have been there to pay Rs.1.25 crores in
those proceedings, it cannot have any bearing on finality and
conclusiveness of the final order under section 245-D(4) already
passed by the Settlement Commission which has statutorily
attained finality under section 245-I of the IT Act. Even if any
order is passed by the Settlement Commission finally in those
separate proceedings against Department's application for
withdrawal of immunity, that, by no stretch of imagination, can
alter the conclusiveness of the Settlement Commission's order
dated 1st December, 2011 passed under section 245-D(4) of the IT
1 (2003) 9 SCC 393
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Act and therefore, the period of limitation under Rule 68B of the
Second Schedule of the IT Act has already expired on 31 st March,
2015.
27. Mr. Kaka further submits that no stay or injunction has
been granted by any court and/or authority on the operation of
the order of the Settlement Commission or against any demand
arising in consequence of such order and therefore, no time-
period ought to be excluded under Rule 68B(2) while calculating
the period of limitation. The impugned order against the appeal
filed by the petitioner is in any event filed/issued after the expiry
of three years from the end of financial year during which the
order of Settlement Commission was passed and therefore would
not be relevant for computing such period of limitation.
28. Mr. Kaka submits that the interpretation canvassed by the
respondents on the basis of intimation of demand dated 30 th
January, 2017, wherein the demand has been updated after
adding interest and penalty, is totally fallacious and incorrect. As
per Rule 68B, the period of limitation starts from the end of the
financial year in which the order giving rise to the demand and
interest becomes conclusive. The order giving rise to the demand
became conclusive when the order under section 245-D(4) was
passed i.e. on 1st December, 2011. It is also an admitted position
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that the order of the Settlement Commission was neither
challenged by the petitioner nor by the Income Tax Department
before the High Court. As per section 245-I, every order passed
by the Settlement Commission is conclusive as to the matters
stated therein. The levy of interest under under section 220 and
245-D(6A) of the IT Act is an automatic process. By levy of
statutory interest, a conclusive order does not become
inconclusive till payment of demand arising out of the conclusive
order. The addition of automatic statutory interest under section
220 and 245-D(6A) and/or even penalty under section 221 of the
Act due to delay in payment is also based on and arises from the
same final and conclusive order of the Settlement Commission
dated 1st December, 2011. Even the interest calculation under
section 245-D(6A) which is based on the Tax Department's own
stand is from the date of the Settlement Commission's order dated
1st December, 2011. The interpretation sought to be advanced by
respondent no. 1 that consequential interest and penalty extend
limitation will render Rule 68B of the Second Schedule of the IT
Act otiose and nugatory and ought to be rejected.
29. Mr. Kaka further submits that the sale only for the penalty
levied under section 221 (without prejudice to its being
consequential) would be contrary to law, being wholly
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disproportionate to the demand as per Rule 34 of the Income Tax
Rules. In fact, sub-section (2) of section 221 of the Act itself says
that the penalty shall be cancelled and refunded where as a result
of any final order the amount of tax, with respect to the default in
the payment of which penalty was levied, has been reduced,
thereby statutorily providing that penalty under section 221 is
consequential to the final order levying tax, which in facts of this
case remains the final and conclusive order of the Settlement
Commission dated 1st December, 2011. In addition, Rule 5 of the
Second Schedule of the IT Act clearly provides that interest, cost
and other charges would be consequential and recoverable.
Hence, it is clear that the order of the Settlement Commission
dated 1st December, 2011 is the only starting point of all these
demands.
30. Mr. Kaka complains that after the conclusion of the hearing,
the Income Tax Department/respondents have filed an affidavit
in reply. This is most unjust and unfair. The whole attempt is to
take the petitioner by surprise and by introduction of new
materials so as to prejudice his case.
31. Mr. Kaka, therefore, would submit that the affidavit in reply
be ignored for it runs into more than 250 pages. Without
prejudice to this submission, the petitioner submits that he does
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not admit and rather denies each and every statement made in
the affidavit in reply, which runs counter or contrary to the case
of the petitioner. Therefore, after conclusion of the proceedings,
any attempt to reopen the factual matters should not be
permitted.
32. For the above reasons, Mr. Kaka would submit that the
petition be allowed. Mr. Kaka relies upon the following judgments
in support of his contentions:-
(i) M. U. Joshi vs. Tax Recovery Officer and Ors.,
[2005(6) Bom. C. R. 17]
(ii) Brij Lal and Ors. vs. Commissioner of Income Tax,
[(2010) 328 ITR 447 (SC)]
33. On the other hand, Mr. Chanderpal appearing for the
respondents would rely upon the statements made in the affidavit
in reply. He would submit that these would demonstrate as to
how the petitioner has grossly abused the process of this court.
He has tried to mislead this court by suppression of true and
correct facts. Mr. Chanderpal would submit that there is no merit
in the contentions of Mr. Kaka. He would submit that ample
opportunities were given to the petitioner and he was
accommodated on several occasions. Mr. Chanderpal would rely
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upon Chapter XIX titled as "Settlement of Cases" appearing in the
IT Act. He would submit that from section 245-A to 245-L, it is
apparent that proceedings before the Settlement Commission are
judicial proceedings. The order of the Settlement Commission is
conclusive, but, the Sections prior to section 245-I falling in the
said Chapter, would also have to be taken into consideration. All
the provisions read together and harmoniously would indicate as
to how in the facts and circumstances of the present case, the
Settlement Commission was desirous of obtaining the report
about compliance with its order. Thus, so long as the petitioner
did not comply with the directions of the Settlement Commission,
he would not enjoy the immunity from prosecution. Therefore,
for compliance with the order and directions of the Settlement
Commission, the matter had to be placed before it. In these
circumstances, going by the language of Rule 68B, the time limit
specified therein had not expired. In these circumstances, there
is no merit in any of the contentions of Mr. Kaka. The writ
petition deserves to be dismissed. It is urged that the judgment of
the Division Bench of this court, which is relied upon, is
distinguishable on facts. Hence, the writ petition be dismissed.
34. Mr. Sridharan, learned senior counsel appearing for the
applicant and who sought permission to intervene so as to give
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complete assistance for construction of the legal provisions,
would support Mr. Chanderpal. Additionally, he would submit
that the applicant is the successful bidder and now the purchaser
of the property at a public auction. The applicant was declared as
the highest bidder in the public auction concluded on 22 nd March,
2017. It has since paid full consideration of the auction of
Rs.17.01 crores by 4th April, 2017 well within the time limit of 15
days stipulated by Rule 57 of the Second Schedule to the IT Act.
Hence, there is a direct interest of the applicant which is
involved. Therefore, the applicant should be directed to be
impleaded as a respondent to the writ petition.
35. Then, Mr. Sridharan made some legal submissions.
However, prior thereto, he relied upon the factual position as
emerging from the record of the Settlement Commission. It is
submitted that the Settlement Commission determined the
income of the petitioner for the assessment years 2002-03 to
2008-09. The Settlement Commission granted eight quarterly
installments, which is two years period to the petitioner to pay
the arrears as per its order dated 1st December, 2011. The
penalty otherwise imposable was much more, but the penalty
actually imposed on the petitioner by the Settlement Commission
is on an income of Rs.1,71,54,123/-. Precisely, a immunity was
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granted by the Settlement Commission to the petitioner qua
balance penalty imposable under section 271(1)(c) in its order
dated 1st December, 2011. Inviting our attention to section 245-
H(1) of the IT Act, Mr. Sridharan would submit that it confers
discretion on the Settlement Commission to grant immunity
subject to conditions it may impose. That is how the Settlement
Commission granted partial immunity, but the same is
conditional on meeting the tax demand within the stipulated
time. Such a conditional order (granting immunity from penalty)
cannot be conclusive under section 245-I of the IT Act, if the
conditions imposed by the order of the Settlement Commission
are not fulfilled. Even otherwise, by operation of law, namely,
section 245-H(1)(A), the immunity was to stand withdrawn on
non-compliance with the conditions imposed by the Settlement
Commission. Hence, the order dated 1 st December, 2011 cannot
be conclusive. This would be demonstrated by the fact that the
petitioner applied on or about 4th December, 2013 for grant of
further time. The Revenue applied to the Settlement Commission
for withdrawal of immunity and both these eventualities would
demonstrate as to how the order of the Settlement Commission
was not conclusive. Our attention is also invited to section 221 of
the IT Act and sub-section (1) thereto to submit that it is a
distinct and separate provision from the order of the Settlement
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Commission. All procedural steps were duly followed for
recovery of amount of Rs. 48 lacs. Our attention is also invited to
Rule 8 of the Second Schedule, which provides for adjustment of
surplus proceeds against outstanding arrears of the assessee.
36. Mr. Sridharan would then submit that the decision of the
Division Bench in Joshi's case (supra) is clearly distinguishable
for the default in this case is a continuing one. Mr. Sridharan
elaborated his submissions orally as also in writing thus:-
8.1. Once an order of the Settlement Commission passed
under section 245D(4) of the IT Act, inter alia, granting
partial immunity from imposition of penalty is subject to
certain conditions stipulated therein, the order would
become conclusive under Section 245I of the It Act only, if
the conditions mentioned therein are complied with.
8.2. In other words, if the conditions stipulated for grant
of partial immunity from imposition of penalty in the order
passed under Section 245D (4) of the IT Act are not
complied with, the order does not become "conclusive"
within the meaning of Section 245I. The matter becomes at
large for imposition of penalty, which can also only be done
by the Settlement Commission alone and no other
authority.
8.3 The above is particularly so, for one more important
reason. Under Section 271(1) (c), if penalty is impossible,
it should not be less than 100% of tax sought to be evaded
and not exceeding 300% of tax sought to be evaded. The
quantum of penalty to be imposed after withdrawal
immunity has to be decided by Settlement Commission
alone. Therefore, order of Settlement Commission is not
conclusive within the meaning of Section 245-I in such a
situation. It is then submitted that the language of section
245-D(6) would also indicate as to how it is mandated that
the terms of settlement should, inter alia, include demand
of penalty. Hence, all matters, which would make the
settlement effective, ought to be provided. If matter
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regarding penalty is reopened for withdrawal of immunity,
it cannot be said that the settlement is effective. Till a
fresh order is passed, the order of the Settlement
Commission is not conclusive.
37. Then, reliance is placed on section 245-H(1A) to submit
that in view of this express provision, the order dated 1 st
December, 2011 cannot be said to be conclusive within the
meaning of section 245-I read with Rule 68B of the Second
Schedule of the IT Act. Mr. Sridharan, relying upon the language
of section 245-H, submits that Expression "save as otherwise
provided in this chapter" in Section 245-I is significant. Section
245-H(1A) mandates "withdrawal of immunity" and "thereupon
provisions of this Act shall apply as if such immunity has not be
granted". In such an event, the case becomes non-conclusive.
Rule 68B is therefore inapplicable. Petitioner has applied on or
about 4th February, 2013 for more time for payment to the
Settlement Commission. In view of the words "or within such
further time as may be allowed by the Settlement Commission"
employed in Section 245-H(1A), the Commission has power to do
so. Hence, earlier order is not conclusive within the meaning of
Section 245-I. Subsequent order of the Commission when issued
granting or declining more time will be material date for
calculating limitation under Rule 68B. It is urged that the
Settlement Commission has power to extend time for payment
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even after passing an order under section 245-D(4) and even
after specifying the time in the order. The words "within such
further time as may be allowed by the Settlement Commission"
appearing in section 245-H(1A) are indicative of the legislative
intent. Mr. Sridharan submits that page 513 of the counter
affidavit of the Revenue is a letter dated 30 th Januarly, 2013 of
the petitioner to the Settlement Commission seeking extension of
time. Page 512 (Same as page 232 of the Writ Petition) of the
counter affidavit is a letter dated 4th February, 2013 of the
petitioner to the Tax Recovery officer enclosing the above
application of the petitioner to the Settlement Commission. In this
letter dated 4th February, 2013, Petitioner has requested the
Commission to give a personal hearing and allow an extended
time period for paying all the dues. In the face of this application
of the petitioner to the Settlement Commission and the power of
Commission under Section 245-H(1A) to extend time, it cannot be
said that the order of the Commission has become conclusive
within the meaning of Section 245-I.
38. Mr. Sridharan submits that section 245-H(1A) employs
expression "immunity granted shall stand withdrawn". This
expression only means that Settlement Commission has no more
discretion in granting of or continuing the immunity. However,
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formal order has to be necessarily passed withdrawing the
immunity, which can be done only by the Settlement Commission
and nobody else. Also, the Settlement Commission alone has
jurisdiction to decide the quantum of penalty, since quantum of
penalty cannot be less than 100% and cannot exceed 300% of tax
sought to be evaded. The assessing officer has no jurisdiction to
determine the penalty imposable under section 271(1)(c).
Therefore, the Settlement Commission has to necessarily pass
fresh orders on the quantum of penalty under section 271(1)(c).
Only after passing of such an order, the order would be conclusive
under Section 245-I.
39. Mr. Sridharan submits that let it be assumed that section
245-H(1A) does not contemplate a formal or fresh order
withdrawing the immunity and by operation of section 245-H(1A)
itself immunity stands withdrawn. Let it also be assumed that
though a fresh order of penalty has to be passed, it can be by
assessing officer himself and not necessarily the Settlement
Commission. Still, these aspects establish that order of the
Settlement Commission is not conclusive within the meaning of
Section 245-I. Therefore, until this application by the Revenue
for withdrawal of immunity in the present case is decided by the
Settlement Commission, the order of the Settlement Commission
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dated 1st December, 2011 cannot be regarded as "conclusive"
within the meaning of Rule 68 of the Second Schedule to the IT
Act, read with Section 245-I thereof.
40. Mr. Sridharan submits that the submission is not this: Non
payment of installments as ordered by the Settlement
Commission renders the order non-conclusive. The precise
submission is this: Immunity from penalty is conditional upon
payment of installments. Non adherence to installments implies
immunity shall be withdrawn and penalties to be imposed afresh
by the Settlement Commission/assessing authority. Therefore,
the order of the Settlement Commission is not conclusive under
Section 245-I.
41. Mr. Sridharan submits that suppose, the order of the
Settlement Commission does not give immunity from imposition
of penalty and tax is directed to be paid within 35 days as
stipulated in Section 245-H(6A). Suppose, the assessee does not
comply with this requirement, still, the non-payment of tax
within this stipulated 35 days will not affect the conclusiveness of
the order under Section 245-I, since no immunity from penalty
has been granted by the Settlement Commission. Similarly,
suppose immunity has not been granted from penalty, but tax
determined in the order is directed to be paid by installments
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and/or time for the same is provided by the Settlement
Commission. Suppose the assessee does not adhere to the
installments/time granted for payment, still, such a situation may
not affect conclusiveness of the order, since no immunity from
penalty has been granted by the Commission. Some immunity is
granted from imposition of penalty and as a condition thereof, the
tax liability is permitted to be paid by installments/within time
stipulated in the order. The order of the Settlement Commission
will be conclusive if the taxes are paid by the assessee as per the
time limit stipulated by the Settlement Commission. Some
immunity is granted from imposition of penalty in the order of the
Settlement Commission, but that is not conditional upon payment
of taxes within a stipulated time specified in the order of the
Settlement Commission. If we keep aside Section 245-H(1A) for a
moment, then, in this example/situation, non-payment of taxes
within the stipulated time, may not affect the conclusiveness of
the order for the purposes of Section 245-I read with Rule 68B of
the Second Schedule of the IT Act.
42. Mr. Sridharan submits that position would be totally
different if the order of Settlement Commission granting partial
immunity from penalty is conditional upon payment of taxes in
stipulated time. That is the position in the present case and that
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makes all the difference. In such a case, the order of the
Commission is not conclusive.
43. Mr. Sridharan submits that the another argument of the
petitioner is this: Even if the immunity granted from imposition of
penalty is withdrawn, the tax liability would not be affected. Only
amount of penalty may increase. Therefore, the order of the
Settlement Commission is "conclusive to the extent of tax or
penalty determined". Therefore, any recovery of the said
amounts by sale of immovable property should be within the
limitation in Rule 68B of the Second Schedule. The argument is
clearly flawed.
44. Rule 68B of the Second Schedule to the IT Act prescribes
that the period of limitation would be from "order becoming
conclusive" and not from "part or portion of the order giving raise
to the demand of tax or penalty becoming conclusive". The order
of the Settlement Commission is one order and has to be read as a
whole. For the purposes of Rule 68B, the order of the
Commissioner cannot be dissected into (a) part determining tax
liability; (b) part determining liability, and (c) part providing for
immunity from penalty.
45. To interpret Rule 68B of the Second Schedule to the IT Act
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in the above manner would amount to reading of the words "part
of" or "portion of" before the phrase "order becoming conclusive"
into the said Rule 68B. This is not permitted in the garb of
interpretation.
46. Mr. Sridharan submits that Section 221 of the Act, provides
for levy of penalty on an assessee for default in payment of tax,
even if there is no evasion of tax. Section 221(1) of the IT Act is
reproduced below:-
"221. Penalty payable when tax in default. -(1)
When an assessee is in default or is deemed to be in
default in making a payment of tax, he shall, in
addition to the amount of the arrears and the amount
of interest payable under sub-section (2) of Section
220, be liable, by way of penalty, to pay such amount
as the Assessing Officer may direct, and in the case of
a continuing default, such further amount or amounts
as the Assessing Officer may, from time to time,
direct, so, however, that the total amount of penalty
does not exceed the amount of tax in arrears".
47. Obviously, Section 221(1) is a provision enacted in
terrorem to ensure timely collection of tax. The said penalty is
leviable even when there is no willful intention to evade tax.
Liability of penalty may arise on mere non-payment of tax by a
defaulting assessee. Proviso to Section 221 gives a discretion to
the assessing officer not to levy penalty.
48. Mr. Sridharan submits that order of penalty under section
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221(1) is a distinct and separate order from the order of the
Settlement Commission and is passed by the assessing officer
himself. Section 245I also reinforces this position. The levy of
penalty under section 221(1) of the IT Act by the assessing
officer is a distinct order, different from and over and above the
order of the Settlement Commission. It is in fact imposed for non-
payment of tax as directed by the Settlement Commission. It is in
fact over and above the liability determined by the Settlement
Commission.
49. Mr. Sridharan submits that section 246-A enumerates
orders passed under the Act which are appealable to CIT (A). It
expressly specifies that order of penalty under Section 221 is
appealable to CIT (A) vide section 246-A(i)(j)(A). This also
establishes that an order imposing penalty under Section 221(1)
is a distinct order. Mr. Sridharan submits that the above position
is reiterated by section 245-J of the IT Act.
50. Mr. Sridharan submits that Section 245-J forms part of
Chapter XIX-A relating to Settlement Commission. It expressly
provides for the imposition of penalty, evidently under section
221(1) of the It Act, for default in making payment of sum
specified by the Settlement Commission in its order. Therefore,
the order of the assessing officer imposing penalty under section
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221(1) read with section 245-J is distinct from the order of the
Settlement Commission and is independent of it.
51. Mr. Sridharan submits that the assessing officer has, vide
five distinct and separate orders, for each of the different
assessment years involved in the present case, all dated 14 th
August, 2013, imposed penalty under section 221(1) of the IT Act
aggregating to Rs. 48 lakhs. These were for solely non-payment
of taxes within the time limit specified by the Settlement
Commission in its order dated 1 st December, 2011. (Illustrative
copies of these five Orders are at pages (a) 447 to 448, (b) 465 to
468 of Counter affidavit of the Revenue).
52. Mr. Sridharan submits that these Orders of penalties passed
under section 221(1) have not been challenged by the petitioner
and have become final. The petitioner has himself referred to
these penalties, vide Exhibit 'C' at page 179 of the writ petition
while setting out the total liability according to petitioner in the
form of a table. The last item in that table is "Add: Penalty under
section 220(1) Rs.48,00,000" (Referred to section 220(1) by the
petitioner is a typing mistake for Section 221(1).
53. Mr. Sridharan submits that all procedural steps are duly
followed by the Revenue for recovery of this amount of Rs.48
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Lakhs. Five notices of demand were issued in Form 7 of the
Income Tax Rules, 1962 under Section 156 of the IT Act, totaling
to Rs.48 lakhs for payment of these penalties, vide illustrative
pages 446 and 464 of the counter affidavit of the Revenue.
Ultimately, Notice in Form ITCP-16 dated 28 th April, 2016 (page
244 of the writ petition) was issued for Rs.38,39,64,000/-
attaching the impugned property. On an application filed by the
petitioner, rectification was done giving credit for amount of
Rs.1,65,89,038/- paid by petitioner. Letter dated 26 th October,
2016 was accordingly issued for a revised sum of
Rs.37,08,02,437/- (page 245-245 of the writ petition). This sum
duly included the penalty amount of Rs.48 lakhs. Thereafter the
impugned property belonging to the petitioner was attached
under Rule 48 of the Second Schedule to the IT Act by issuance of
another notice in Form ITCP 16 dated 17th February, 2017
(Annexure 'A') inter alia, for non-payment of Rs.48 lakhs (as part
of total arrears of Rs.6,61,36,789). Relevant portion of this form
ITCP-1 reads as under:-
"Where as, Shri Rajiv Yashwant Bhale has failed to
pay the sum of Rs.6,61,36,789/- (interest under Section
245D (6A) Rs 6,13,36,789 + penalty under Section 221 of
Rs.48,00,000/-), in letter of intimation dated 30/01/2017,
and the interest payable under Section 220(2) of the
Income Tax Act, 1961"
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54. Mr. Sridharan submits that also a proclamation of sale was
issued against the subject property vide Form ITCP 13 dated 17 th
February, 2017 inter alia, for non-payment of Rs.48 lakhs (as
part of total arrears of Rs.16,51,55,214/-).
55. Mr. Sridharan submits that the advertisement published for
auction of the property (at page 316 of the writ petition) and the
communication sent to the petitioner by respondent No. 3 on 30 th
January, 2017 (at page 368 of the counter affidavit), indicated
the total dues of Rs.16,51,55,214/- for which the attached
property was being auctioned. The said total dues, inter alia,
specifically and duly included the amount of penalty under
section 221 of Rs.48 lakhs. Therefore, all the procedures, inter
alia, for the recovery of Rs.48 Lakhs by way of attachment and
auction sale of the impugned property have been duly followed by
the Income Tax Department.
56. For all these reasons and relying upon the written
submissions tendered on record by Mr. Sridharan on 24th April,
2017, it is urged that the writ petition be dismissed.
57. Reliance is placed upon judgments of the Hon'ble Supreme
Court of India and this court to buttress and support the above
contentions.
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58. For properly appreciating the rival contentions, it would be
worthwhile if one refers to the facts. An application for
settlement was made by the petitioner to the Income Tax
Settlement Commission, Additional Bench, second floor,
Mahalaxmi Chambers, Mahalaxmi, Mumbai 400 034. The
petitioner sets out the details in the prescribed format, including
that of payment of additional tax and interest. The petitioner,
while elaborating the particulars of the issues to be settled,
nature and circumstances of the case (assessment year-wise) at
Annexure 'C', has set out as to how the tax was assessed and was
payable. He also refers to the nature and circumstances of the
case and complexity of the investigation involved.
59. The issues to be settled by the Hon'ble Settlement
Commission were determined by the petitioner as under:-
3.1 Determination of the person in whose name the entire
income relatable to land sale and land development part of
Wakad Project is to be taxed.
3.2 Determination of the total undisclosed income of the
appicant in respect of period covered under the
assessment proceedings u/s 153A of the ITA, 1961 i.e. A.Y.
2002-03 to A.Y.2008-09.
3.3 Telescoping of the additional income offered and
capitalization of the amount as may be considered
appropriate by the Hon'ble Settlement Commission.
3.4 Waiver/reduction of penalty leviable under the
various provisions of the Income-tax Act, 1961.
3.5 Grant of immunity from prosecution to the applicant
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under the ITA, 1961 and all other central enactments as
may be applicable.
3.6 Grant of installments for the payment of the
additional amount of tax etc., if any and as may be found
payable.
3.7 Grant of such other relief to the applicant as is
deemed fit and proper by the Honorable Commission.
3.8 The applicant craves leave to add/amend/
delete/modify all / any of the issues to be settled."
60. Then, the petitioner at Annexure 'E' (Item Nos. 1 to 5 of the
confidential Annexure) gave a full and true statement of facts
regarding the issues of settlement, including the terms of
settlement sought by the petitioner. The petitioner sets out the
manner in which the income was derived. The petitioner also
supplied the requisite documents. Then, the Settlement
Commission passed an order, copy of which is annexed as
Annexure 'B' at page 108 of the paper book and that order is
fairly detailed. The Settlement Commission, in para 28 points out
that there were two applicants, namely, Mr. Rajiv Yeshwant
Bhale and M/s. Pratham Builders and Developers Pvt. Ltd. and
both of them requested for waiver of interest chargeable under
sections 234-A, 234-B and 234-C of the IT Act. Without prejudice,
it was requested that the interest may be charged in accordance
with the judgment of the Hon'ble Supreme Court of India in the
case of Brijlal (supra). The Commission held that in the light of
the Hon'ble Supreme Curt decision in the case of M/s. Anjuman
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Ghaswalla (supra), it has no power to waive interest chargeable
under the aforesaid provisions. However, it agreed with the
alternate plea of the applicants that interest under section 234-B
will be charged up to 6th August, 2010 i.e. the date on which the
order under section 245-D(1) was passed as per the directions of
the Supreme Court in the case of Brijlal (supra). The Settlement
Commission, in para 29, then observes that the applicants also
requested for waiver of interest chargeable under section 220(2)
of the IT Act. However, in the view of the Settlement Commission,
the request is infructuous because the assessments are still
pending and the assessment orders are yet to be passed, which
the assessing officer will do consequent to these orders. Then, in
para 30 of this order, the Settlement Commission dealt with the
request for payment by installments and directed as under:-
"30. Payment by installments:
Both the applicants have requested for granting of 8
quarterly installments for making the payments against
demand raised in pursuance of the order of settlement. It
was submitted that financial condition of both the
applicants is quite precarious, and it will not be possible for
them to pay the demand in one go. The request was not
countered by CIT (DR) and the same is being allowed. The
first installment will be due within stipulated period of 35
days mentioned in section 245D(6A)."
61. Further, on the point of immunity from penalty and
prosecution, the Settlement Commission dealt with the case of
both sides from para 31 onwards. The argument of the assessee's
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representative that applicants have made full and true disclosure
of their income and they are acting in the spirit of settlement has
been noted and dealing with all this in para 31.1, the Commission
held thus:-
"31.1 The CIT(DR) left the matter at the discretion of the
Commission so far as the immunity in regard to
prosecution is concerned. He, however objected to the
request of applicants that they should be granted
immunity in respect of imposition of penalties. It was
strongly pleaded that the applicants have not made true
and full disclosure of their income in the petition filed
before the Commission. According to him even if it is
presumed that large part of concealed income determined
in this order is based on estimation, one cannot ignore the
fact that there are several issues in respect of which there
was no full disclosure in the SOF. He took up the case of
Shri Rajeev Bhale first. It was pointed that in PB-2, which
was filed on 27.9.2011 at the commencement of
proceedings, the undisclosed income was admitted at
Rs.7.95 crores as against a sum of Rs.2.25 crores disclosed
u/s. 153A + Rs.1.70 crores disclosed in SOF=3.95 crores. It
shows that the applicant was aware of the fact that he was
not making true and full disclosure while coming before
the Commission. Secondly, surrender of following items
suo-moto in PB-II clearly shows applicant's casual
approach while preparing the SOF:
Credit balance written off Rs.20,76,792
Profit on sale of shares Rs.52,77,657
Salary fresh offer Rs.23,91,548
Peak shortage in cash flow Rs.1,41,35,301
Interest on fixed deposit Rs.23,03,819
Unaccounted investment Rs.7,15,000
According to CIT(DR) settlement provisions stand on
a unique pedestal and applicant's desire to come clean
forms basic platform of the scheme of Settlement. Any
breach of this basic foundation will make the applicant
disentitled from the immunity provisions. CIT(DR) then
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stated that similar arguments apply in regard to Pratham
Builders where also nature of additions offered is similar."
62. Then, year-wise computation of concealed income, on which
penalty is leviable, is set out in a chart at page 155 of the paper
book. In para 32, the Settlement Commission observes that the
immunity granted to the applicants vide this order may be
withdrawn if they fail to pay the applicable tax demanded within
time, and in the manner specified by this order, or fail to comply
with other conditions stated therein. In para 33, the Commission
directed as under:-
"33. Immunity granted to the applicants may also at any
time be withdrawn, if the Commission is satisfied that the
applicants had in the course of the settlement proceedings,
concealed any particulars material to the settlement, or
have given false evidence. Thereupon the applicants may
be tried for the offence for which immunity was granted, or
for any other offence for which the applicants appear to
have been guilty in connection with the settlement, and the
applicants shall also become liable to the imposition of any
penalty under the Act to which the applicants would have
been liable had such immunity not been granted."
63. Thus, in para 33 and 34, the Settlement Commission made
certain pertinent observations. The Settlement Commission then
forwarded the figures in terms of its directions.
64. The petitioner himself, in the writ petition, mentioned that
the chart of the year-wise working has been annexed as
Annexure 'C' to the petition. The petitioner then states in para 16
of the petition that the Deputy Commissioner of Income Tax,
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Circle - 1(2), Pune passed order under section 153-A read with
section 245-D(6) of the IT Act giving effect to the order of the
Settlement Commission on 16th January, 2012, copy of which is
at Annexure 'D' to the petition. Then, the notice of demand under
section 156 of the IT Act was issued to the petitioner on 16 th
January, 2012, copy of which is annexed as Annexure 'E' to the
petition. The petitioner, in para 16 at page 11 of the petition,
states that the penalty orders were passed under section 271(1)
(c) read with section 245-D(6) on 14th August, 2013 and in para
17, the petitioner says that he paid an amount of Rs.3.55 crores
against the total amount of Rs.11.98 crores and the final unpaid
amount thus works out to Rs.8.43 crores as per Annexure 'F'.
65. In para 18, the petitioner states that due to non-payment of
installments, the Tax Recovery Officer, Circle - 1, Pune, drew a
certificate of recovery in the prescribed form for the amount of
Rs.9.68 crores. Thereafter the error in payment of tax dues was
realised and the quantum of outstanding demand was reduced to
Rs.8.51 crores. Various other certificates were drawn for
attachment and recovery of tax dues. Then, a notice of demand
dated 23rd January, 2013, calling upon the petitioner to pay a
sum of Rs.9,86,12,000/-, was issued and after which, there was a
correspondence. The petitioner, in the correspondence,
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requested that the proceedings be kept in abeyance as he was
making efforts to pay the dues, but was facing financial problems.
Thus, the orders giving effect to the directions of the Settlement
Commission had to be passed. Then, there was a notice of
demand, which was issued. The petitioner disputed the
computation thereof. Admittedly, on 16th January, 2012, there
was a penalty order under section 271(1)(c) read with section
245-D(6) of the IT Act passed by the Deputy Commissioner of
Income Tax, Pune, which order also given effect to the directions
of the Settlement Commission. We have on record the petitioner's
reply at page 232 of the paper book dated 4th February, 2013.
That reply reads thus:-
"04.02.2013
From,
Rajiv Bhale,
Pinnac Gangotri,
Aundh, Pune
To,
Tax Recovery Officer,
(Central) Range - 1, Pune,
Income Tax Department,
PMT Building,
Pune.
Dear Madam,
Sub.: Reply to your letter dated 23.01.2013,
for arrears recovery of Rajiv Bhale, A. Y. : 2003-
04 to 2008-09.
In reference to the above subject, we want to request you
to kindly hold the rigorous recovery proceedings in
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regards to the arrears of Rajiv Bhale for the dues laid down
by settlement commission for the A. Y. 2003-04 to 2008-
09, as we are requesting the Hon. Settlement Commission
to give us a personal hearing, and allow us an extended
time period for paying all the dues,. We are doing the same
as we are facing several genuine liquidity problems,
demonstrating submission for the same are already made
to the Hon. Settlement Commission. We are also attaching
the copy of the submission letter accepted by the Hon.
Settlement Commission.
We again request you to kindly understand our position,
and kindly positively look at the matter, as we are an
honest tax payer and we will pay all our dues promised, it
is just the matter of time.
Thanking you in anticipation
Yours sincerely,
For Rajiv Bhale
_______________
CA Kishor B. Phadke
Authorised Representative"
66. A bare perusal of this letter/reply would indicate as to how
a defaulter like the petitioner, who makes a request as above and
in the language as reproduced above, is now complaining that the
sale of the attached property violates Rule 68B of the Second
Schedule to the IT Act. It is the petitioner, who makes a specific
case in this letter that he wishes to approach the Settlement
Commission seeking a personal hearing on the issue of extension
of time for paying all the dues. The request in that behalf,
according to the petitioner is already made in writing to the
Settlement Commission. It is in these circumstances that we are
of the opinion that a defaulter like the petitioner cannot raise the
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issue of the sale being vitiated in law. The petitioner is urging
that the order of the Settlement Commission dated 1st December,
2011 is final and conclusive and the time would begin to run from
this date. However, it is the very defaulter-petitioner, who
addresses the above communication. The petitioner, therefore,
cannot blow hot and cold. The petitioner urges that he desires
postponement of the recovery proceedings for he wants to again
request the Settlement Commission to accommodate him. It is
such a petitioner who now faults the whole process and by
purporting to raise a legal challenge.
67. We have before us the communications from the petitioner
to the Tax Recovery Officer. At Annexure 'N' at page 240 of the
paper book, there is a copy of the letter dated 20 th June, 2016
addressed by the petitioner to the Assistant Commissioner of
Income Tax, Circle - 2, Income Tax Department, PMT Building,
Pune. This letter is on the subject of payment of tax dues for the
block period A. Y. 2002-03 to A. Y. 2008-09. In this
communication, the petitioner refers to the hearing before the
Settlement Commission dated 27th May, 2016. The petitioner in
final para 7 of this communication/letter at page 243 of the paper
book states that he has submitted a plan of action. He is already
in advanced stage of understanding with the intending
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lenders/financial institutions in this regard. Further, the
assessee-petitioner requests the Assistant Commissioner of
Income Tax to release two current accounts, one with the HDFC
Bank and another with Janata Sahakari Bank Limited, Pune so
that some financial transactions can be undertaken from these
accounts and at least he can restart operations. Presently, there
is complete stoppage.
68. The attachments were levied, but on 26th October, 2016, the
Tax Recovery Officer communicated to the petitioner the outcome
of the request made on 26th June, 2016 by the petitioner in
writing. The Assistant Commissioner of Income Tax, Circle - 2,
Pune carried out rectification for the assessment years and gave
credit for the prepaid tax of Rs.1,65,89,038/- and the outstanding
demand was revised in terms of the order of the Settlement
Commission. However, it was clarified that the total demand
outstanding in individual capacity, excluding interest under
section 220(2) and penal interest under section 245-D(6A) as on
that date is Rs.37,08,02,437/-.
69. On 1st November, 2016, the Income Tax Department wrote
to the petitioner that a notice in the requisite format was issued
to pay a sum of Rs.9.86 crores. However, that demand was
revised by giving effect to a rectification as requested by the
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petitioner. The revised demand of Rs.8.52 crores plus interest
and penal interest was intimated on 26th October, 2016. Such a
demand was covered by the order of the Settlement Commission,
Mumbai. Further, as instructed by the Settlement Commission,
Mumbai, vide the hearing conducted on 1st August, 2016, the
petitioner was requested to pay Rs.1.25 crores within one month
from the date of hearing to show his bonafides. That also has not
been adhered to. Thereafter, there is an attachment of the
residential bungalow. Since the petitioner has failed to pay the
outstanding tax liability and demand is not disputed before any
Income Tax authority, there was no alternative, but to sell the
property by way of public auction. That is how it was proposed to
sell the residential bungalow and adjust the sale proceeds against
the tax liability.
70. The petitioner preferred an appeal and in which, he himself
states that the Commission passed an order under section 245-
D(4) of the IT Act dated 1st December, 2011. The financial year
ends on 31st March, 2012. Yet, the petitioner, in para 6 of the
statement of facts, preceding the grounds of appeal, stated that
the assessing officer passed an order giving effect to the
directions of the Settlement Commission on 16th January, 2012.
He further states that the Settlement Commission allowed him to
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pay the demand in installments and thereafter, when the order of
the Settlement Commission was given effect to, the assessing
officer computed the demand. The petitioner states that he made
part payment towards the outstanding demand, but was not able
to honour the balance. That is how the notice dated 23 rd January,
2013 was issued.
71. Then, the petitioner refers to the attachment and a final
notice of demand. The order giving effect to the Settlement
Commission's directions was passed on 16th November, 2012
together with final notice of demand. However, the petitioner
raises the issue of applicability of Rule 68B of the Second
Schedule to the IT Act and submits that the Tax Recovery Officer
erred in law and on facts and proceeded to acquire vacant
possession of the residential bungalow for effecting its sale vide
his letter dated 1st November, 2016. The Tax Recovery Officer
ought to have appreciated the provisions of Rule 68B, the
permissible period of four years from the date of finality of
demand i.e. 1st December, 2011 being the date of the order under
section 245-D(4) of the IT Act. Thus, the petitioner himself
approbates and reprobates in the sense that the requisite period,
according to the petitioner, begins to run from 1st December,
2011, but in the same breath, now, the petitioner projects in the
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memo of appeal the ground that this period is four years from the
date of finality of demand. Though he refers to all the
communications emanating from him, yet, the permissible period
of four years has been carved out in the above manner. This, the
petitioner computes on the basis of a standing order 164E dated
1st March, 1996, under which, the period was extended to four
years. The petitioner, thus, was not sure as to whether the period
is three years from the end of the financial year in which the
order giving rise to the demand of any tax, interest, fine, penalty
or any other sum, for the recovery of which the immovable
property has been attached, has become conclusive or as the case
may be final or as understood by him. Pertinently, the petitioner
was aware that the Rule is employing the words "from the end of
financial year", in which the order giving rise to the demand of
any tax, interest, fine, penalty or any other sum, for the recovery
of which the immovable property has been attached, has become
conclusive under the provisions of section 245-I of the IT Act".
The petitioner, at one stage, refers to the order dated 1 st
December, 2011 passed by the Settlement Commission as
triggering point. However, in the grounds, he conveniently, does
not refer to the period consumed by his own applications before
the Settlement Commission and his own request for
postponement or deferment of the recovery proceedings or to
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hold them in abeyance. These requests were made by the
petitioner on his own and because of the financial problems faced
by him. All this was a creation of the petitioner himself.
72. This memo of appeal presented by the petitioner on 21 st
November, 2016 was then considered by the Principal
Commissioner of Income Tax - II, Pune, who made an order under
Rule 86 of the Second Schedule of the IT Act. Rule 86 reads as
under:-
"86. (1) An appeal from any original order passed by
the Tax Recovery Officer under this Schedule, not being an
order which is conclusive, shall lie to the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner.
(2) Every appeal under this rule must be presented
within thirty days from the date of the order appealed
against.
(3) Pending the decision of any appeal, execution of the
certificate may be stayed if the appellate authority so
directs, but not otherwise.
(4) Notwithstanding anything contained in sub-rule (1),
where a Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner
is authorised to exercise powers as such in respect of any
area, then, all appeals against the orders passed before the
date of such authorisation by any Tax Recovery Officer
authorised to exercise powers as such in respect of that
area, or an area which is included in that area, shall lie to
such Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner."
73. A bare perusal of this rule would indicate as to how the
Principal Commissioner was empowered to deal with an appeal
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against the original order passed by the Tax Recovery Officer
under the Second Schedule, not being an order which is
conclusive. While dealing with this appeal, all the facts and
circumstances have been referred in great details. The argument
based on the Division Bench judgment of this court, to which we
will advert a little later, has also been noted. While rejecting this
appeal, the appellate authority held thus:-
"17. In this case, it is undisputed that the order of the
Hon'ble Settlement Commission dated 01.12.2011 in para
30 very clearly stated that the assessee has requested for
grant of 8 quarterly instalments for payment of the
demand and this time expired on 24.10.2013. Hence, it is
clear that the order of the Settlement Commission can only
become conclusive after the assessee has paid the 8
quarterly instalments because the order of the Hon'ble
Settlement Commission has to be read as a whole and not
in parts/bits & pieces and when taken as a whole the order
is very clear as to its being conclusive only on payment of 8
quarterly instalments granted to the assessee on his
request.
Till date, the assesse has not paid any of the
instalments on time and has only paid Rs.1,65,89,038
which is slightly more than the amount of first instalment
and was also paid beyond the time for payment of the first
instalments as required by the order of the Hon'ble
Settlement Commission.
18. Hence, assessee is in default-which is continuing
default till date since no further instalments have been
paid by the assessee and so much so that when the
assessee was required to deposit an amount of Rs.1.25
crores on or before 01.09.2016 by the direction of Hon'ble
Settlement Commission, he failed to even deposit this. So,
it is a clear case of violation of the conditions required to be
fulfilled for the order of the Hon'ble Settlement
Commission to become conclusive, because the order
requires the assessee to fulfill the payment of demand
arising from the settlement order in order to make it
conclusive which assessee has failed to comply with till
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date and it is a continuing default on the part of the
assessee which attracts interest, penalty under the
relevant provisions of the Income Tax Act for failure to
comply with the payment of instalments granted to the
assessee at his request.
19. Now therefore the assesse cannot say that the order
of the Hon'ble Settlement Commission has become
conclusive because he has defaulted in making the
payments in instalments and thereby obstructed the
fulfillment of the condition imposed by the order of the
Hon'ble Settlement Commission requiring the assessee to
make the payment in 8 quarterly instalments and
therefore making it conclusive on fulfillment of this
condition. The assessee cannot be allowed to take
advantage of his own default and state that even though he
has not fulfilled the stipulated conditions required to be
complied with mandatorily - by mere lapse and efflux of
time, he will derive a benefit on the basis of his own default
simply because the time to pay the 8 quarterly instalments
has run out and therefore he is absolved and discharged of
all liabilities and his property cannot be sold to recover the
dues not paid by him. The order of the Hon'ble Settlement
Commission in para 30 imposing conditions for payment of
the tax liability in 8 quarterly instalments is compulsory
condition on the fulfillment of which only the order can
become conclusive because the order has to be read as a
whole and not selectively and therefore not having fulfilled
the condition - the default being continuous till date, the
order remains uncomplied with and therefore not
conclusive between the assessee and the Hon'ble
Settlement Commission and Department.
20. Further interests as per Section 245D(6A) and
220 of the Income Tax Act on the assessee will have to
be levied on the assessee. The interest u/s 245D(6A)
is mandatory and becomes applicable as soon as time
period of 35 days after receipt of order of hon'ble
Settlement Commission expires. These interests will
be calculated till the date on which assessee pays his
entire demand. Thus demand arising out of these
interests has not yet reached finality. The Rule 68 is
not only about the 'tax demand' but also covers
'interest demand'. As explained above, the amount of
interest is not yet crystalized in this case. Hence, from
this angle also, it cannot be said that the demand in
the context of Rule 68 became final in F.Y. 2011-12.
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21. Rule 68B (2)(i) states that "In computing the
period of limitation under sub-rule (1), the period-
i. During which the levy of the aforesaid tax,
interest, fine, penalty or any other sum is
stayed by an order or injunction of any Court,
shall be excluded."
The matter of non payment of demand of Hon'ble
Settlement Commission and withdrawal of immunity
is raised before Hon'ble Settlement Commission and
the commission had started hearings also in this
regard. On 27.10.2016 hon'ble Settlement
Commission gave sine-die adjournment for the
hearings u/s 245H(1A). Thus, proceedings are
pending in the Hon'ble Settlement Commission in
connection with pending demand from 20.11.2012 till
today, it can be said that this period of 4 years
(20.11.2012 to 25.11.2016) should be excluded while
computing the period of limitation under 68B(1).
Thus, from this angle also, it cannot be said that the
time period available for the department for the sale of
the Aundh property has been expired.
22. Further from the available records it is also seen
that show cause letter for withdrawal of immunity
was sent by the hon'ble Settlement Commission to the
asseesee on 04.01.2013. However assessee by his
letter dated 04.02.2013 requested TRO (central) not
to hold rigorous recovery action as he will be
approaching hon'ble Commission with the request of
extension of time for payment of dues. Thus assessee
himself had requested more time for the payment to
hon'ble Settlement Commission. It is clearly a
violation of principle of estoppel. Assessee cannot
raise one point before one authority and another
before other authority to suit his needs.
23. Also, it is pertinent to note that the assessee
having defaulted on 01.09.2016 for peyment of Rs.
1.25 crores as required by the Hon'ble Settlement
Commission to demonstrate his intention to comply
with the terms & conditions of the order has by his
acts of omission and commission falied to fulfill the
mandate of the Hon'ble Settlement Commission. The
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requirement of payment of tax in 8 instalments is
sine-qua-non for the fulfilment of the requirement of
order of Hon'ble Settlement Commission and is
inextricably linked to the terms of the order and
cannot be severed and therefore the case of failure of
compliance of above terms of payment and the order
of Hon'ble Settlement Commission remains
inconclusive.
Thus, till date the order of Hon'ble Settlement
Commission not having became conclusive by reason
by continuing default of the assessee for failure to
make the payment the plea of the assessee fails and
the appeal is therefore dismissed."
74. It is in the light of these observations that the Principal
Commissioner dismissed the petitioner's appeal. We do not think
that the view taken by the Principal Commissioner was either
perverse or vitiated in law. It is a passible view of the matter. We
equally agree with the Principal Commissioner when he faults the
petitioner for having not disclosed the communication dated 30 th
January, 2017. The demand was computed on the basis of the
petitioner's rectification application. The penalty under section
221 was also computed together with interest. In the affidavit in
reply, the Principal Commissioner says in clearest terms that this
letter intimates the final and revised demand for the block period
2003-04 to 2008-09. The final and conclusive demand is
intimated by this letter, which includes the demand after giving
the effect to the petitioner's rectification application and interest
under section 220(2) and 245-D(6A) of the IT Act. This letter
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having been brought on record that the Department's action is
justified, according to this Principal Commissioner. We see much
force in this stand of the Revenue. On facts, we find that this is
not a case which requires our interference in writ jurisdiction.
This court's jurisdiction under Article 226 of the Constitution of
India is both, extraordinary and discretionary. It is equitable as
well. It should not be exercised so as to allow a defaulter like the
petitioner to derive benefit or take advantage of his own wrong.
We think that the writ petition deserves to be dismissed on this
ground alone.
75. Once the above view is taken, strictly, it is not necessary to
decide the legal question. The only issue raised in this case was
whether the order passed by the Settlement Commission can be
said to be conclusive or not. In the present case, the facts are
eloquent enough. They clearly spell out the position that in the
order of the Settlement Commission, there was a request noted.
That was a request made by the petitioner and for payment of the
tax in installments. That request was granted and time was
stipulated for payment by installments. All this is incorporated in
the order of the Settlement Commission. It is the petitioner, who
could not abide by the time limit and applied for extension. It is
the petitioner, who proceeded on the footing that such an
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application for extension could have been filed and pressed. It is
in these circumstances that the petitioner cannot now raise a
technical plea. That too by relying upon the period prescribed by
Rule 68B(1). That rule itself and as clarified above, does not end
with the words "after the expiry of three years from the end of
financial year", but states further that "demand of any tax,
interest, fine, penalty or any other sum, for the recovery of which
the immovable property has been attached, has become
conclusive". The rule does not end here as well, but makes a
specific reference to the provisions of section 245-I and Chapter
XX. Section 245-I has been referred by us already. The
conclusivity of the order passed by the Settlement Commission is
to matters stated in such orders and passed under section
245D(4). Save as otherwise provided in Chapter XIXA, no matter
referred by the order can be reopened in any proceeding under
this Act or any other law for the time being in force. However,
there is a power of Settlement Commission to grant immunity
from prosecution and penalty and that is to be found in section
245-H. It cannot be argued and at least by the petitioner that the
Settlement Commission could not have entertained any
application for extension of time. The Settlement Commission
makes an order under section 245-D(4) and which order in this
case granted liberty to the petitioner to pay the amount by
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installments. Since the petitioner made an application for
extension of time, that was entertained. It is in these
circumstances, the reliance placed on sub-section (6) of section
245-D is justified as that determinates that it is the Settlement
Commission, which has to make an order in terms of sub-section
(4) of section 245-D, but such order shall provide for the terms of
settlement, including any demand by way of tax, penalty or
interest, the manner in which any sum due under the settlement
shall be paid and all other matters to make the settlement
effective. Therefore, the Settlement Commission, according to the
petitioner, retained control over the proceedings and was not
denuded of its power to grant the extension for such period as
was sought by the petitioner. It is in these circumstances the
conclusiveness attached to the matters referred by the order of
the Settlement Commission, in terms of section 245-I of the IT
Act, has been subject to the provisions of Chapter XIXA and
Chapter XIXA itself contains Section 245-D(6) and (6A).
Further, sub-section (6B) of section 245-D empowers the
Settlement Commission to entertain an application for
rectification of any mistake apparent on the face of the record,
amend any order passed by it under sub-section (4) with a view to
rectify any mistake apparent from the record. Hence, our view
that the Settlement Commission retains control over the
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proceedings and that is how it entertained the further application
of the petitioner is in accord with the statutory scheme. We have
not deviated from it. We do not think that the larger issue and
posed for our consideration needs to be decided in the facts and
circumstances of the present case.
76. In any event, the word "conclusive" itself has to be
understood in the context. It means "bring or come to an end". In
Advanced Law Lexicon, 3rd Edition Reprint 2007, this word is
understood as final, finishing, ending. The word "conclusive"
means the closing, settling or finally arranging of a treaty,
contract, deed etc. It is in that sense the word has been
understood and must be, therefore, given that meaning. In these
circumstances, we do not think that the view taken is in any way
perverse or contrary to law.
77. The decisions relied upon by Mr. Kaka and particularly in
the case of M. U. Joshi (supra) are distinguishable. In M. U. Joshi
(supra), the petitioner, at the relevant time, was a partner of a
firm. The assessment orders were passed, huge demands were
raised against the firm. The appeals by the firm against these
assessment orders were dismissed and further appeals were also
dismissed. The Division Bench noted that there was never any
dispute that the order passed by the Income Tax Appellate
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Tribunal on 15th June, 1994 has attained finality. Since the firm
failed to discharge the tax liability finalized for the assessment
years 1986-87 and 1987-88, the Tax Recovery officer treated the
petitioner Joshi, who was a partner of the firm, as defaulter and
attached the residential flat of the petitioner for recovery of the
demand confirmed against the firm. Pertinently, an attempt was
made by proclamation of sale dated 26th August, 1996 to sell the
flat by public auction on 26th September, 1996, but it did not
materialise. Then, the petitioner filed a miscellaneous application
before the Income Tax Appellate Tribunal seeking stay of the
auction. That application was also dismissed on 19th May, 1998.
78. The Division Bench noted that on several occasions the
Revenue attempted to auction the flat, but it did not materialise.
Ultimately, the proclamation of sale dated 23rd February, 2004
was issued for auction of the attached flat. That was objected to
on the ground of the limitation prescribed under Rule 68B of the
Second Schedule of the IT Act. That objection was rejected and
the sale of the attached flat was confirmed. That is how the writ
petition was filed. The Division Bench, therefore, noted that Rule
68B is clear. Given the fact that the order passed by the Income
Tax Appellate Tribunal dated 15th June, 1994 had attained
finality, several attempts were made to sell the flat, but they did
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not materialise. The eventual auction notified on 23 rd February,
2004 was clearly beyond statutory period. In para 12, based on
this reasoning, the Revenue's contention was rejected and the
argument of the petitioner Joshi was accepted. It was also the
case of the Revenue that the miscellaneous application of
petitioner Joshi was dismissed by the tribunal and the starting
point would be the date of the order of the tribunal on the
miscellaneous application. Since it was to expire on 31st March,
2004, the confirmation of the sale on 30 th March, 2004 would be
within the period of limitation. The Division Bench noted this
argument and rejected it on the ground that the miscellaneous
application filed by petitioner Joshi was not to seek stay of the
levy of tax, interest and penalty, confirmed by the Income Tax
Appellate Tribunal on 15th June, 1994. The miscellaneous
application was filed only to seek stay of the auction on the
ground that the attached flat was the only flat owned by the
petitioner and if he is evicted from the same, he and his family
members would be rendered homeless. Even if such an
application was pending, there was no stay against the recovery
or enforcement of the demand. It is on such a view that the
petition was allowed by applying Rule 68B.
J.V.Salunke,PA
Judgment-WP.3366.2017.doc
79. The facts before us are not identical. The petitioner himself
seeks a substantive relief in the form of extension of time to comply
with the Settlement Commission's order. The Settlement
Commission's initial order was based on the petitioner's request to
make payment of the tax in installments. That request was
accepted, installments were determined and even the time was
stipulated. It is the petitioner, who sought modification of this time
relief and extension to make payment by installments. This was not
a request as made in Johsi's case (supra). The request was distinct.
There was an attachment levied and the petitioner apprehended
that if the time to make payment expires, the auction may follow.
Therefore, the request of the petitioner was to extend the time to
make payment in installments and if that had been granted, nothing
could have been done by the Revenue pursuant to the attachment.
If the time was extended and the payment was made, then, the sale
could not have taken place at all. In these circumstances, based on
the petitioner's request, no steps were taken. Secondly and more
importantly, the Settlement Commission's order itself was not
conclusive until the request, as noted above, was dealt with and
disposed of. The payment by installments was a direction
incorporated in the order of the Settlement Commission. It is that
main order, which has not attained finality, particularly in the light
of the application made by the petitioner. If that order was not
J.V.Salunke,PA
Judgment-WP.3366.2017.doc
conclusive within the meaning of Rule 68B and which finding cannot
be said to be perverse or vitiated by any error of law apparent on the
face of the record, then, the decision of the Division Bench in Joshi's
case (supra) cannot be applied. It is distinguishable on facts.
80. We see no difficulty for Brij Lal (supra) was not relied upon as
much for the construction and interpretation of Rule 68B, but for
understanding the scheme of the settlement as well. We do not see
how we can take any assistance from the observations in Brij Lal's
case (supra) for the interpretation of Rule 68B. Even that decision
does not carry the petitioner's case any further.
81. As a result of the above discussion, the writ petition fails. Rule
is discharged. There would be no order as to costs.
82. In the light of the disposal of the writ petition, the civil
application does not survive and stands disposed of as such.
83. At this stage, a request is made to stay the operation of this
judgment as also to maintain status quo prevailing today. This
request is opposed by the respondents, and equally, by the
intervener. Having noted that we have dismissed the Writ Petition
by assigning reasons and secondly, that the sale is concluded, we do
not think either request of Ms. Salgaonkar can be accepted. The
request is refused.
(PRAKASH.D.NAIK, J.) (S.C.DHARMADHIKARI, J.)
J.V.Salunke,PA
