2009 (12) TMI 1075 - HC - Income Tax

Recovery of Outstanding dues from the petitioner - undue procedure regarding sale of the property by way of auction - issuance of notice of demand in 1984 the proclamation of public auction of agricultural land was issued as back as on 6.6.1996 for recovery of the outstanding amount - Auction of agricultural land - procedural lapses pointed out by the petitioner - in the absence of bidders the ITO Ward-1 Vapi authorised under sub-rule (1) of rule 59 by CIT Surat acted as a bidder against the reserve price of the property and that is the matter of challenge by the petitioner on the various grounds inter alia that an opportunity has been denied to him Whether there is any procedural lapse which would render the entire auction sale illegal or void and secondly whether there is any substance in the submission about violation of natural justice and fair play as sought to be canvassed? - HELD THAT - As on the one hand though grievance is made with regard to the auction sale and the procedure even after the confirmation of such a sale for four years he has not made any grievance. Not only that when he states about the pending appeal under Rule 86 which is not disposed of expeditiously he does not choose to take any action or pursue the same till the present petition is filed and conveniently he has not referred to the application which could be made under Rule 60 which is required to be made within a stipulated period with full deposit of the amount. This reflects the attitude and there is no explanation on this count by the petitioner. Therefore the submissions made by learned Sr. Counsel Mr. Soparkar cannot be readily accepted as on scrutiny of the papers it is evident that the petitioner has either not filed any petition or deliberately allowed the time to pass. There is no explanation worth the name as to even after confirmation of the sale for which he has made a grievance in the present petition he did not file any petition for 4 years. Not only that even thereafter he has not filed the petition or had taken any recourse. Proclamation of sale was dated 4.2.1997 and 30 days had passed between proclamation of the sale and the date of auction and thereafter the certificate of sale has been issued as back as on 14.10.2003 though the auction was held on 26.3.1997. Even after the certificate regarding confirmation of sale was issued on 14.10.2003 no objection has been raised by him at the relevant time or subsequently and only by raising an objection dated 13.10.2007 he has made the grievance. It is in these circumstances we are of the considered view that there is no substance in the petition and the petition deserves to be rejected. Even on the ground of delay and acquiescence the person should approach the court within a reasonable period. Though no hard and fast rule can be laid down for such purpose particularly for filing a petition under Art. 226 227 of the Constitution of India party like the petitioner has to move within a reasonable time whereas in the facts of the present case as it is discussed hereinabove he has allowed time to pass and thereafter cannot be permitted to file petition contending that the procedure has not been followed when he had all the opportunity after the proclamation was issued and therefore even on that count also discretion cannot be exercised to entertain the present petition. WP dismissed.

Summary

The core legal questions considered by the Court include:

1. Whether the auction sale of the agricultural land under the Income-tax Act, 1961, was conducted in accordance with the prescribed procedural requirements, including fixation of reserve price and adherence to the timeline for confirmation of sale.

2. Whether the petitioner was denied natural justice and fair play, particularly regarding the opportunity to avail benefits under Rule 62 and the issuance of the sale certificate without affording a proper hearing as mandated under Rule 60 of the Second Schedule of the Income-tax Act.

3. Whether the delay in disposal of the appeal filed by the petitioner under Rule 86 of the Second Schedule, amounting to over a decade, constitutes a denial of justice warranting interference.

4. Whether the petitioner's failure to pursue the appeal and raise objections in a timely manner impacts the maintainability of the present petition under Article 226 of the Constitution of India.

5. Whether the invocation of Rule 59(1) of the Second Schedule, allowing the Income Tax Officer to bid in absence of other bidders, was valid and in accordance with law.

Issue-wise Detailed Analysis

1. Procedural Validity of the Auction Sale

The legal framework governing the auction sale is embedded in the Second Schedule of the Income-tax Act, 1961, particularly Rules 59, 60, 62, and 86. Rule 59(1) permits the Income Tax Officer to bid for the property if no other bidders are present, while Rule 60 mandates issuance of sale confirmation certificate only after a stipulated period (typically 30 days) post-auction, allowing for objections or deposit of amounts under Rule 62.

The petitioner challenged the auction on grounds that no reserve price was fixed, and the sale certificate was issued on the same day as the auction, violating the 30-day waiting period under Rule 60. The Court examined the proclamations issued in 1996 and 1997, which explicitly mentioned the reserve price, contradicting the petitioner's claim. The Department's communication dated 7.4.1997 clarified that Rule 62 was inapplicable due to the invocation of Rule 59(1), which was legally permissible.

The Court found that the auction was conducted in accordance with the statutory provisions. The issuance of the sale certificate on 14.10.2003, though delayed from the auction date of 26.3.1997, was not shown to violate any procedural mandate. The petitioner's contention that the certificate was issued on the auction date itself was factually incorrect. The Court emphasized that the auction and confirmation process complied with the procedural framework and no procedural lapses rendered the auction void or illegal.

Competing arguments regarding the absence of reserve price and premature confirmation were rejected based on documentary evidence and statutory interpretation. The Court noted that the petitioner was aware of the reserve price and the procedural steps but failed to raise timely objections.

2. Alleged Violation of Natural Justice and Fair Play

The petitioner contended that he was denied an opportunity to be heard, particularly regarding his application under Rule 62 and the issuance of the sale certificate without affording him a hearing as required under Rule 60. The Court analyzed the petitioner's application dated 4.4.1997 expressing willingness to deposit the amount under Rule 62, which was rejected by the Department on 7.4.1997 citing inapplicability of Rule 62 due to Rule 59(1) being invoked.

The Court held that the petitioner was afforded sufficient opportunity to raise objections and pursue remedies. The Department's rejection was communicated promptly, and the petitioner's failure to pursue the appeal or file a petition challenging the auction in a timely manner indicated acquiescence. The Court observed that the petitioner did not raise any objection for over four years after confirmation of sale, which militates against a claim of denial of natural justice.

The Court also noted that no application under Rule 60 was pending at the relevant time, and the petitioner did not fulfill the pre-requisite condition of depositing the full amount with interest to avail relief under Rule 60. Thus, the Court found no merit in the contention that natural justice was violated or fair play denied.

3. Delay in Disposal of Appeal under Rule 86

The petitioner's appeal under Rule 86, filed in 1997, was disposed of only in 2009, a delay attributed to misplacement of records by the Department. The petitioner argued that the delay amounted to denial of justice.

The Court acknowledged the delay but emphasized the petitioner's own conduct in not pursuing the appeal diligently. The Court highlighted that the petitioner did not take timely steps to expedite the disposal or raise interim objections. The Court also noted that the appeal did not raise any grievance regarding the validity of the auction itself at the time, which undermines the present challenge.

Thus, the Court concluded that the delay, while regrettable, did not warrant setting aside the auction or sale confirmation, especially given the petitioner's inaction and acquiescence over a prolonged period.

4. Impact of Petitioner's Delay and Acquiescence

The Court underscored the principle that a party challenging a statutory auction must act promptly and pursue available remedies without undue delay. The petitioner's failure to object within a reasonable time, particularly after confirmation of sale and issuance of sale certificate, was fatal to his claim.

The Court observed that the petitioner's delay of over a decade in challenging the auction and the procedural compliance demonstrated by the Department precluded discretionary interference under Article 226. The Court emphasized that no hard and fast rule exists for reasonable time, but in the facts of this case, the delay was excessive and unexplained.

5. Validity of Invoking Rule 59(1) and Department's Authority to Bid

The Department invoked Rule 59(1) to authorize the Income Tax Officer to bid for the property in absence of other bidders. The petitioner challenged this on grounds of procedural impropriety.

The Court found that Rule 59(1) explicitly empowers the Department to act as a bidder to protect revenue interests when no bids are received. The reserve price was fixed and notified, and the Department's action was consistent with the statutory scheme. The Court rejected the petitioner's argument that this was improper or illegal.

Significant Holdings

The Court held that "the auction and confirmation of sale were conducted strictly in accordance with the provisions of the Second Schedule of the Income-tax Act, 1961, and no procedural irregularity or violation of natural justice has been established by the petitioner."

It was further held that "the petitioner's failure to raise timely objections and pursue the appeal with due diligence amounts to acquiescence and disentitles him to relief at this belated stage."

The Court emphasized the principle that "delay and inaction in challenging statutory auctions, especially after confirmation and issuance of sale certificates, disentitle the aggrieved party from seeking equitable relief."

On the invocation of Rule 59(1), the Court concluded that "the Department was fully empowered to bid for the property in absence of other bidders, and such action is neither illegal nor arbitrary."

Accordingly, the Court rejected the petition in limine, holding that the petitioner's contentions regarding procedural lapses, denial of natural justice, and delay in appeal disposal lacked merit and did not warrant interference with the auction sale or confirmation.