Full Judgment Text
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CASE NO.:
Appeal (civil) 2488 of 2001
PETITIONER:
SRI MOHAN WAHI
Vs.
RESPONDENT:
COMMISSIONER, INCOME-TAX, VARANASI & ORS.
DATE OF JUDGMENT: 30/03/2001
BENCH:
CJI, R.C. Lahoti & Doraiswamy Raju.
JUDGMENT:
L...I...T.......T.......T.......T.......T.......T.......T..JJ U D G M E N T
R.C. Lahoti, J.
The relevant facts are jejune and beyond any pale of
controversy. Late Bhagwati Prasad owned a house property
described as D-53/91-D, Luxa, Varanasi (hereinafter referred
to as the house property). He had four sons - namely, P, S,
R and K. Under his will of the year 1962, probated in the
year 1965, the house property devolved upon his four sons.
The elder two sons - P and S, had entered into a partnership
known as M/s United Provinces Commercial Corporation, Luxa,
Varanasi (UPCC, for short) dealing in import and sale of
heavy machinery and road rollers. The labour troubles
resulted in the firms business collapsing in the year 1967.
The partners left Varanasi and migrated elsewhere. In the
year 1972, Income-tax assessments of the firm UPCC were
finalised for the assessment years 1967-1968 to 1969-1970.
Recovery certificates were issued in 1973- 1974 pursuant
whereto the house property was attached. On 3.12.1979 a
proclamation for sale of the property was issued setting out
a demand of Rs.30,82,000/- and upset price at Rs.1,70,000/-.
On 11.1.1980, at the public auction, respondent no.3 made a
bid proposing to purchase the property for Rs.1,70,000/-
(which was the upset price). The bid was accepted by the
officer conducting the sale. An amount of Rs.42,500/- being
1/4th of the auction money, was deposited by the
auction-purchaser on 11.1.1980 simultaneously with the
acceptance of the bid. The balance amount of Rs.1,27,500/-
was deposited on 25.1.1980 within the prescribed period of
15 days.
R, the third brother had died. His widow, Padma, filed
a civil suit in the Court of Civil Judge, Varanasi
submitting that the undivided property of the four brothers
and in any case the share of the brothers, who were not the
partners in the firm, could not have been attached and
advertised for sale for recovery of dues against the firm.
She also sought for an ad interim restraint on sale. On
9.1.1980, the Court of Civil Judge deemed it not proper to
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stay the auction sale but nevertheless felt a prima facie
case having been made out to stay the confirmation of the
auction sale. Accordingly, the Union of India and the
authorities of the Income-tax department were directed,
through an ad-interim injunction, not to confirm the sale.
In the year 1984 the auction-purchaser, respondent no.3
herein, was also impleaded as a party to the suit. The
ad-interim injunction continued to operate until the suit
itself came to be dismissed in default of appearance on
12.1.1998. On 13.1.1998 an application for restoration of
the suit was filed. On 30.7.1999 the suit was restored to
file.
The assessments made against the firm UPCC were all
ex-parte and a substantial part of the demand raised against
the firm consisted of penalty and interest. The firm
agitated the matter in the hierarchy of Income-tax
Department. The challenge to the orders of assessment
failed before the Commissioner of Income Tax (Appeals) who
dismissed the appeals relevant to assessment years 1967-1968
to 1970-1971 as having been filed beyond the prescribed
period of limitation. Four appeals were filed before the
Income-tax Appellate Tribunal, Bench Allahabad. By an order
dated 11.12.1987 all the four appeals were allowed. The
Tribunal formed an opinion that there was sufficient cause
which had prevented the assessee from filing the appeals
before the CIT (A) in time and therefore the appeals were
liable to be restored on the file of CIT (A) to be dealt
with on merits. It was ordered accordingly. During the
course of its order the Tribunal upheld a finding of fact
recorded by the CIT (A) that the assessee could not be said
to have been served with the demand notice. On being so
remanded, the appeals were heard on merits by the CIT (A).
Most of the matters relating to demand on account of tax,
penalty and interest were resolved at the stage of CIT
(Appeals) while the tax demand referable to 1967-1968 was
resolved before the Tribunal. The fact remains that on
different dates in the year 1989 the several demands against
the assessee firm had all stood wiped out and therefore
reduced to nil. On 26.3.1990 the Income-tax Officer, Ward
II, Varanasi wrote to Commissioner of Income-tax, Allahabad
that various demands raised against the assessee firm had
stood reduced to nil. On 22.11.1996 the assessee firm, M/s
UPCC wrote to the Income-tax Officer, Ward II, Varanasi that
all demands of tax and penalties having been
cancelled/liquidated, refunds were due and the Tax Recovery
Officer may be advised for cancellation of all the recovery
certificates. Copy of the application was endorsed to the
Tax Recovery Officer. On 16.1.1997 the advocate for the
assessee firm wrote to the ITO, Ward-II, Varanasi that in
view of all the demands against the firm having ceased to
exist and instead refunds having become due to the firm, it
may be confirmed that all the recovery certificates issued
for demands against the firm had stood withdrawn/cancelled.
A copy of communication dated 26.3.1990 from ITO, Ward II,
Varanasi to the Commissioner of Income-tax was annexed with
the letter.
In spite of the abovesaid communications, on 25.3.1998
sale in favour of respondent no.3 was confirmed by the Tax
Recovery Officer though only as regard the interest of P and
S in the house property and a sale certificate was also
issued to respondent No.3. The order of the Tax Recovery
Officer confirming the sale was put in issue before CIT,
Varanasi by the firm UPCC and its partners P and S, by
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filing a petition under section 264 of the Act. Vide order
dated 21.5.1999, the CIT dismissed the petition forming an
opinion that whatever happened after the auction sale held
on 11.1.1980 was immaterial and the Tax Recovery Officer had
no other option except to confirm the sale. S, the
petitioner before us then filed the present writ petition
laying challenge to the order of Tax Recovery Officer
confirming the sale and issuing sale certificate to
respondent No.3 also to the order of C.I.T. dated
21.5.1999. The fact that all the demands against the firm
(and the partners) had ceased to exist by 1996 and 1997 is a
fact positively asserted in para 5 of the writ petition
filed before the High Court and not denied in the
counter-affidavit filed on behalf of the Commissioner of
Income-tax. So also the fact that the demands against the
firm UPCC had stood cancelled and this fact was communicated
by the ITO, Ward II, Varanasi to the Commissioner of
Income-tax, Allahabad through his letter dated 26.3.1990 is
also admitted in the counter- affidavit. However, the
petition has been dismissed by the High Court. The
aggrieved petitioner has filed this petition for special
leave under Article 136 of the Constitution.
Leave granted.
Two questions arise for decision in this appeal :
i) Whether the Tax Recovery Officer could have confirmed
the sale on 25.3.1998 when the demands on account of tax for
the recovery of which tax recovery certificates were issued
had admittedly ceased to exist; and
ii) What is the effect of a notice of demand under
Section 156 of the Income-tax Act, 1961 having not been
served on the assessee on the sale held for recovery of
arrears of income-tax?
Taking up first question the first, according to Section
222 where an assessee is in default or is deemed to be in
default in making a payment of tax, the Tax Recovery Officer
may issue a certificate specifying the amount of arrears due
from assessee and shall proceed to recover from such
assessee the amount so specified by one or more of the modes
which include attachment and sale of the assessees
immovable properties. The Second Schedule sets out the
procedure for recovery of tax. We will refer to some of the
rules contained in the Second Schedule and relevant for our
purpose. Rules regarding attachment and sale of immovable
property are contained in Part III of Second Schedule. Rule
56 provides that the sale shall be by public auction to the
highest bidder and shall be subject to confirmation by the
Tax Recovery Officer. Several provisions contained in the
rules which follow Rule 56 are in pari materia with the
provisions dealing with attachment and sale of immovable
property contained in Order 21 of the C.P.C. dealing with
execution of decrees passed by civil courts. However, in
Order 21 of the C.P.C., a provision similar to Rule 56 of
Second Schedule is not to be found. Rule 60 provides for an
application to set aside sale of immovable property being
made by defaulter or an interested person on his depositing
the specified amount within 30 days from the date of sale.
Rule 61 deals with application to set aside sale of
immovable property on the ground of non-service of notice on
the defaulter under the Schedule or on the ground of
material irregularity in publishing or conducting the sale.
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Under Rule 62 a sale may be set aside on an application by
the purchaser on the ground that the defaulter had no
saleable interest in the property sold. The prescribed time
limit within which the application can be made under Rule
60, 61 or 62 is 30 days from the date of sale. Where no
application is made for setting aside the sale or such an
application having been made is disallowed, the Tax Recovery
Officer shall make an order confirming the sale and
thereupon the sale shall become absolute. On a sale or
immovable property becoming absolute, a sale certificate
shall be issued under Rule 65.
Under Section 224, an assessee cannot dispute the
correctness of any certificate drawn up by the Tax Recovery
Officer but it is lawful for the Tax Recovery Officer to
cancel the certificate for any reason if he thinks it
necessary to do so or to correct any clerical or any
arithmetical error therein. Sub-section(3) of Section 225
provides as under:-
225. Stay of proceedings in pursuance of certificate
and amendment or cancellation thereof.
xxx xxx xxx
(3). Where a certificate has been drawn up and
subsequently the amount of the outstanding demand is reduced
as a result of an appeal or other proceeding under this Act,
the Tax Recovery Officer shall, when the order which was the
subject-matter of such appeal or other proceeding has become
final and conclusive, amend the certificate, or cancel it,
as the case may be.
The term reduced in Sub-section(3) of Section 225
would include a case where the demand consequent upon an
appeal or any proceedings under the Income-tax Act has been
reduced to nil also. The Tax Recovery Officer is obliged to
give effect to such reduction in demand and accordingly
amend or cancel the certificate. The scheme of Part III of
Second Schedule indicates that the sale proceedings
terminate on their becoming absolute whereafter all that
remains to be done is the issuance of sale certificate.
However, an order confirming the sale by the Tax Recovery
Officer is a must. The efficacy of the sale by public
auction in favour of the highest bidder has been made to
depend on the order of confirmation by the Tax Recovery
Officer by incorporating Rule 56 in the Schedule. It is
true that ordinarily if there is no application filed for
setting aside sale under Rules 60, 61 or 62 and 30 days from
the date of the sale have expired, the Tax Recovery Officer
has to make an order confirming a sale. Nevertheless, an
order shall have to be actually made. The combined effect
of Sub-section(3) of Section 225 of the Act and Rule 56 and
Rule 63 of Second Schedule is that if before an order
confirming the sale is actually passed by the Tax Recovery
Officer, the demand of tax consequent upon an order made in
appeal or other proceedings under the Act has been reduced
to nil, the Tax Recovery Officer is obliged to cancel the
certificate and as soon as the certificate is cancelled, he
shall have no power to make an order confirming the sale.
The sale itself being subject to confirmation by the Tax
Recovery Officer, would fall to the ground for want of
confirmation.
In the case at hand the sale was held on 11.1.1980. No
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application was filed for setting aside the sale either by
the assessee or by the auction purchaser or by anyone
interested in the property. On expiry of 30 days from the
date of the sale the Tax Recovery Officer could have passed
an order confirming the sale. However, the Tax Recovery
Officer was injuncted by the writ of civil court from
confirming the sale. The interim order issued by the civil
court ceased to operate on 12.1.1998 whereafter an order of
confirmation was passed on 25.3.1998 by the Tax Recovery
Officer ignoring, or unmindful of, the important event which
had taken place in between. Before 25.3.1998, the demand
against the assessee admittedly stood reduced to nil. This
fact was in the notice of Income-tax Officer as well as the
Commissioner of Income Tax. Attention of the Income-tax
Officer as also the Tax Recovery Officer was also invited by
the firm M/s. UPCC through its communication dated
22.11.1996 (Annexure P- 6). On 16.1.1997, the counsel for
the assessee had specifically called upon the income tax
officer who had raised the demand against the assessee to
confirm if all the recovery certificates issued against the
assessee firm had stood withdrawn or cancelled. In view of
the facts within the knowledge of the department and the
communications so made, the Tax Recovery Officer could not
have confirmed the sale on 25.3.1998. Rule 56 in Second
Schedule of the Income-tax Act, 1961 is neither a redundant
nor a formal provision. It casts an obligation on the Tax
Recovery Officer to pass an order confirming the sale
consciously and with due application of mind to the relevant
facts relating to sale by public auction which is to be
confirmed. Under Rule 63, confirmation of sale is not
automatic. An order confirming the sale is contemplated to
make the sale absolute. Ordinarily, in the absence of an
application under Rule 60, 61 or 62 having been made, or
having been rejected if made, on expiry of 30 days from the
date of sale the Tax Recovery Officer shall pass an order
confirming the sale. However, between the date of sale and
the actual passing of the order confirming the sale if an
event happens or a fact comes to the notice of the Tax
Recovery Officer which goes to the root of the matter, the
Tax Recovery Officer may refuse to pass an order confirming
the sale. The fact that sale was being held for an assumed
demand which is found to be fictitious or held to have not
existed at all, in fact or in the eye of law, is one such
event which would oblige the Tax Recovery Officer not to
pass an order confirming the sale and rather annul the same.
The High Court in our opinion, clearly fell in error in not
allowing relief to the petitioner-appellant by setting aside
the sale.
Shri S.K. Jain, learned counsel for the
auction-purchaser, respondent No.3, referred to Janak Raj
Vs. Gurdial Singh and Anr., (1967) 2 SCR 77 and Sardar
Govindrao Mahadik and Anr. Vs. Devi Sahai and Ors., AIR
1982 SC 989 wherein it has been held that once a sale has
taken place in execution of a decree, the sale has to be
confirmed notwithstanding the fact that after the holding of
the sale, the decree was set aside. In Janak Rajs case,
sale was held in execution of an ex-parte decree. The
ex-parte decree was set aside subsequent to the date of the
sale but before an order confirming the sale was passed.
This court held that in the absence of an application for
setting aside the sale having been moved on the grounds
available under Rules 89 to 91 of Order 21 of C.P.C., the
court could not have refused to confirm the sale. However,
in this case itself, this court has observed (at page 80)
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that there may be cases in which apart from the provisions
of Rules 89 to 91 the court may refuse to confirm a sale,
as, for instance, where a sale is held without giving notice
to the judgment debtor, or where the court is misled in
fixing a reserved price or where there was no decree in
existence at the time when the sale was held. In Sardar
Govindrao Mahadiks case, Janak Rajs case was referred.
The court has drawn a distinction between a court auction
held in favour of a decree holder and where the auction
purchaser is an outsider or a stranger. In former case on
the decree ceasing to exist before the sale is confirmed,
the sale may be refused to be confirmed but in the latter
case, equity in favour of the stranger should be protected
and the judgment debtor should be left to suffer for the
default on his part for not obtaining stay of the execution
of the decree from where it was under challenge. Though the
learned counsel for the auction purchaser has relied heavily
on these decisions, suffice it to observe that these are the
cases of auction sale held under Order 21 of the C.P.C.
and, therefore, may not apply to the case of an auction sale
held under Second Schedule of the Income-tax Act in view of
Rule 56 contained therein. Moreover, in these decisions
also, the Supreme Court has contemplated situations where in
spite of the auction sale having been held and no
application for setting aside the sale having been moved,
yet in exceptional situations the sale may be refused to be
confirmed and may be set aside. Shri S.K. Jain also relied
on Padanathil Ruqmini Amma Vs. P.K. Abdulla, JT (1996) 1
SC 381, wherein this court has observed that unless the
auction purchasers were protected, the properties which are
sold in court auctions would not fetch a proper price. It
is true that sanctity of sale of property by public auction
has to be protected but at the same time a citizen faced
with proceedings for recovery of assumed arrears should not
be deprived of his property in spite of judicial or quasi-
judicial pronouncement holding, before the sale was
confirmed, that there were no arrears. This observation
applies a fortiori under the scheme of Income-tax Act, the
relevant provisions whereof have already been referred to by
us.
We now take up the second question.
Section 156 of the Act provides as under:-
156. Notice of demand.
When any tax, interest, penalty, fine or any other sum
is payable in consequence of any order passed under this
Act, the Assessing Officer shall serve upon the assessee a
notice of demand in the prescribed form specifying the sum
so payable.
If the amount specified in the notice of demand under
Section 156 is not paid within the time limited by
sub-section (1) or extended under sub-section(3) of Section
220, then the assessee shall be deemed to be in default
under sub-section (4) of Section 220. Tax recovery
certificate can be issued under Section 222 when an assessee
is in default or is deemed to be in default. Proceedings
for recovery of tax under the Second Schedule can be
initiated against a defaulter. Thus Section 156 provides
for a vital step to be taken by the assessing officer
without which the assessee cannot be termed a defaulter.
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The use of the term shall in Section 156 implies that
service of demand notice is mandatory before initiating
recovery proceedings and constitutes foundation of
subsequent recovery proceedings.
We have already stated that the finding of fact recorded
by C.I.T.(Appeals) and the Tribunal was that notice of
demand was not served on the assessee. The very foundation
for initiating the recovery proceedings, therefore, was
non-existent and the assessee could neither have been deemed
to be in default nor any proceedings for recovery of tax
could have been initiated against him.
The provision corresponding with Section 156 of the
Income-tax Act, 1961 contained in Section 29 of the
Income-tax Act, 1922 came up for the consideration of this
Court in Income-Tax Officer, Kolar Circle and Anr. Vs.
Seghu Buchiah Setty - (1964) 52 ITR 538. Hidayatullah, J.
(as His Lordship then was) held that it is after the demand
is made, the tax penalty and interest become a debt due to
the Government The notice of demand is a vital document in
many respects. Disobedience to it makes the assessee a
defaulter. It is a condition precedent to the treatment of
the tax as an arrear of land revenue. His Lordship
emphasised that the service of notice of demand has a few
vital impacts amongst others : (i) when the notice of
demand is not complied with, the assessee can be treated as
a person in default; (ii) on the failure of the assessee to
pay after a notice of demand is issued, the recovery
proceedings can be started and the amount of tax can be
treated as an arrear of land revenue. However, in this case
Hidayatullah, J. went on to hold that if an assessment made
by the Income-tax Officer is altered - reduced or increased
- by reason of any order under the Act, it is the duty of
the Income-tax Officer to issue a fresh notice of demand in
the prescribed form and serve upon the assessee. This
particular finding of Hidayatullah, J. created serious
complications and resulted in nullifying several recovery
proceedings, as also creating bottlenecks in the recoveries
of outstanding demands. The Parliament, therefore, enacted
Taxation Laws (Continuation and Validation of Recovery
Proceedings) Act, 1964 which was given a retrospective
effect. Section 3 of this Act provides that in the event of
government demand being reduced by an order in appeal or
other proceedings it shall not be necessary for the taxing
authority to serve upon the assessee a fresh notice of
demand, it would suffice if taxation authority intimated of
reduction to the assessee and the Tax Recovery Officer to
scale down the amount of recovery and the proceedings
initiated on the basis of the previous notice of demand
shall continue to be valid. To this extent the decision of
this Court in Seghu Buchiah Setty was superseded.
In Homely Industries Vs. Sales Tax Officer, Sector V,
Kanpur - (1976) 37 STC 483 also the significance of service
of demand notice came up for the consideration of this Court
and it was held that there can be no recovery without
service of a demand notice; if such notice was not served,
the recovery proceedings are not maintainable in law and are
invalid and the same along with the recovery certificates
are liable to be quashed.
In Ram Swarup Gupta Vs. Behari Lal Baldeo Prasad & Ors.
- (1974) 95 ITR 339, a Division Bench of Allahabad High
Court referred to the effect of Taxation Laws (CVRP) Act,
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1964 on the law laid down by this court in Seghu Buchiah
Settys case and held :-
The effect of these provisions is to dispense with the
need of issuing a fresh notice of demand and the recovery
certificate and to allow the original recovery proceedings
to continue, but only for the amount found due after
reduction in the appeal, and it is for this purpose that the
taxing authority is required to send intimation of the fact
of the reduction to the assessee and to the Tax Recovery
Officer. As the proceedings for recovery can be continued
only for the amount that finally remains due, and not for
any amount in excess thereof, the requirement of sending
intimation to the Tax Recovery Officer becomes an essential
duty of the taxing authority and must be held to be a
mandatory condition. Non-compliance of that condition will
be an illegality in the procedure and will invalidate the
proceedings. A sale held in proceedings initiated and
continued for the recovery of an amount in excess of the
amount payable by the assessee, after its reduction in
appeal, will be invalid. Such a sale is not validated by
clause (c) of section 3 of the Act.
The Division Bench decision of Allahabad Court Court in
Ram Swarup Guptas case was cited with approval before this
Court in Union of India Vs. Jardine Henderson Ltd. -
(1979) 118 ITR 112 though it was distinguished for its
applicability to the facts of the case before this Court.
The Division Bench of Orissa High Court has held in Sunil
Kumar Singh Deo Vs. Tax Recovery Officer & Anr. - (1987)
166 ITR 882 that non-service of demand notice goes to the
root of the jurisdiction of the officer initiating recovery
proceedings. We find ourselves in agreement with the view
so taken. Incidentally, we may refer to three Division
Bench decisions of the High Court of Madhya Pradesh, viz.,
Ghanshyamlal Vs. State of M.P. - (1961) MPLJ SN 218,
Manmohan Lal Shukla Vs. Board of Revenue, M.P. & Ors. -
(1964) MPLJ 32 and Premchand Ramchand Vs. Board of Revenue,
M.P. & Ors. - (1964) MPLJ 337. Section 146 of M.P. Land
Revenue Code, 1959 provides that before issuing any process
for recovery of arrears of land revenue the Tehsildar or
Naib Tehsildar may cause a notice of demand to be served on
any defaulter. Chief Justice P.V. Dixit speaking for the
Division Benches, in all the three cases, has held that the
word may has the imperative meaning of shall and no
proceedings for recovery can be initiated without service of
notice of demand failing which the proceedings would suffer
from jurisdictional defect. For a long period of time the
High Court of Madhya Pradesh has been taking this view
consistently.
We are, therefore, clearly of the opinion that service
of notice of demand on the assessee under Section 156 of the
Act, is mandatory before taking steps for recovery under
Second Schedule. Non-service of notice of demand goes to
the root of the validity of subsequent proceedings for
recovery. A sale held in recovery proceedings initiated
without serving the notice of demand shall be invalid and
hence shall be liable to be annulled on being called in
question.
In Surinder Nath Kapoor Vs. Union of India & Ors. -
AIR 1988 SC 1777 property was attached and sold pursuant to
a garnishee order which was found to be non-existent on
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account of a nullity attaching thereto. The sale was set
aside. This Court held :
the garnishee order that was passed was a nullity and
any sale held pursuant to such an order is also a nullity.
It is quite immaterial that the sale was confirmed. When a
decree or order is illegal, any sale held in execution of
such a decree or order and confirmed cannot be set aside on
the ground that it was illegal when the sale is in favour of
a third party. But, when a decree or order is a nullity, it
will be deemed to have no existence at all and any sale held
in execution of such a decree or order must also be held to
be null and void.
In the present case, the plea as to non-service of
demand notice having been raised before the High Court, in
our opinion the High Court should not have adopted too
technical a approach by refusing to deal with the plea
because it was not raised in the manner in which the High
Court thought it should have been raised. The plea went to
the root of the matter. The plea was raised before the
departmental authorities right from the ITO to the Tribunal
and was not given up before the High Court also. It would
not have been difficult for the High Court to ask the
Income-tax Department to produce the record of the
proceedings and to show if the demand notice was at all
served on the assessee. A little more sensitive approach is
required to be adopted in the process of dispensing justice
when it is found that valuable property of a person was
sought to be sold away for recovery of such arrears as did
not exist at all.
Thus, on both the grounds, we hold that the sale of suit
property in favour of respondent No.3 is liable to be set
aside. The appeal is allowed. The impugned judgment of the
High Court is set aside. The writ petition filed by the
appellant shall stand allowed. All the proceedings for the
sale of the disputed property as also the order of the Tax
Recovery Officer confirming the sale are hereby quashed.
The sale having fallen to the ground, the purchase money
deposited by the respondent No.3 shall, obviously, be liable
to be refunded to her. She also needs to be compensated by
awarding suitable interest for the period for which she has
been deprived of the use of her money for no fault of her.
In our opinion, it would meet the ends of justice if the
amount of Rs.1,70,000/- deposited by her with the Tax
Recovery Officer is directed to be refunded and she is also
awarded interest @ 12% per annum. Who should bear the
liability for payment of interest? For the period for which
the sale was not vitiated on account of the demand having
not been adjudged to be non- existent, in our opinion, the
assessee should pay the interest. Once the demand ceased to
exist and that fact was brought to the notice of the Tax
Recovery Officer by the assessee, the former should have
cancelled the recovery certificate and, therefore, with
effect from that date till the date of refund, the interest
should be paid by the Union of India, i.e., the Income-tax
department, represented by respondent nos. 1 and 2, which
has also kept the money and made use of it. It is,
therefore, directed that the amount of Rs.1,70,000/- shall
be refunded to the respondent No.3 by the respondents No.1
and 2 within a period of two months from the date of this
judgment. For the period commencing from 11.1.1980 on an
amount of Rs.42,500/-, and from 25.1.1980, on an amount of
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Rs.1,27,500/-, calculating upto 22.11.1996 the appellant
shall pay the interest @ 12% per annum to the respondent
No.3 which may, in default of payment, be recovered from the
house property. With effect from 23.11.1996 upto the date
of refund, the respondent No.3 shall be entitled to recover
interest at the same rate from respondents No.1 and 2. The
amount of interest shall also be calculated and paid within
a period of two months from today. We make it clear that
the interest is being awarded purely on equitable
considerations, in the facts and circumstances of this case,
and in doing so we are not laying down any principle of law
to be followed as a precedent. The appeal stands allowed in
these terms. No order as to the costs.
CJI.
J. ( R.C. Lahoti )
J. ( Doraiswamy Raju )
March 30, 2001.
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