TMI Blog1989 (12) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... it O. S. No. 87 of 1981 in the court of the Subordinate Judge of Kozhikode for recovery of the amount due under the mortgage. The suit was decreed on July 31, 1982. This decree was assigned by the bank to one Mrs. Jolly Thomas for a sum of Rs. 4,41,000. After the decree was passed, demand notices in Form ITCP-I were served on the petitioner by the Tax Recovery Officer in August, 1983, for payment of the amounts of income-tax and wealth-tax and the interest thereon due from the petitioner. Since only a part of the amount was realised by the arrest and detention of the petitioner, the Bank House Property of the petitioner was proclaimed for sale by the Tax Recovery Officer. He published two notices, exhibits P-1 and P-2, of which exhibit P- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subordinate judge, the correct amount to be ascertained after deducting a sum of Rs. 4,09,670.80 deposited in court by the Government of Kerala on the acquisition of another property of the defaulter, namely, Kara South Bungalow. The Tax Recovery Officer submitted to the court that he was prepared to deposit whatever amount was legally due to Mrs. Jolly Thomas. E. A. No. 262 of 1989 still remains undisposed of. This submission of the Tax Recovery Officer was in recognition of the prior charge which Mrs. Jolly Thomas had for the amount of the decree due to her over the arrears of tax claimed by the respondents. The petitioner filed two applications on February 20, 1989, and March 10, 1989, claiming payment to him of the amount remaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted upon at present. The petitioner challenged this order by filing a petition under rule 86 of the Second Schedule to the Income-tax Act, 1961, before the Commissioner of Income-tax, Cochin. The Commissioner rejected this petition by his proceedings, exhibit P-6. The Commissioner noted that Mrs. Jolly Thomas had priority for her debt. The petitioner's contention that, in view of the statement in exhibit P-1 proclamation that she did not have prior charge over the tax dues, the amount remaining out of the sale price, after adjusting the tax dues, should be paid to the petitioner without payment to Mrs. Jolly Thomas, was not accepted by the Commissioner, in view of the clear intimation at the time of auction of the priority in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets were realised and the costs incurred in the course of such execution ; (b) if there remains a balance after the adjustment referred to in clause (a), the same shall be utilised for satisfaction of any other amount recoverable from the assessee under this Act which may be due on the date on which the assets were realised ; and (c) the balance, if any, remaining after the adjustments under clauses (a) and (b) shall be paid to the defaulter. (2) If the defaulter disputes any adjustment under clause (b) of sub-rule (1), the Tax Recovery Officer shall determine the dispute." Thereunder, proceeds of the sale of property are to be adjusted first towards the amount due under the certificate in execution of which the assets are sold an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot afford a cause of action to the petitioner to contend that no part of the sale proceeds should be paid to Mrs. Jolly Thomas despite the priority in her favour. As stated earlier, the petitioner admits that, in law, Mrs. Jolly Thomas has priority for her debt over the arrears of tax. The mere fact that the Tax Recovery Officer made a mistaken recital in exhibit P-1, which was, not persisted with or followed in exhibit P-2 or at the time of auction, cannot detract from the legal position that Mrs. Jolly Thomas has priority for her debt. The petitioner cannot estop the Department based on his tenuous plea that, irrespective of the legal position, he should be paid the residue after adjusting only the tax arrears, without clearing the debt d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner's claim for payment cannot be entertained and accepted at present. If, after paying off Mrs. Jolly Thomas and after adjusting the amount due to the Department, any balance is left, certainly an occasion arises for the petitioner to stake his claim for payment of that amount. That stage has not arisen inasmuch as the amount due to Mrs. Jolly Thomas is yet to be crystallised by the Sub-Court in the pending application E. A. No. 262 of 1989. The Tax Recovery Officer has to make deposit of that amount as soon as that is determined and then adjust the tax dues. The second contention raised by the petitioner also, therefore, fails. There was a faint submission that the Tax Recovery Officer is not depositing the amount due to Mrs. Jolly Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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