TMI Blog1996 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Writ Appeal No. 293 of 1991 connected with Writ Appeal No. 721 of 1991 (see [1992] 197 ITR 398 (Kar). The question is whether the common appellant in these appeals who was original petitioner No. 2 in these special leave petitions had any locus standi to prefer an application under rule 60 of the Second Schedule to the Income-tax Act, 1961, for setting aside the sale of immovable property of the defaulter income-tax assessee from whom he is alleged to have agreed to purchase the said property and which property was sold in auction by the Income-tax Department in the execution of the certificate of recovery of income-tax issued against the defaulter, owner of the property. In order to answer this question the backdrop facts may be noted at the outset. One Y. S. Devendra Murthy who was the owner of the property auctioned by the Income-tax Department had committed default in payment of income-tax dues assessed against him for the relevant assessment years. The Tax Recovery Officer under the Income-tax Act issued notice to him on September 3, 1973, as per rule 2 of the Second Schedule to the Income-tax Act which deals with Procedure for recovery of tax . The said defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very Commissioner who rejected the said appeal and passed order dated June 13, 1988. At that stage the appellant along with the general power-of-attorney holder of Y. S. Devendra Murthy, named Shri Y. S. Surender filed a writ petition in the Karnataka High Court challenging the orders of the Tax Recovery Officer and the Tax Recovery Commissioner. A learned single judge of the High Court by his order dated December 14, 1990, allowed the writ petition and quashed the orders dated April 20, 1988, passed by the Tax Recovery Officer and dated June 13, 1988, passed by the Tax Recovery Commissioner. The learned single judge held that the application moved by the appellant was maintainable under rule 60 and as he had in the meantime withdrawn the deposited amount he permitted the general power-of-attorney holder of Y. S. Devendra Murthy to make deposit within four weeks and directed the Tax Recovery Officer to deal with the matter in accordance with law. An amount of ₹ 4,45,783 was accordingly deposited with the Tax Recovery Officer. The aforesaid order of the learned single judge was challenged by the Tax Recovery Commissioner, Karnataka-II, Bangalore, and the Tax Recovery Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property as his suit for specific performance was not only pending on the date of the auction sale, but had got decreed by consent on the very next day of moving such application. Shri P. P. Rao submitted that the application was moved on April 12, 1988, and the suit in favour of the appellant was decreed by consent of the parties on the next day, that is, April 13, 1988. Thus on the day on which the Tax Recovery Officer rejected the appellant's application he was already having the full title in this property as successor-in-interest of the defaulter. It was vehemently submitted that even assuming it is held that the defaulter through his power-of-attorney holder had not filed a separate application under rule 60 and had merely supported the application of the appellant even then as per the said rule the appellant had sufficient locus standi as he was interested in the property which was the subject-matter of the auction sale and that the Revenue was only concerned with its tax dues. Once the deposit fully met the said claim of the Revenue, it could not insist on such a technicality that the appellant's application was not maintainable qua the auction purchaser respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that was assured by the appellant by depositing the entire amount with interest and costs, the Revenue could not contend that it would still insist on going ahead with the auction and getting it confirmed. That the appellant had moved an application under rule 60 within the permissible limit of thirty days from the date of auction. In the light of the aforesaid rival contentions, we now proceed to deal with the question posed for our consideration. Rule 60 of the rules in the Second Schedule to the Income-tax Act reads as under : 60. (1) Where immovable property has been sold in execution of a certificate, the defaulter, or any person whose interests are affected by the sale, may, at any time within thirty days from the date of the sale, apply to the Tax Recovery Officer to set aside the sale, on his depositing,--- (a) the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, with interest thereon at the rate of fifteen per cent. per annum calculated from the date of the proclamation of sale to the date when the deposit is made ; and (b) for payment to the purchaser, as penalty, a sum equal to five per cent. of the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iswaneedam Post, Bangalore-560 091, and Y. S. Devendra Murthy has executed an agreement in this behalf agreeing to sell the properties. I have filed the suit for specific performance of the contract to enforce the said agreement in O. S. No. 5 of 1984 on the file of the Additional Civil Judge, Bangalore. I have paid the amount also in advance. In the meantime, your hon'ble authority was pleased to hold auction on March 14, 1988, in respect of Survey No. 20/1.2.3 for the recovery of arrears due in respect of Shri Y. S. Devendra Murthy. Still there is time to pay the amount by the said Y. S. Devendra Murthy. As I am having right and interest over the property that has been auctioned I am ready and willing to pay the amount in full. To this effect, Shri Y. S. Surendra, the brother and the power-of-attorney holder of Shri Y. S. Devendra Murthy has authorised me to pay the amount. The said authorisation letter is enclosed herewith. Accordingly, I am prepared to pay the amount that your hon'ble authority is entitled to recover from Y. S. Devendra Murthy. The amount detailed below may kindly or accepted and the sale may kindly be set aside. In the prayer clause of the said app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser that when equities are to be balanced between the two rival claimants, namely, the prospective purchaser of the auctioned property under an agreement to sell on the one hand and the auction purchaser who had purchased the property in the tax recovery proceedings on the other, it has to be seen whether the appellant could claim any legal interest and even a preferential interest in the property which would entitle him to get the auction sale set aside. In this connection, rule 16(2) on which strong reliance was placed by Shri Salve, is found clearly to have hit the said agreement in favour of the appellant. To recapitulate, notice under rule 2 of the Second Schedule to the Income-tax Act was issued to the defaulter on September 3, 1973. It may be that the attachment might have taken place years afterwards but on November 20, 1982, when the defaulter agreed to sell off his property to the appellant he totally bypassed the requirement of rule 16(1) which lays down that where a notice has been served on the defaulter under rule 2, the defaulter or his representative-in-interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... locus standi to move the application dated April 12, 1988, for getting the auction sale set aside. It is also to be noted that he had no legal interest in the said property on the date of the application. It is axiomatic that mere agreement to sell creates no legal interest or right in the property which is the subject-matter of the agreement. In this connection, a Division Bench of the Karnataka High Court in D. V. Satyanarayana v. TRO [1992] 197 ITR 407 has taken the view that a person who had obtained an agreement to sell which is hit by rule 16 of the Second Schedule to the Income-tax Act cannot make an application under rule 61 for setting aside the sale as a person holding interest in the property. On the scheme of the Rules aforesaid this view represents the correct legal position. On the same analogy such an agreement holder cannot equally apply under rule 60 in his own right to get such auction sale set aside. The decision of the learned single judge of the Kerala High Court in M. Rajagopal v. Secretary, State Transport Authority [1978] 115 ITR 364 heavily relied upon by learned senior counsel for the appellant is of no assistance to him for the simple reason that in that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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