Law: Income Tax Act, 1961

Section: SecondSched

Income-tax---Recovery of tax ---Attachment and sale of property---Person having first charge over property obtaining decree before auction by Revenue Authorities---Decree-holder filing petition to set aside sale or in alternative to pay her amount decreed---Order passed for such payment---Order not challenged by assessee---TRO could not return excess over tax arrears to assessee---Indian Income Tax Act, 1961, Sched. II. Normally, under Rule 8 of Schedule II to the Income Tax Act, 1961, the Income-tax Officer has to return the excess amount after adjusting the amount due to the Department. But in a case where there is a first charge, it is the duty of the Department to adjust the amount realised under the auction towards that first charge. The appellant was in arrears of income-tax, wealth tax and interest thereon amounting to Rs.8,97,773. Recovery proceedings were initiated by the Tax Recovery Officer, Calicut. An item of immovable property belonging to the appellant, viz., bank house property, was put to auction. The property was sold for an amount of Rs.12,01,000 at the auction conducted on February 7, 1989. There was a prior liability on the property in favour of the Chartered Bank and the Chartered Bank had obtained a decree on July 31, 1982. The decree was later assigned in favour of one J.T. The charge, created in favour of the Chartered Bank on the property was not initially known to the Department. J.T. filed a petition requesting the Tax Recovery Officer to set aside the sale or in the alternative to pay her a sum of Rs.8,07,327.14. But the request for setting aside the sale was rejected and the auction sale was confirmed on March 14, 1989. J.T. filed a petition for a 'direction to the Tax Recovery Officer to deposit the entire sale proceeds in Court. The Court ordered the Tax Recovery Officer to pay the amount due as per the decree with interest. In the meanwhile, the appellant filed a petition before the Tax Recovery Officer for the return of the balance amount after adjusting the amount of tax arrears. The Tax Recovery Officer rejected the same. An appeal against dismissal of the petition was dismissed and so was a writ petition. On further appeal:…

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